Brussels Commentary on EU Public Procurement Law 9781509923205, 9781509923212, 9783848701209, 9783845258881

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Preface This book is intended to serve as a legal commentary to the law and directives of the European Union on public procurement. Public procurement can be defined as the process whereby public authorities or other public entities purchase goods, works and services. The aim of the procurement process is to obtain the purchases through methods that optimize the cost/benefit value of such procurement to the benefit of the public. While as it is described below in the introduction the EU treaties provide a number of principles and provisions which are of obvious relevance to the handling of public procurement the quintessence of EU law in this field is provided through the adoption throughout a period of almost fifty years of a number of central directives providing a rather stringent and detailed regulation which must be observed by the Member States and implemented in their national law. The development toward an ever closer regulation within this field of law began in 1971 when a directive on procurement of public works was adopted. It took a rather long time before, in 1977, the directive on supply of goods was adopted, Then it was not until 1990 that the next procurement directive, the so-called utilities directive, arrived and in 1992, a directive on procurement of services followed suit. Along the way two so-called remedy directives were adopted in order to safeguard the possibilities of taking action against violations of the procurement rules. After a major overhaul of the procurement directives in 2004 including consolidating the classic directives within the public sector in one public sector directive a second and just as comprehensive amendment of the previous directives and an additional directive on concessions took place in 2014. In between these two generations of procurement directives the first procurement directive directed at the defence and security sector was adopted. The aim of the 2014 legislation was, broadly speaking, to make the directives more flexible, clear, transparent and less bureaucratic. The “modernisation” has also served to incorporate important case law by the Court of Justice into EU procurement legislation. The new directives have brought with them a number of important and practical amendments. That is the case, e.g., with regard to allowing for more flexibility in the use of competitive dialogue and negotiated procedures. New is also the possibility of entering into so-called innovation partnerships which is a new form of procurement process meant to promote the development and eventually subsequent purchase of new types of products. The rules on framework contracts have been clarified and the access of SMEs (small and medium-sized enterprises) to public contracts has also been improved in a number of ways, e.g. through rules promoting the splitting up of contracts into smaller parts and rules on a maximum requirement regarding the turnover of tenderers. New rules on the use of environmental certification requirements have become less burdensome with regard to documentation and it has become possible to apply lifecycle considerations. The introduction of the so-called European Single Procurement Document (ESPD) constitutes an attempt to simplify bureaucratic burdens. Also the development with regard to the application of internet based technologies has made its imprint on the directives and that to the extent that it has been made mandatory to handle procurement procedures through electronic means only. As a major step the new directives have eliminated the former categories II A and II B which provided for exceptions from applying the main mechanisms for procurement (in particular prior publication) with regard to certain groups of services. The present directives contain fewer such exceptions and instead of excepting certain services they introduce a new form of procurement: the so-called “light procedure” based on simpler procedures. The method can be applied to certain services in the social and health sectors

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and the fields of hotel and restaurant services and some legal services etc. In this connection, the introduction of special rules with regard to so-called reserved services should also be mentioned. The new directives contain highly relevant provisions regulating how to deal with procurement with regard to mixed contracts. The same goes for so-called in-house procurement and the possibility of amending a contract after its conclusion. Rules on dynamic purchasing as well as the methods of joint purchasing have been amended. The rules concerning mandatory/voluntary exclusion have been subject to amendment and the concept of self-cleaning which makes it possible for tenderers to make use of a method allowing them, as the case may be, to refute that they should be excluded form tendering, has been introduced. Generally procurement procedures already found in the directives from 2004 have been subject to more intensive and detailed regulation in the directives adopted in 2014 which, notwithstanding the benefits that that may entail, also has led to more complicated regulation than before. It cannot be overlooked that, over time, the bulk of EU legislation on public procurement has grown to an extent that has made it ever more complicated to apply the law of those directives. It has therefore become even more crucial than before, in particular for civil servants and practitioners, to consult the procurement directives and in so doing have the benefit of a legal commentary. We believe that this book in spite of its heavy weight provides a commentary that is easy to consult and use in everyday practice. We (NOMOS and the editors) have found that, given the size and complexity of the area of public procurement, our intention of achieving the best possible result would be best served by making use of experts on the specific issues of public procurement. With authors from different Member States the contributions will to a certain extent reflect different approaches and references just as the knowledge of national case law, ways of transposing the different directives and legal literature (in English or in any other language) will play a part as we find that this approach will enrich the book. However, we have sought harmonisation with regard to language and format of the book whereas the personal writing styles have been kept and therefore will differ between contributions. The book contains a part describing how to use the book. It is found just below. The very volume of this book and of the directives which are reprinted in it mirror that European Union law in the field of public procurement bear testimony to the fact that EU procurement law has come a long way when compared with the modest beginnings and after a period of progress spanning almost fifty years. The relevance of EU procurement law is also reflected in the fact that the number of cases ending before the EU courts have risen considerably over the years. The practice of the European Court of Justice has, of course, not only led to the solution of a number of more or less intricate cases but also to the adoption of amendments or entirely new provisions in the procurement directives. The areas of free movement of goods and harmonisation of national laws, the rules on State aids and competition as well as the significant body of EU procurement law constitute interdependent corner stones of the Single Market and those fields of law have, of course, brought about important legal contributions in the form of textbooks and commentaries. This books adds one more to the list, and it is the hope of NOMOS and of the two editors, professor Dr. Michael Steinicke and Dr. Peter L. Vesterdorf, as well as the various authors contributing to this commentary that their work will come to serve as a valuable multinational instrument of assistance to the many public authorities and other public entities as well as economic operators and assisting lawyers. It is not VI

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foreseen that the directives in force at the present time will be undergoing major reform or amendment in the foreseeable future. It is thus likely that, if well received, the book may come to be solidly placed on the law book shelves in relevant offices all over the EU and in neighbouring countries in which the EU rules on public procurement are or will be applicable. The editors are both affiliated to the lawfirm of Publicure, Denmark and would like to thank the colleagues for interesting discussions on public procurement and the inspiring professional atmosphere. Finally, we thank Dreyers Fond for supporting the translation of parts of the book. The book is updated until second quarter of 2017. Michael Steinicke Silkeborg November 2017

Peter L. Vesterdorf Copenhagen November 2017

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How to use the commentary The book is structured in one introductory chapter and five parts each containing an area of public procurement regulation. The introductory chapter covers the context of public procurement including the EU background, primary law, general principles, other related areas of law, and international rules pertaining to the subject of the commentary. The five different parts of the commentary are the following: Part I: Part II: Part III: Part IV: Part V:

Public Sector Directive (2014/24) Utilities Directive (2014/25) Concessions Directive (2014/23) Defence and Security Directive (2009/81) Enforcement Directives (1989/665 and 1992/13)

The first four parts cover the substantive directives, i.e. the directives establishing the procedures to be used when public entities are purchasing from the market. The four directives are to a large degree built on the same skeleton, using the same concepts, principles, covering the same phases etc. and therefore issues like e.g. using the economic thresholds are regulated similarly in the four directives. To gain benefit from these structural similarities as well as to avoid repetition we have structured the commentary with a primary focus on the Public Sector Directive since this is the directive with the most general content and the directive with the largest and most general application. In practice this means that all the provisions in the Public Sector Directive are subject to an extensive commentary. The specific provisions in the other three substantive directives (the Utilities Directive, the Concessions Directive and the Defence and Security Directive) are commented on only in the event that this is not the case in the Public Sector Directive. An example is the open procedure. This procedure is explicitly applicable in two of the directives (the Public Sector Directive and the Utilities Directive). The commentary to the open procedure is therefore extensive in Part I covering the Public Sector Directive but consists primarily of a reference to the Public Sector Directive in the relevant provision in the Utilities Directive. In cases where there are some similarities but also some differences we have tried to balance the reference back to the Public Sector Directive while also describing the points of difference in the relevant article of the specific directive. We have made an effort to describe any differences between the directives where such differences are subtle and where the differences might lead to confusion in practice. This could be the case for entities sometimes subject to the Public Sector Directive and sometimes subject to the Defence and Security Directive (depending on the subject-matter of the contract). If, e.g., the contracting authority wants to apply the procedure competitive dialogue it is imperative that the contracting authority is aware of the differences between the two versions of this specific procedure in the two directives. The index will show the different parts and will make it easier to find the relevant information.

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Abbreviations AG Art. C cf. CFREU Chap. CJEU Clean Vehicles Directive CMLR CoE Concessions Directive CPB CPV Defence and Security Directive Directive

Dir. Doc. EBRD EC ECHR ECLI ECSC ed EDA EEA EEC EGTC EJC ELCC ELJ EMAS EP EPPPL ERCL ESPD EU EUMETSAT EUR EUROCONTROL GC GmbH GPA IASB ibid. ICT i.e. ILO IMI IPPP IPSASB ISO JECLaP JEREMIE

Advocate General Article Case confer Charter of Fundamental Rights of the European Union Chapter Court of Justice of the European Union Directive 2009/33/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of clean and energy-efficient road transport vehicles Common Market Law Review Council of Europe Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts Central Purchasing Bodies Common Procurement Vocabulary Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC Directive Document European Bank for Reconstruction and Development European Community European Court of Human Rights European Case Law Identifier European Coal and Steel Community edition /editor European Defence Agency European Economy Area European Economic Community European Grouping of Territorial Cooperation European Court of Justice Environmental Life Cycle Cost European Law Journal Community Eco-management and Audit Scheme European Parliament European Procurement & Public Private Partnership Law Review European Review of Contract Law European Single Procurement Document European Union European Organisation for the Exploitation of Meteorological Satellites Euro(s)(€) European Organisation for the Safety of Air Navigation General Court Gesellschaft mit beschränkter Haftung Government Procurement Agreement International Accounting Standards Board ibidem Information and Communication Technology / Inter-Community Transfer id est International Labour Organisation Internal Market Information System Institutionalised Public-Private Partnerships International Public Sector Accounting Standards Board International Organization for Standardization Journal of European Competition Law & Practice Joint European Resources for Micro to Medium Enterprises

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Abbreviations LCC LoI MS NACE NATO NUTS OCCAR OECD OJEU OUP para. PCP PIN PPLR Privacy and Electronic Communications Directive Prot. Public Sector Directive R&D REAL Rome I SGEI SME SOLVIT TEU TFEU TRL TTIP ULR UN Utilities Directive

Vol. WTO

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Life Cycle Costs Letter of Intent Member State Nomenclature statistique des activités économiques dans la Communauté européenne North Atlantic Treaty Organization Nomenclature of Territorial Units for Statistics Organisation Conjointe de Coopération en Matière d’Armement (Organisation for Joint Armaments Procurement) Organisation for Economic Co-operation and Development Official Journal of the European Union Oxford University Press Paragraph Pre-Commercial Procurement Prior Information Notice Public Procurement Law Review Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector Protocol Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC Research and Development Review of European and Administrative Law Regulation (EC) No 593/2008 of the European Parliament and the Council of 17 June 2008 on the law applicable to contractual obligations Services of general economic interest Small and Medium-Sized Enterprises Internal Market Problem Solving Network Treaty on European Union Treaty on the Functioning of the European Union Technology Readiness Level Transatlantic Trade and Investment Partnership Uniform Law Review United Nations Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC Volume World Trade Organization

Contributors Christopher Bovis JD, Dip Econ, MPhil, LLM, FRSA is Professor of International Business Law at the University of Hull. He is internationally renowned specialist in public sector management, public and defence procurement and public private partnerships and author of Public Private Partnerships in the EU, by Routledge, and EU Public Procurement Law and Regulation, by Oxford University Press. He advises national governments in public procurement reforms and has acted on behalf of public sector and industry on numerous high profile projects. He has been instrumental in structuring flagship public-private partnerships in the UK, EU and overseas. He is Editor-in-Chief of the European Procurement and Public Private Partnerships Law Review. Concessions Directive, Art. 30-55 Roberto Caranta is professor with the Law Department of the University of Turin. He is frequently involved in consultation and formation projects for different national, EU and international institutions. He works on judicial protection, environmental law, and public procurement law. He was the General rapporteur to the 2014 FIDE Congress in Copenhagen: ‘General Report’ in U. Neergaard, C. Jackson, G.S. Ølykke (eds) Public Procurement Law: Limitations, Opportunities and Paradoxes. The XXVI FIDE Congress in Copenhagen,Vol. 3 (DJØF, 2014). Together with Steen Treumer he is editing the European Procurement Law Series (formerly DJØF, now Elgar). Public Sector Directive, Art. 25-32 Charles Clarke, LLB (Hons), LLM (Dist) is an associate attorney at Arnold & Porter Kaye Scholer LLP in Brussels. He specialises in antitrust law and policy, with particular emphasis on merger control and public procurement. He regularly advises clients across many different industries and jurisdictions on antitrust and public procurement issues. He has published a number of articles in his area of specialisation, with themes covering the public procurement rules/case-law and other areas of antitrust law. He is Case-Law Editor of the European Procurement and Public Private Partnerships Law Review. Concessions Directive, Art. 30–55 Alexander Egger is Rechtsanwalt and heads the practice group for EU, Regulatory, Public Procurement & State Aids at Lansky, Ganzger + partner in Vienna. His major employments have included posts in the Ministry for Foreign Affairs and as Référendaire at the Court of Justice of the EU. He holds doctorates in law and in political science, graduated from the College of Europe (Bruges) and continued his academic career with the Habilitation. He is Fellow of the European Law Institute (ELI), a member of the Societas Iuris Publici Europaei (SIPE), has served as TWINNING and TAIEX expert for the EU and also regularly contributes to studies for the European Commission. Public Sector Directive, Art. 7-12

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Contributors

Carri Ginter is an Associate Professor of EU Law at the University of Tartu School of Law. He is also a Partner at Sorainen, where he is responsible for the firms dispute resolution practice in Estonia, Latvia, Lithuania and Belarus. He holds a PhD from Tartu University, an LL.M from the University of Stockholm. Ginter has published works on EU law internationally and is a co-author of the leading textbook on EU competition law in Estonia. He supervises research on LL.M and PhD level. In 2009 and 2012 he was awarded as Lecturer of the Year. In 2013 he was awarded the Tartu University Badge of Distinction. Enforcement Directives Dr Albert Sanchez Graells is a Reader in Economic Law at the University of Bristol Law School and a Member of the European Commission Stakeholder Expert Group on Public Procurement (2015-18). He has published the leading monograph Public Procurement and the EU Competition Rules, 2nd edn (Bloomsbury-Hart, 2015), recently edited Smart Public Procurement and Labour Standards. Pushing the Discussion after RegioPost (Hart, 2018), and also coedited Reformation or Deformation of the Public Procurement Rules (Elgar, 2016). Most of his working papers are available at http:// ssrn.com/author=542893 and his analysis of current legal developments is published in his blog http://www.howtocrackanut.com. Concessions Directive, Art. 1-29 Carina Risvig Hamer, is Associate Professor and holds a master’s degree in law from Aarhus University and a PhD from Copenhagen Business School. She has been working at the Danish Competition Authority for several years (2006-2013), where her tasks included drafting legislation, giving guidance on public procurement law and taking part in the negotiations of the Public Procurement Directives. She is author to several books and articles on public procurement e.g. “Public contracts, not covered, or not fully covered, by the Public Sector Directive” (2012) a commentary on the Danish complaints system and remedies (2015) and a public procurement text book “Grundlæggende Udbudsret”, 2016. Public Sector Directive, Art. 33-39, 56-64 Tobias Indén holds a doctor’s degree in law (jur.dr.) from Umeå University. He is currently employed as a professor (with special responsibilities) at the University of Southern Denmark as well as an associate professor at Umeå University. Indén is the author of several books on state aid and public procurement. Public Sector Directive, Art. 67-73 Sune Troels Poulsen is associate partner and attorney-at-law at Mazanti-Andersen Korso Jensen law firm in Copenhagen, Denmark. He holds a PhD from the University of Aarhus, Denmark. Sune Troels Poulsen is the author of several books on EU Procurement Law, EU Competition Law and EU State Aid Law. He advises within the fields of procurement law, competition law and EU State Aid Law. Sune Troels Poulsen is a founder of the Danish Procurement Law Association and the Danish State Aid Law Association. Utilities Directive, Art. 1-98

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Mari Simovart holds an LLM degree from Duke University School of Law, USA, and a Doctor Iuris degree from the University of Tartu, Estonia where she is employed as a Docent. Simovart teaches Master level classes in public procurement law that have been repeatedly nominated for the best class – Lectio cum laude – in recent years. Being the author of numerous academic publications focusing on the EU public procurement law, Simovart’s academic contributions have a particularly high impact in the area of interaction between public procurement law and national private law of the EU Member States. Enforcement Directives Michael Steinicke is a professor of EU law including public procurement at Aarhus University. He earned his PhD on a thesis on public procurement at the University of Southern Denmark. Since 2004 he has been a professor of law at the University of Southern Denmark and Aarhus University. He has authored or co-authored 15 books and related issues on public procurement including the most comprehensive book in Danish (commentary to the 2004-directives) and written a large number of scientific articles. He has been Head of department at two law departments and is affiliated with the specialised procurement law firm Publicure. Public Sector Directive, Art. 1-6, 13-24, 40-55, 65-66, 74-94; Defence and Security Directive Andrea Sundstrand holds an LL.M. in public law (jur. dr) from the University of Stockholm. She is an associate professor at the Law Faculty at the university, where she is also the course director for the courses on constitutional law and public procurement law. She has also written several books and articles on public procurement law. Andrea is the founder and editor of the Procurement Law Journal (UrT.cc), a legal journal that publishes scientific articles on public procurement law. She is a member of the Council of the Swedish Procurement Authority and also a member of the Swedish Bar Association. Public Sector Directive, Art. 74-77 Peter L. Vesterdorf holds a master’s degree in law (cand. jur.) and a Ph.D. in EC law (lic. jur.) from the University of Copenhagen. His major employments have included posts in the European Parliament (research and documentation), the Danish Parliament, the Danish Ministry of Foreign Affairs (i.a. as an EC law adviser), the European Court of Justice (legal clerk or referendaire) and the Danish Federation of Small and Medium-size (EC/EU law adviser). Vesterdorf is the author of several books on EC/EU law (i.a. on the Single Market, competition law, State aid, public procurement and on the EC/EU institutions).

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0. Introduction Michael Steinicke 0.1. About the book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2.1. The purposes behind the public procurement directives . . . . . . . . . . . . . . . . . 0.3. The legal framework. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.1. The Treaty of the Functioning of the European Union . . . . . . . . . . . . . . . . . . 0.3.2. The general principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.2.1. The non-discrimination principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.2.2. The proportionality principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.2.2.1. The proportionality principle in general . . . . . . . . . . . . . . . . . . . . . . . 0.3.2.2.2. The proportionality principle in relation to the public procurement situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.2.2.3. The applicability of the proportionality principle in public procurement outside the scope of the directives . . . . . . . . . . . . . . . . . . . 0.3.2.3. The principle of mutual recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.2.3.1. Generally about the principle of mutual recognition . . . . . . . . . . 0.3.2.3.2. The principle of mutual recognition in connection with public procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.2.3.3. The principle of mutual recognition outside the scope of the directives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.2.4. Application of the principles outside the scope of the directive . . . . . . 0.3.2.4.1. General considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.2.4.2. The basic principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.2.4.3. Transparency of the tendering process . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.2.4.4. Transparency regarding award of contract. . . . . . . . . . . . . . . . . . . . . 0.3.3. Other sources of law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.4. International law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.4.1. Government Procurement Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 10 11 12 17 19 20 20 22 24 25 25 28 29 35 39 40 45 50 51 51

0.1. About the book This book on the public procurement directives is structured as a commentary with 1 the commensurate characteristics. In order to gain an insight into the universe of the procurement directives, it is necessary to introduce a number of other rules which also influence the public sector’s award of contracts and which therefore might or could be used as an alternative to or together with the procurement directives.

0.2. History During the first years of the European Community (now the EU) there were no spe- 2 cific rules on public procurement. The handling of public purchasing was covered by the EC Treaty’s rules alone. The reason for not adopting any rules on public procurement was that the Member States did not regard public procurement from a common market perspective. Many countries saw public procurement as an issue to be determined by the individual Member States, since by its nature procurement is not a regulatory activity and something that was considered to belong to the autonomy of the Member States. It was widely accepted that public authorities could without restrictions choose the specific collaborator or tender the authority wanted – irrespective of the contracting entity’s reason for the choice. At that time contracting entities were already covered by the Treaty and the prohibition on discrimination on grounds of nationality, but there was not much focus on the tendering procedures now covered by the procurement directives. The first public procurement directive was adopted in 1970. In general it had a broad 3 scope and aimed to create transparency about public contracts.1 Shortly thereafter the

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first Public Works Directive was passed, Council Directive 71/305/EEC. Almost six years later the next directive saw the light of day (Council Directive 77/62/EEC – the Public Supply Directive). It took almost an additional ten years before the procurement area once again was in focus. In connection with the Community’s comprehensive plan of completing The Single European Market, a White Paper on this ambitious project, COM (85) 310 was passed in the middle of the 1980 s. Public procurement was emphasized as one of the focus areas by the Commission, and the process culminated with the adoption of four public procurement directives in the beginning of the 1990 s: one in 1992 (services) and three in 1993 (goods, works and utilities). During the 1990 s, the Commission continuously worked on improving the public procurement regulatory scheme and a major step was taken in 1996 with the Green Paper on public procurement, COM (96) 583. The Green Paper included a number of areas which the Commission wanted to improve, including topics like: more flexible procedures, possibilities for including social and environmental conditions in the procurement rules and possibilities for making electronic procurement. In 1998, the Green Paper was followed by COM (98) 143 which introduced several specific improvements of the public procurement directives. At first they resulted in minor amendments of the directives then in force with the introduction of directives 97/52/EC and 98/4/EC. A further minor amendment of the directives was implemented in 2001 with directive 2001/78/EC on the use of standard forms in connection with regulations on public procurement. In 2000, the efforts to pass two new public procurement directives started: a consolidated classic directive (The Public Works Directive, the Services Directive and the Procurement Directive combined in one directive), hereinafter called the Public Sector Directive (Directive 2004/18), and the Utilities Directive (2004/17). These public procurement directives were first drafted in connection with COM (2000) 275 and COM (2000) 276 (the Utilities Directive), respectively and were adopted on March 31 st 2004. Compared to the previous directives the most significant amendments of the directives included the merging of the three previous directives (construction works, goods and services now in one directive), more express regulation of electronic communication in connection with procurement (as a result of the technical development), improved possibilities of specifying the subject-matter of the contract, requirements on weighting of award criteria, introduction of several new procurement procedures (competitive dialogue, dynamic purchasing systems and electronic auctions), express regulation of suspension of so-called non-economic conditions in tendering procedures and rules on framework contracts. A major issue in procurement regulation had previously been how to handle works, goods and services within the defence and securities sector. Defence procurement was regulated in the two directives but merely by a reference to TFEU Articles 346 and 347 excluding defence purchasing from the scope of the directives. With the purpose of not missing out of the large potential found in the defence sector the EU legislator adopted a procurement directive on defence and security procurement in 2009 (Directive 2009/81/EC the Defence and Security Directive). For more on the Security and Security Directive, see part IV of this commentary. The last step in the ongoing development of secondary procurement legislation in the EU is formed in what could be called the most comprehensive round of procurement legislation yet. The formal process was initiated by submitting proposals for a Public Sector Directive, a Utilities Directive and – as something quite new – a Concessions Di1

2

See directive 71/304/EEC – the so-called Liberalizing Directive.

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0. Introduction

rective.2 The three directives were adopted in February 2014 with a deadline for implementation by April 2016: Public Sector Directive 2014/24/EU, Utilities Directive 2014/25/EU and Concessions Directive 2014/23/EU. The new directives are basically continuing the majority of the basic principles, lines and provisions from the previous directives. The basic model for how to conduct a procurement has not been changed, but a number of amendments has been made in order to observe certain practical and policy considerations. In the preamble to the Public Sector Directive recital 2 the overall scope for the policy changes is presented in the following way: “Public procurement plays a key role in the Europe 2020 strategy, set out in the Commission Communication of 3 March 2010 entitled ‘Europe 2020, a strategy for smart, sustainable and inclusive growth’ (‘Europe 2020 strategy for smart, sustainable and inclusive growth’) as one of the marketbased instruments to be used to achieve smart, sustainable and inclusive growth while ensuring the most efficient use of public funds. For that purpose, the public procurement rules adopted pursuant to Directive 2004/17/EC of the European Parliament and of the Council and Directive 2004/18/EC of the European Parliament and of the Council should be revised and modernised in order to increase the efficiency of public spending, facilitating in particular the participation of small and mediumsized enterprises (SMEs) in public procurement, and to enable procurers to make better use of public procurement in support of common societal goals. There is also a need to clarify basic notions and concepts to ensure legal certainty and to incorporate certain aspects of related well-established caselaw of the Court of Justice of the European Union.”

These considerations have led to several new initiatives in the directives among others: the introduction of the European Single Procurement Document (ESPD – a new and intended less burdensome and bureaucratic way of documenting the qualification requirements set forth by the contracting authority), introduction of the new procedure called innovation partnership (allowing a comprehensive contractual set- up including an innovation process as well as a delivery phase), a number of different rules intended to improve the access to public contracts for SME’s, and (yet again) increased focus on the possibilities of observing non-economic considerations (environmental, social, etc), as well as a new system for services (from a distinction between A- and B-services to a distinction between services and social and other specific services). On a path running parallel to the various substantive procurement directives there 9 has been a development of the regulatory regime of enforcing the procurement rules. Public procurement is characterized by a particular process which gives rise to a number of very specific challenges in regards to enforcement which is why there was a need to introduce enforcement tools directed at these very particular enforcement issues. The first enforcement directive saw the light of day in 1989 – Directive 1989/665 on enforcement of the public procurement directives (the Remedies Directive) and in 1992 – Directive 1992/13 on enforcement of the Utilities Directive (the Utilities Remedies Directive). Both directives were amended through Directive 2007/66 which introduced new sanctions and a standstill period following the award of contract. Afterwards the provisions on enforcement have been harmonized across the procurement directives (through the Defence and Security Directive 2009/81 Articles 55-64 – enforcement rules – and the Concessions Directive 2014/23 Articles 46-47 – which amends the Remedies Directives). The Remedies Directives are subject to commentary and analysis in Part V. 2 The proposals were presented on the basis of COM(2010) 608 Towards a Single Market – For a highly competitive social market economy. They were set forth in proposal for a Directive on public procurement – COM(2011) 896; a proposal for a Directive on procurement by entities in the water, energy, transport end postal services sector – COM(2011) 895, and a proposal for a Directive on the award of concession contracts – COM(2011) 897.

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0. Introduction

0.2.1. The purposes behind the public procurement directives 10

The background for the procurement directives appear from several of the recitals in the preambular considerations of the different directives. The public procurement directives have their legal basis in the TFEU rules on free movement. On the basis of this, the primary purpose of the directives is to implement the internal market. 3 In continuation hereof the purpose is to optimize the competition for public procurement, thereby providing the companies in the internal market with the possibility of participating in tendering, so that all participants get an equal chance in the competition. This appears from C-243/89, the European Commission v Denmark (the Storebaelt case), and the purpose is based on the 9th recital of the preamble to the first Public Works Directive (71/305/ EEC). In the 1st recital to Directive 2014/24 is stated that the general principles of the TFEU must be complied with and to ensure this “for public contracts above a certain value, provisions should be drawn up coordinating national procurement procedures so as to ensure that those principles are given practical effect and public procurement is opened up to competition.” (Our italics) The purpose is furthermore to limit the public sector’s expenses and limit the risk of corruption and criminal fraud with public means, cf. COM (96) 583, The Green Paper on public procurement, paragraphs 2.3 and 2.4. Although not expressed as an actual purpose of the public procurement directives, the consideration for the contracting entity to gain favorable contracts must also be seen as a consideration behind the directives. The consideration for competition, however, plays a more prominent part within procurement law, and the possibilities to gain favorable contracts must be considered an advantageous side-effect from the efforts to generate competition.

0.3. The legal framework 11

For national public authorities, the joint legal basis for public procurement consists of partly European, partly national, partly international rules. Below the rules outside of the public procurement directives are introduced. 0.3.1. The Treaty of the Functioning of the European Union

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The Treaty of the Functioning of the European Union is the primary basis for public procurement at a European level. The principal provisions are the rules on freedom of movement. They constitute the basis for the legal authority for the procurement directives. The relevant provisions are Article 34 (free movement of goods), Article 45 (free movement of workers), Article 49 (right of establishment), Article 56 (freedom to provide cross-border services) and Article 63 (free movement of capital). In addition, Article 18 of the TFEU is also significant (the prohibition of discrimination based on nationality). The provisions of the TFEU are important in two different situations involving procurement. Firstly, the TFEU provisions covering public procurement apply where the public procurement directives do not apply. In such situations, the TFEU provisions are 3 See also case C-237/99, the Commission v French Republic, in which the Court of Justice pointed out that the purpose is to remove the obstacle to the free movement of services and free trade movement and to protect the interests for the economic actors which have been established in a Member State and who wish to offer goods and services to contracting entities in other Member States. In continuation hereof the purpose of the directive is both to remove the risk of granting national tenderers or applicants a preferential position on award of public contracts and the possibility that a body financed by the state, local authorities or other public law bodies are guided by other considerations than economic considerations.

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the primary rules of the European Union’s legal basis in combination with the general EU-principles. Secondly, the TFEU provisions apply on public procurement also where the public procurement directives apply. In this situation it is necessary to observe the interaction between the TFEU and the public procurement directives, see for example below regarding the interaction between the rules of the directives on technical specifications and TFEU Article 34 on free trade movement (see section 42.4). The rules on freedom of movement primarily contain a prohibition against discrimination between foreign and domestic enterprises, persons, products and services. In addition, the provisions also include a prohibition against certain non-discriminating measures. The Court of Justice has ordered several decisions regarding the use of the TFEU provisions in connection with public procurement, both within and outside the scope of the provisions. In case 45/87, the Commission v. Ireland (Dundalk), the Court of Justice held that it was a violation of Article 34 of the TFEU that an Irish standard was stated as a specification instead of an international standard. The Court of Justice found that it was a violation of (then) the EC Treaty that “or equivalent” was not added in connection with the indication of the Irish standard, so other contractors than Irish contractors could have had their quality evaluated. In the cases C-275/98, Unitron and C-324/98, Telaustria, the Court of Justice has considered the scope of the contracting bodies’ obligations in connection with public procurement outside the scope of the directives. In the Telaustria-case the Court of Justice determined that “notwithstanding the fact that, as Community law stands at present, such contracts are excluded from the scope of Directive 93/38, the contracting entities concluding them are, nonetheless, bound to comply with the fundamental rules of the Treaty, in general, and the principle of non-discrimination on the ground of nationality, in particular. As the Court of Justice established in … [Unitron]…, that principle implies, in particular, an obligation of transparency in order to enable the contracting authority to satisfy itself that the principle has been complied with. That obligation of transparency which is imposed on the contracting authority consists in ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of procurement procedures to be reviewed.”4 It is established in case law that there is no de minimis level for the TFEU rules on 13 free movement – in contrast to e.g. the competition rules and the public procurement directives which both contain de minimis rules. This was established in C-59/00, Vestergaard, where the Court of Justice had to consider an inquiry from the Danish Complaints Board for Public Procurement. The obligation which is established in Unitron and Telaustria has practical significance for the contracting authority. Unfortunately, the exact scope of the obligation has not been determined. The obligation must be assumed to be fulfilled to the extent that the contracting authority contacts a number of enterprises with a view to establishing a competitive situation and where the awarding process itself is of such nature that participating enterprises and regulatory authorities can survey the process. The obligations which are imposed on the contracting authorities according to the TFEU depend on the size of the task which is put out for tender. Thus, more comprehensive requirements will be made to the establishment of the transparency in connection with large excluded con4 See Telaustria, paragraphs 60-62. For more information about the later case law on use of the principles and the rules on free movement outside the scope of the public procurement directives, see section 0.3.2.4.

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tracts than to procurement of goods below the limits of the threshold values as the first contracts mentioned are presumed to be more interesting for the community. Although this practice seems quite clear, a few decisions could highlight the Court of Justice’s use of de minimis evaluation in some cases. On the specific level, the decision in C-231/03, Coname may be an expression of such an assessment in relation to the free movement of services. However, there is reason to distinguish between the various free movements in this respect. This is due to the fact that in relation to the free trade movement and freedom of movement for persons it has clearly been rejected to establish a de minimis limit. The question of de minimis is narrowly related to the question of when a certain public contract can be expected to have a European relevance. The two assessments are primarily conceptually separated by the fact that the de minimis evaluation is based on whether there is enough European interest where the assessment of whether there is cross-border interest is based on whether there is any European interest at all. Only a level of degree separates the two. See also section 0.3.2.4. 14 In addition to the provisions on free movements, the contracting entities and the procurement situation in general are also potentially subject to the TFEU competition rules. The most important provisions are Article 101 (agreements restricting competition), Article 102 (prohibition of abuse of a dominant position), Article 106 (public enterprises and enterprises which have been granted special or exclusive rights) and Article 107 (State aid prohibition).5 Usually, Articles 101 and 102 do not apply to the relationship between contracting entity and tenderer (i.e. the traditional relation involving the procurement rules), but primarily apply to the relationship between the tenderers.6 This is because the public authorities are units which carry out exercise of authority, i.e. activities not subject to the competition rules. In order to apply the competition rules, it must be undertakings, which, according the Court of Justice, includes all types of entities engaging in economic activity, regardless of the organization and formal framework of the activity.7 Decisions from the Court of Justice and the Court of First Instance have assessed whether public procurement in itself implies an economic activity. The primary case is C-205/03 P, Federacion de Empreses de Instrumentacion Clentifica Media Technical y Dental (FENIN) issued on 11 July 2006. In this decision, first the General Court (T-319/99) and later the Court of Justice had the opportunity to consider whether a contracting authority and its purchasing activities could be regarded as an economic activity in the understanding found in the competition rules. The Court of Justice affirmed the General Court’s decision and thus found that a purchasing activity in itself is not an expression of an economic activity in the sense of the competition rules. The decisive factor was that a link was made between a purchase and the later use of the purchased goods or services. In cases where the subsequent application of the good was not a resale or use in connection with commercial activities, the purchase itself did not constitute an economic activity. In other words: If a contracting authority makes purchases or services to be used in connection with the contracting authority’s ordinary

5 The literature has just in recent years started to show interest in the intersection between competition law and public procurement law. The most prominent contribution to this field has been given by Albert Sanchez Graells who gives a thorough and interesting (and somewhat debatable) perspective on the relation between the two areas of law in his book: Public Procurement and the EU Competition Rules. 6 Typical non-compliances between tenderers in connection with call for tenders are the so-called bid riggings or agreements on coordination of call for tenders. The tenderers pre-fix the prices on tenders and thereby also those who are going to be awarded the contract in question. 7 See i.e. the decision of The Court of Justice in C-41/90, Höfner.

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activities as a public authority, the purchasing activity will not be regarded as an economic activity and thus not be included by the competition rules. The Court of Justice has confirmed this line of thinkning in subsequent cases, see C-113/07 P, Selex. The decisions have been thoroughly critisised by numerous commentators mentioning different arguments in support of their critique. Following arguments for leaving the FENIN reasoning and result have been advanced (among others): that the FENIN case fails to focus on the effect of the measure established through public purchasing, that the result in the FENIN case law makes poor economic sense8 and that the FENIN case is unnecessarily formalistic). On the other hand it could be argued that the critics have neglected to consider the overall balance in the internal market regulation between the rules directed at the private undertakings (competition rules) and the rules directed at public authorities (free movement rules). Through this balance the primary regulation of public authorities’ activities (including procurement) is the free movement provisions – and these provisions also constitute the legal foundation for the procurement directives. The public procurement directives include rules on exclusive rights, namely the situa- 15 tions where a special or exclusive right is awarded, and situations where a unit, which holds such a right, makes procurements. Within this field the public procurement directives supplement Article 106 of the TFEU on special and exclusive rights. The State aid rules have been cited in a few cases, and it is established in practice that 16 public procurement may not be qualified as “hidden” state aid. This was established in case 21/88, Du Pont de Nemours. Italy adopted a law which decided that all public bodies and administrations had to make 30% of their procurement of radiological films and liquids from industrial producers, farming and craft industries with plants and factories in Southern Italy (the Mezzogiorno) where these products were to be produced wholly or partly. During a case between Du Pont de Nemours Italiana SpA and Unità sanitaria locale no. 2 di Carrera, the ECJ was presented with questions regarding the Italian law’s compliance with the (then) EC Treaty’s State aid provisions.9 The Court of Justice laid down that the Treaty’s provisions on State aid under no circumstances could serve as basis for repealing the consequences of Article 28 of the Treaty (now: Article 34 TFEU). This is substantiated by the fact that both sets of rules aim at ensuring the free movement of goods between the Member States on normal competitive conditions. In C-94/99, Arge, it was determined that it did not conflict with the procurement rules that a tenderer receives State aid. The result of this decision is incorporated into the public procurement directive as Article 55 (now: Directive 2014/24 Article 69) on the handling of abnormally low tenders now includes a rule on the possibilities of rejecting abnormally low tenders from enterprises which have re-

Albert Sanchez Graells, Public Procurement and the EU Competition Rules, p. 163. Regarding the intersection between tendering procedures (and the procurement rules) and the State aid rules there are a large number of contributions from the literature, see (among other contributions): Mihalis Kekelekis & Kine Neslein, Public procurement and state aid, in Bovis (ed.), Research Handbook on EU Public Procurement Law, Chapter 15; Albert Sanchez Graells, Public Procurement and State Aid: Reopening the Debate?, in PPLR, 2012, p. 205, Battista, The respect of State Aid rules in PPPs, EPPPLR, 2007, p. 70, Michael Steinicke, Competitive neutrality – critical remarks, in Hartig Danielsen, HagelSørensen, Heide-Jørgensen & Nielsen (eds.): Festskrift til Jens Fejø; Michael Steinicke, Public contracts through procurement – can there still be state aid?, in Pros and Cons of Competition in/by the Public Sector, Konkurransverket, 2009; Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 302 et seq.; Pernille Edh Hasselgård, The Use of Tender Procedures to Exclude State Aid: The Situation under the EU 2014 Public Procurement Directives, in EPPPL, 2017, p. 16. 8

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ceived State aid. For further information, see the comment on Article 69, part I, chapter 69. Apart from the above-mentioned situations, there are a number of cases where tenders (or public procurement) influence the use of the State aid rules. First of all it could be State aid in breach of Article 107 of the TFEU if a public unit pays overprice for a service bought from a private supplier which is then favored by a pecuniary benefit. Secondly, the call for tenders is expected to involve a presumption that the agreement is based on market price and thus that no overprice for the service occurs, cf. for example C-280/00, Altmark.10 Thirdly, it is furthermore determined in i.a. T-116/01, P&O European Ferries that the condition that call for tenders which are basically not needed may be an advantage resulting in State aid even though the price which is paid for the service does not differ from the market price and even though the agreement has been entered into on market conditions.11 The advantage which results in aid is thus not overprice but, on the contrary, tendering of services which the contracting authority does not need. 0.3.2. The general principles Based on the rules of the TFEU, a number of general principles have been established with regard to public procurement specifically in connection with procurement outside the scope of the public procurement directives. Within the scope of the public procurement rules, especially the principle of equal treatment and the principle of transparency are important (for further information, see the comment on Article 18). 18 A general EU legal principle can be defined as a general proposition of law of some importance from which concrete rules derive and also that a principle determines some considerations which point in a specific direction but which does not necessarily lead to a specific result.12 Thus, a principle is very often less specific that concrete and detailed rules. A thorough analysis of the general principles within EU law shows several types of such principles and that they vary very much in terms of purpose and content. In this context, it is therefore not appropriate to try making a general definition of general principles apart from what can be derived from the above. The 1st recital of the preamble of the Public Sector Directive has indicated that the general EU legal principles, which are derived from the provisions on free movement, such as the principles on non-discrimination, equal treatment, mutual recognition, proportionality and transparency, shall apply as regards public authorities’ award of contracts. The principles of equal treatment, transparency and proportionality are explicitly regulated in Article 18. Those principles will not be subject of detailed mention in this chapter. For a thorough analysis, see the commentary to Article 18. 17

10 An apparent discrepancy exists between the two first situations. But the first situation only looks at the contract and the services exchanged, not whether the agreement was awarded via tender. The Altmark decision may indicate that the Court of Justice in general will consider the award of public contracts as an expression of exchange of services at market price. It may well be that the Altmark decision primarily should be viewed in the light of the specific situation and the specific evaluation which were needed in this situation. Thus, it may well be that if it, in connection with a specific tender, can be ascertained that the tender procedure has been faulty, it cannot unconditionally be cited that the purchase price is an expression of the real market price. Here the fact that the contract was awarded via a tender may very well not exclude that an enterprise has got an advantage (via overprice) in the sense of article 107 of the TEUF. 11 About this, see Jens Hillger, The award of a public contract as State aid within the meaning of Article 87 (1) EC, Public Procurement Law Review, 2003, p. 109 et seq. 12 Takis Tridimas, The General Principles of EC Law, p. 1.

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0.3.2.1. The non-discrimination principle One of the most important principles within EU law is the principle on non-discrimi- 19 nation. This principle is found in explicit form in Article 18 of the TFEU and the principle is the conceptual framework for the TFEU’s provisions on free movement of goods, persons, services and capital and these provisions therefore contain more specific versions of the principle.13 The provisions in question are applicable to all Member States and public bodies in the Member States. Thus, the rules on, e.g., free movement of goods must be obeyed in connection with public procurement. The provisions of the TFEU are primarily directed towards discrimination based on nationality but do also include specific rules with prohibition against discrimination based on other conditions, including gender discrimination. The concepts discrimination and differential treatment are used synonymously in the following.14 In legal terms EU defines discrimination as cases where equal situations are treated unequally or cases where unequal situations are treated equally. There is not much difference between the non-discrimination principle and the perhaps most important principle within public procurement law: the principle of equal treatment. Basically, the principles express a negative respectively a positive emphasis of the same requirement: all tenderers are subject to the same terms and conditions in connection to tendering procedures. For a more thorough description, reference is made to the comment on Article 18 (Part I, chapter 18). Contrary to these specific prohibitions against discrimination, the prohibition in Article 18 of the Public Sector Directive is general, i.e. it is not directed towards discrimination based on special conditions (for example nationality or gender) but on all other types of discrimination. 0.3.2.2. The proportionality principle 0.3.2.2.1. The proportionality principle in general The proportionality principle is a general EU legal principle which aims to ensure 20 that the decisions made and the measures initiated are proportionate compared to the desired goals. The proportionality principle is relevant in many different situations. But a special example is the judgment of whether the Member States’ measures, which may have a trade barrier effect, can be accepted because the trade barrier effect is an acceptable side-effect from the handling of a legitimate consideration, e.g. the consideration to the environment or social conditions. The proportionality principle consists of three elements: 1) an assessment of the spe- 21 cific measure’s ability to handle the consideration which is the aim of the measure, 2) an assessment of the necessity of the measure and, finally, 3) a weighing out of opposite considerations based on an additional determined value of the considerations. The ability assessment consists of a judgment of whether the measure in question is suitable for handling the consideration which the contracting authority invokes. The assessment of necessity consists of an assessment of whether the consideration in question could have been handled with less intrusive means than the measure chosen. If

See Article 34, Article 45, Article 49, Article 56 and Article 67 of the TFEU. The concepts are often used synonymously in the literature, although formally speaking discrimination sometimes is said to be unfair discrimination implying that other types of discrimination is fair. This difference is not regarded to have any significance in this connection and therefore there is no distinction between the concepts. 13

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this is the case, the measure is not proportional compared to the consideration attended to. The final weighing, or the proportionality principle strictly speaking, consists in weighing the opposite considerations against each other. Extensive trade barriers or non-compliance with the procurement rules cannot be legitimated by all types of considerations. Or in other words: Substantive breaches of prohibitions could only be legitimized in essential or significant considerations. To some extent, the type of considerations which legitimize the deviation from the public procurement directives can be different from the considerations which legitimize the deviation from the TFEU’s prohibitions. While only non-economic societal breaches can be legitimized in the last-mentioned case, there has been no delimitation of the types of considerations which are considered legitimate according to the public procurement directives. Legitimate considerations according to the public procurement directives could also be considerations related to the possibilities of reaching an appropriate agreement, for instance that a contract cannot be defined in a satisfactory manner, or that a call for tenders must be made in such a hurry that the normal deadlines cannot be obeyed. 0.3.2.2.2. The proportionality principle in relation to the public procurement situation Proportionality is a general EU legal principle, and as such it will also apply to public procurement. The principle was previously mentioned in the preamble but is now explicitly part of the provision on the general principles. The principle of proportionality has not been the explicit subject of cases before the court. The reason might be that the principle of proportionality within the area of the free movement which forms the foundation of the procurement rules has the function of balancing opposing interests and is therefore not subject to individual scrutiny. Another reason maybe that the principle has not been explicitly included in the provision relating to general principles until the 2014 directives. In relation to the public procurement directives, the proportionality principle will be applied in a way that differs from what is the case in connection with the trail of the breach of the provisions on free movement. The contracting entity must especially be expected to comply with the proportionality principle when it comes to the handling of negotiated procedures. The use of the proportionality principle is particularly required here as the contracting entity is not subject to any procedural limitations by the directive in connection with this procedure. The contracting entity must determine the procedure. The contracting entity is subject to a proportionality obligation so the contracting entity must prepare the procedure in such a way that it is possible to maintain and control the competition in connection with the negotiations. Therefore the principle of equal treatment and the principle of transparency are the pivotal principles, but the proportionality principle can have a supplementary role. Likewise, the proportionality principle must be observed in connection with the limitation of the service, on the specification of the service, in connection with the assessment of the candidate’s aptitude, in connection with the assessment of the compliance of the specifications and in all the other situations where the contracting entity determines procedures or is entrusted with autonomy. 23 Contrary to the other general principles which apply to public procurement, the proportionality principle also has a protective meaning directed at the contracting entity. The principles on equal treatment, transparency and mutual recognition all aim to ensure maintenance of competitive situations and that the contracting entity does not limit 22

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the enterprises’ possibilities of being eligible for a specific task. Contrary to this, safeguarding proportionality also protects the contracting entity from requirements which impose inordinate obligations on the contracting entity with the result that these obligations may impede the possibilities of the contracting entity of getting an adequate, applicable procedure of being awarded a contract. Like this, and in this context, the proportionality principle could be an essential counterweight compared to the other principles regarding requirements. Basically, all the contracting entity’s dispositions are subject to the proportionality principle. However, the proportionality principle is not always important; examples where the proportionality principle is not used or is less important could be cases where the contracting entity could change to negotiated procedure based on the fact that there are not (enough) admissible tenders. Practice from the Court of Justice, however, indicates that the contracting entity may also annul, cf. the Metalmecanicca case. It could be stated that as starting point, where possible, the contracting entity ought to choose the most competitive solution instead of a solution which induces less optimization of competition. Or: the least extensive (the most proportional) solution would not be annulment of the tender but rather using a more lenient solution (negotiated procedure). Although this solution seems to conform best with the proportionality principle the contracting entity will probably not be directly obliged to choose the negotiated settlement. The considerations which normally have to be balanced are, on the one side, the desire for competition through the tender and, on the other side, the objective of the contracting entity, meaning the intention to obtain a flexible and practical award of contract with the best possible contract as the result. 0.3.2.2.3. The applicability of the proportionality principle in public procurement outside the scope of the directives The proportionality principle has a two-tier application regarding public procure- 24 ment outside the scope of the directives. Firstly, the proportionality principle must be generally applied to problems involving procurement law which arise out of public procurement. Secondly, the proportionality principle is part of the review regarding the free movements which most often is the primary applicable law in connection with public procurement contracts awarded outside the scope of the directive. There is a difference between the two reviews which may have a practical significance. Before the proportionality review pursuant to the provisions on the free movements, the Court of Justice assesses the underlying objectivity of the considerations. Only societal considerations can be handled legitimately pursuant to the Treaty’s provisions on the free movements. All other considerations, including considerations which are due to purely commercial conditions or practical conditions regarding award of contract, cannot legitimate non-compliance of the prohibition against, i.a., trade restrictions. Regarding a general application of the proportionality principle in connection with public procurement, there are no limits as to which considerations are legitimate. This is also understood from the directive’s escape clauses which for in most cases concerned are of a practical nature. In connection with the general weighing of proportionality in public procurement, it is thus not the nature of the consideration but primarily its weight which is assessed. Regarding the contracts which, as a rule, are subject to the directives, but which nevertheless as a result of explicit exceptions in the directives are not covered by the procedural rules of the directives the principles also apply.

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For further information about the proportionality principle on the award of concession contracts, see the Commission’s interpretative communication EU Official journal 2000 C 121, p. 2. 0.3.2.3. The principle of mutual recognition 0.3.2.3.1. Generally about the principle of mutual recognition 01. The principle of mutual recognition has been established in connection with the rules on freedom of movement.15 The principle implies a Member State’s obligation to recognize qualifications obtained in another Member State even though the enterprise or person, who claims to possess the qualifications, does not hold the documentation otherwise required in the first Member State. The principle shall be used in all cases where qualifications are sought to be recognized in other Member States than the one where the qualifications have been obtained. 0.3.2.3.2. The principle of mutual recognition in connection with public procurement The principle is a general EU principle and therefore it is also going to be applied in connection with public procurement. In this context, the principle has a primary scope which covers the assessment of the applicant’s qualifications and the assessment of the qualifications and certifications underlying the submitted tenders.16 As mentioned above, the principle is one of the general principles to be applied with regard to public procurement, cf. the 1st recital of the preamble of the Public Sector Directive. The principle on mutual recognition concerns all types of documentation of qualifications in connection with the two evaluation phases: the (pre-)qualification and the award.17 26 In regard to the prequalification or selection, the directives lay down a range of qualifications or conditions which the contracting entity requires to be documented by means of evidence. These conditions are the applicant enterprises’ economic, financial and technical standing. Any other characteristics than the before-mentioned are not allowed to be used as background for the evaluation of the enterprises.18 In relation to the award, the contracting entity may require, e a, in principle, non-exhaustive list of requirements to be met and take the view that a, in principle, non-exhaustive range of conditions may be applied to the award of the contract. It is only to a limited degree that there are requirements to the documentation of the prequalification and the award,19 and the principle of mutual recognition is very important when it comes to public procurement. 20 Contrary to the qualitative selection (see section 58 et seq.), the quantitative selection 21 (see section 65) includes the option of selecting the enterprises on the basis of a propor25

In regard to the free movement of goods, see case 120/78, Cassis de Dijon. A range of the public procurement directives’ specific rules on presentation of requirements and criteria are thus connected to the principle of mutual recognition, see for example the rules on technical specifications in the comment on Article 42. 17 An example of the application of the principle of mutual recognition, see case 45/87, the Commission v Ireland (Dundalk). 18 The principle is also applied on documentation to be examined in order to prove that an enterprise is not in bankruptcy, has not committed criminal acts, has no debt to the public, etc. pursuant to Article 57. See the comment on this provision. 19 In relation to the documentation of technical capacity of the enterprises, see the comment on Article 58. 20 Pursuant to Article 57 specific options are listed to document compliance with the requirements. 21 Qualitative selection covers that part of the pre-qualification which concerns evaluation of whether the enterprises comply with the minimum requirements they are required; quantitative selection covers a situation, where the contracting entity is obliged to limit the number of enterprises. 15

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tional compliance of the selection criteria. In such cases, the principle of mutual recognition is less important as the principle is primarily relevant when making an absolute comparison (i.e. do the enterprises meet fixed requirements?), and not, as is the case in connection with the quantitative selection, when making a relative comparison (i.e which of the enterprises survive the absolute comparisons, which meet the requirements in the best way?). The principle on mutual recognition has already played a role in product evaluation 27 in the case of public procurement in several cases for the Court of Justice. In cases regarding comparison of products, the principle of mutual recognition forms the implicit basis for the comparison.22 The TFEU (and to a lesser degree the public procurement directives) allow reference to trade marks, as long as they are followed by the wording “or the like”.23 The wording indicates a comparison between the reference product and the products upon which the tenderers base their tenders. There should be a distinction between an actual and a formal recognition. The actual recognition is for example expressed by product comparison, i.e. it means that the actual qualities of the products are recognized. The formal recognition is expressed in connection with recognition of documentation, i.e. it is another type of documentation (e.g. foreign accounting standards or the like) which is recognized instead of the documentation which is required by the contracting entity. It must be assumed that it is the actual recognition which primarily needs to be ensured. This is due to the fact that the entire EU procurement law is based on a system of references and that specific assessments of actual qualities make the basis for the evaluation phases. In cases where it is certain that a formal recognition provides a security as regards compliance with the actual qualifications, this is adequate. However, it is not possible to require more than a formal recognition in cases where the documentation consists of European standards. In such cases, the contracting entity does is not permitted to require actual recognition. As a rule, there are no limits regarding which qualifications are subject to an evaluation of recognition. It may concern different types of documentation of accounting, documentation for linguistic qualifications, certificates, product features and the like documented by standards, authentication requirements etc. Regarding the free movements, it is especially certificates and other types of qualification documentation which have forced the application of the principle of mutual recognition. Within procurement law this category is supplemented with recognition of the physical characteristics and design of products. 0.3.2.3.3. The principle of mutual recognition outside the scope of the directives As is the case with the other directives, the principle of mutual recognition also ap- 28 plies outside the scope of the directives. This means that the principle must be observed regarding procurement which either has a contract value below the threshold value or is exempt from the directives due to other reasons. As practice also shows, there will probably not be any real difference between the evaluation of recognition within or outside the scope of the directives. The considera-

22 See the Dundalk case mentioned above, and the cases C-395/93, Commission v the Netherlands (UNIX I) and 328/98, Commission v Austria (UNIX II). 23 Within the framework of the public procurement directives only trademarks can be used as reference products if the contracting entity cannot sufficiently precisely and intelligibly describe the subject-matter of the contract, see section 42.4.

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tions mentioned above also apply for the principle on mutual recognition where the TFEU is the primary legal basis. On the application of the principle of mutual recognition in thr case of award of concession contracts, see the Commission’s interpretative communication EU Official journal 2000 C 121, p. 2. 0.3.2.4. Application of the principles outside the scope of the directive One of the questions of recent years which have attracted much attention within procurement law concerns the obligations resulting from the general principles and provisions laid down in the TFEU when procurement is made outside the scope of the public procurement directives.24 The number of procurement contracts outside the scope of the directives is large and covers a great variety of situations. A lot of questions arise in regard to purchasing procedures outside the scope of the directives. The question with most merit is: which obligations follow from the principles and provisions on free movement. Another question is whether the contracting entity in these different situations must be subject to identical obligations compared to the directives. This is answered in the following sections. The situations which are primarily legally based on the TFEU provisions and the general EU principles are partly those situations where the contracting entity is completely outside the scope of the directives and partly the situations where the contracting entity to some degree is outside the scope of the directives’ specific obligations. Previously, the most common situations outside the directives were concession contracts, B-services, contracts subject to specific exemptions, and contracts below the economic thresholds. With the recent adjustments of the procurement regime concession contracts are now subject to the procedural requirements laid out in the Concessions Directive (2014/23 – see the commentary in Part III). The distinction between Aservices and B-services has now been removed and most B-services are now subject to the full procurement procedure – only a few services are exempt through the so-called “light regime”.25 This leaves only contracts below the thresholds and contracts subject to specific exemptions outside the scope of the directives. 30 In all of these situations there is a potential for the use of the general EU principles. The basic condition is, however, that specific contracts represents a “certain cross-border interest”. In contrast to the (fairly) easily applicable economic thresholds found in the directives the assessment of when a contract has a “certain cross-border interest” is very complex and includes numerous potential elements, e.g. the subject-matter of the contract, the estimated value of the contract, the sector of the purchase and the geographical place for performing the service or works or delivering the goods.26 31 It has been argued that these different situations must be subject to different norms and obligations. See, i.a., Advocate-General Sharpston’s opinion in C-195/04, the Commission v. Finland where the transparency obligation in connection with contracts 29

24 Cf. the literature about this, including e.g. Peter Braun, A Matter of Principles, in Public Procurement Law Review, 2000, p. 39; Rhodri Williams, Contracts awarded outside the scope of the public procurement directives, Public Procurement Law Review, 2007, NA, p. 1; Totis Kotsonis, The Extent of the transparency obligation imposed on a contracting authority awarding a contract whose value falls below the relevant threshold, Public Procurement Law Review, 2007, NA, p. 71; Adrian Brown, Transparency obligations under the EC Treaty in relation to public contracts that fall outside the procurement directives, Public Procurement Law Review, 2005, NA p. 153; Carina Risvig Hansen (now: Hamer), Contracts not covered or not fully covered by the Public Sector Directive; Dacian Dragos & Roberto Caranta (eds.), Outside the EU Procurement Directives – Inside the Treaty?; Sue Arrowsmith, The Law of Public and Utilities Procurement, chap. 4. 25 The Public Sector Directive Articles 74-77 only requires a minimum level of procedural rules and thereby leaves room for the use of the general EU principles.

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which fall below the relevant threshold seems to present a special role, and Rhodri Williams,27 who seems to suggest that there may be a difference between (previous) appendix II B services on the one side and service concessions and contracts of minor economic value on the other side. However, the obligations cannot be assumed to differ depending on whether or not the exception is based on one reason or another in the public procurement directives. If, pursuant to the TFEU, the obligations differ, then this is due to the fact that within the application of the TFEU provisions there is basis for differentiating, not because a given contract according to secondary regulation (the public procurement directives) coincidentally is classified as an exception. Examples of such a situation are cases where only one economic operator can deliver the service in question. According to the public procurement directives, there is allows for excluding the most restrictive provisions of the directives in these situations and choose a more flexible type of procedure, i.e. the negotiated procedure.28 Under the auspices of the TFEU there is also basis for an exemption from the strictest TFEU obligations, but this is due to the independent or per se condition stating that there is no reason to establish a competitive situation if only one enterprise can be provider. The TFEU and the general principles have a significantly different character com- 32 pared to the detailed public procurement rules. Thus, it is unclear which exact obligations follow from these general rules. In recent years, the Court of Justice has been presented with a number of cases where exactly this theme has been in focus. These cases have provided some clarification regarding which specific obligations rest with the contracting entity when it comes to procurement outside the scope of the public procurement directives. However, the decisions still leave a number of questions unanswered. The following sections provide an analysis of the relevant decisions in order to determine which obligations rest with the contracting entity in this connection. As the Court of Justice’s interpretation of the obligations resting upon the contracting entity pursuant to the TFEU has only to a limited degree resulted in a clarification to the benefit of the contracting entities, the rulings of the Court of Justice’s have been dealt with by different interpretative sources. These have been partly provided by the literature, but primarily by different interpretative communications from the Commission. The most important ones are the Commission’s interpretative communication on community law which applies to the award of contracts which are not or are only partly included in the public procurement directives (OJ 2006/C 179/02), the Commission’s Green Paper on public-private partnerships and community law on public contracts and concessions (COM(2004)327), and the Commission’s interpretative note on concessions in OJ 2000 C 121, p. 2. Most of the decisions of the Court of Justice regarding this question have affected the 33 determination of what is the basic requirement to the contracting entity. The first significant statements on the duties of the contracting entities were presented in C-324/98, Telaustria, in which the Court of Justice determined that where the public procurement directives do not apply

26 See C-113/13, Spezzino, para. 49. A number of cases before the EUCJ has dealt with the issue of certain cross-border interest, see among others C-231/03, Coname, C-458/03, Parking Brixen GmbH, C-507/03, Commission v Germany, C-147/06 and C-148/06, SECAP SpA, T-258/06, Germany v Commission, C-91/08, Wall, C-95/10, Strong Seguranca, C-278/14, Enterprise Focused Solutions. For more, see Carina Risvig Hansen (now: Hamer), Contracts not covered or not fully covered by the Public Sector Directive, chap. 6. 27 Contracts awarded outside the scope of the public procurement directives, Public Procurement Law Review, 2007, NA, p. 1. 28 See the Public Sector Directive Article 32.

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0. Introduction “… the contracting entities concluding them are, none the less, bound to comply with the fundamental rules of the Treaty, in general, and the principle of non-discrimination on the ground of nationality, in particular. As the Court held in Case C-275/98 Unitron Scandinavia and 3-S, paragraph 31, that principle implies, in particular, an obligation of transparency in order to enable the contracting authority to satisfy itself that the principle has been complied with. That obligation of transparency which is imposed on the contracting authority consists in ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of procurement procedures to be reviewed.”29

The following debate firstly concerned a further delimitation of the transparency obligation. This obligation is discussed in, i.a., the cases C-458/03, Parking Brixen, C-231/03, Coname, and C-410/04, Comune di Bari.30 34 In the majority of these cases, the general principles (including the principle of transparency) as well as the TFEU’s provisions have been relied upon and used. Although the distinction between the application of the general principles and the TFEU’s specific rules are somewhat unclear in these cases, the distinction is nonetheless significant. This is primarily due to the fact that in cases where the Treaty’s rules are applied, there is a possibility to legitimate any breaches by referring to the exceptions belonging to the Treaty. In part these exceptions involve some explicit exceptions, for example Articles 51 and 52 in relation to the freedom of establishment (Article 49) and services (Article 56). In addition, it is also possible to legitimate breaches through certain exceptions made by the Court of Justice, see for example C-55/94, Gebhard, and case 120/78, Cassis de Dijon. Breach of the free movement rules in connection to public procurement can be seen in two different ways. On the one hand, it can be argued that the TFEU’s specific provisions to ensure the free movement traditionally include a restriction of action, i.e. restrictions against implementing conditions which could have limited the effect of the free movement. The restriction of action does not, however, seem to suffice in connection with public procurement because such infringements do not often consist of acts, i.e. call for tenders or call for competition, but, on the contrary, consist of not initiating (the right) activities. Thus, there was a need for expansion of the traditional frame of restrictions to also including a restriction of omission, i.e. a restriction against staying passive in cases where it is necessary to act in order to ensure the free movements. This duty to act is a consequence of the transparency obligation: transparency with regard to a tender cannot be established unless action takes place. Regarding the public procurement directives, this is just a natural and necessary part of the rules, but in relation to the TFEU’s provisions on free movement, the duty to act is new.31 It is clear that the provisions on free movement are less suited for judging omissions than actions. This is also confirmed in the case law of the Court of Justice which will be examined on the following pages. On the other hand it could be argued that the use of the free movement rules are basically just using the traditional discrimination test when applied to public procurement. In this light the infringement basically works as follows: if a contracting authority does not ask all relevant economic operators to enter the competition some of these will be discriminated against, since they are not given the possibilities given to those invited to join the competition. Therefore, the test is merely one of discrimination. 32 It could be C-324/98, Telaustria, paras 60-62. See furthermore the pending cases in C-507/03, the Commission v The Republic of Ireland, and C-195/04, the Commission v the Republic of Finland. 31 The duty to act is primarily seen in relation to public procurement, but also in a few other situations the Court of Justice has imposed an obligation to act, see for example C-265/95, the Commission v France and C-112/00, Schmidberger. 29

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argued, that regardless of which view is chosen the practical problems seem to be identical in regard to applying the free movement rules to public procurement. 0.3.2.4.1. General considerations The following sections introduce the obligations which are derived from different 35 sources. But firstly an overview of some basic conditions which are significant for the application of the TFEU’s provisions and the general principles is provided. Overall, the TFEU’s provisions apply to all procurements (and other transactions) on a market,33 including (and maybe particularly) procurement outside the scope of the public procurement directives. Basically, there is no difference as to which treaty obligations are imposed on the contracting entity irrespective of the reason for a given contract not to be subject to the public procurement directives. One of the most important instruments for determining the scope of application of 36 the public procurement directive is the threshold values indicating the lower level indicating when a public contract (in the context of the directive) is interesting at a European level. In continuation hereof it has sometimes been considered whether there was (or should be) a de minimis threshold for the contracting entity’s obligations in relation to the TFEU’s rules so far as the application on public procurement is concerned. It is obvious that a de minimis threshold could be needed in relation to public procurement. In connection with, e.g., a procurement at the value of Euro 10,000.00, a contracting entity might otherwise be obliged to initiate a competitive procedure resulting in a level of cost which could easily exceed the value of the contract value thus causing a disproportionate administrative burden as a result of the procurement. Unfortunately, there have not been any signs of such a de minimis threshold until recently. In case C-231/03, Coname,34 the Court of Justice found: ”With regard to the case in the main proceedings, it is not apparent from the file that, because of special circumstances, such as a very modest economic interest at stake, it could reasonably be maintained that an undertaking located in a Member State other than that of the Comune di Cingia de’ Botti would have no interest in the concession at issue and that the effects on the fundamental freedoms concerned should therefore be regarded as too uncertain and indirect to warrant the conclusion that they may have been infringed.”35 In its interpretative communication on public procurement outside the scope of the 37 Public Sector Directive, the Commission refers to Coname’s reservation about applying the Treaty’s rules in certain situations stating that this assessment must be made involving the circumstances significant for that specific situation, such as the subject-matter of the contract and expected value and the special conditions which are in evidence for the sector in question (for example the size, structure, commercial practice of the market) and the geographical place to execute the contract.36 According to the Commission, it is the contracting entity itself which has to assess whether there is a European interest in the specific procurement.

32 See C-324/98, Telaustria, paragraph 60 and 61, C-231/03, Coname, paragraph 17, and C-119/06, the Commission v Italy, paragraphs 63 et seq. 33 See, however, Articles 346 and 347 of the TFEU and art. 15 of the Public Sector Directive (see comment on this in Part I). 34 The case concerned a service concession which was excluded from the previous services directive. 35 Paragraph 20. 36 Interpretative communication on award of public contracts outside the scope of the public procurement directive, section 1.3.

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The Commission furthermore states that if the contracting entity concludes that the contract in question is important for the internal market, it must award it in accordance with the basic norms derived from community law. 38 Another question of significant relevance for the application of the rules on free movement is whether a contract is awarded to another unit or whether it is just an internal organization of the execution of the assignment. In case of the last-mentioned situation, corresponding to the extended in-house doctrine, the rules on free movement cannot be used. This is determined in C-458/03, Parking Brixen. With regard to the assessment of when an internal transfer is taking place the assessment will be the same as the one used within the scope of the directive, cf. C-107/98, Teckal. Thus decisive is whether the TFEU’s provisions are applied, whether the contracting entity assigns a task to a unit which it exercises control over just as it exercises control over its own departments and where the unit in question handles the majority of its activities together with the contracting entity.37 With the new procurement directives the issue of in-house awarding of contracts is now explicitly regulated in the provisions (e.g. Directive 2014/24 Article 12). The comprehensive case law of so-called extended inhouse awards (the Teckal-case) and the exception for horizontal agreements (the Hamburg-case law) are still applicable to public contracts outside the scope of the directives (and for the Defense and Security Directive, 2009/81, since this directive does not contain any specific rules on in-house awards). 0.3.2.4.2. The basic principles 39

As mentioned above, the Telaustria case determines that the contracting entities are obliged to observe the TFEU’s basic rules in general and the principle of prohibition of discrimination based on nationality in particular. The same case indicated that this especially implies the obligation to ensure transparency in connection with all contracts concluded (“for any potential tenderer”) and at the same time to ensure transparency in the procedure itself. References are made to the general principles, including the principle of transparency and the principle of prohibition of discrimination based on nationality. Whereas it was clear that these principles apply to procurement outside the scope of the directive, it is less clear regarding the principle of equal treatment. Although the public procurement directives do not apply directly below the threshold values, it must be assumed that the principle of equal treatment to some degree does. This is so because the principle of equal treatment is a general EU (procurement) principle and thus must in general apply to procurement in the Member States even though the contract value is below the threshold value and even though other exceptions from the public procurement directives apply. The EU general principles reflect so important and basic conditions that, in areas regulated by EU law, it would not be correct to dispense with the rules just because you find yourself below a specific economic limit. Although not quite clarified whether the principle of equal treatment in its present shape as reflected in the public procurement directives is applied below the threshold values,38 the contracting body is obliged not to discriminate enterprises in connection with public procurement below the threshold values, cf. C-324/98, Telaustria. The public procurement directives include a range of provisions containing explicit exemptions. This, for example, is the case with regard to Article 15 of the Public Sector C-458/03, Parking Brixen, paragraph 62. Based on the opinion of the Court of Justice in Parking Brixen, paragraph 28, it must be assumed to be the case. 37

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Directive on defence exception and Article 32 on negotiated procedure. While in the latter case the principle of equal treatment is applied it is more doubtful whether the same applies in the former case. The following deals with the most important questions regarding the application of the TFEU’s rules and the (other) general principles reviewed primarily on the basis of the case law of the Court of Justice. Case law has focused very much on transparency. This case law is divided into two groups: the first one concerns the question about disclosure of the procurement process while the other group concerns requirements with regard to the procedure of award as such. The cases before the Court of Justice have primarily belonged to the first category. 0.3.2.4.3. Transparency of the tendering process The principal element of one part of the case law, which, i.a., is evident in Telaustria is 40 the need to ensure transparency about the procurement phase. Even after several decisions from the Court of Justice it is unclear exactly which requirements are necessary in order to establish transparency. Whereas the statements by the Court of Justice statements have been unclear the Commission’s statements have added clarity regarding the contracting entity’s obligations outside the scope of the public procurement directive. 39 Overall, the legal status can be summarized as follows: Basically, identical obligations apply to creating transparency of the procurement irrespective of whether it concerns specific exemptions or contracts that fall below the threshold values. The contracting entity must make preliminary assessments to find out whether the procurement is of interest to economic operators from the other Member States. Based on this assessment, the contracting entity must choose the model appropriate for the specific contract in order to establish transparency. The contracting entity’s specific obligations to create transparency has not yet been determined with certainty, likewise the lower limit for the creation of transparency has not been clearly outlined. The overall spectrum for the TFEU obligations probably covers activities ranging from an obligation to make an EU adequate publication to a duty to contact a number of economic operators before a contract is awarded. If it can be established that there is no certain cross-border interest in connection to a specific procurement, there will be no European obligation to create transparency. In its communications on contracts which are not or are only partially covered by the public procurement directives the Commission refers to the practice of the Court of Justice and indicates that the basic principles presuppose a publication. This is probably correct. Previous case law (Telaustria) shows that it changed from referring to establishment of transparency to requiring publication (Coname). The purpose of requiring publication is to provide an enterprise in another Member State access to the necessary information regarding the contract before it is awarded thus enabling the enterprise to show its interest in the contract in question. In continuation of the obligation to advertise the intent to enter into a contract it is relevant to discuss the obligations arising as a consequence thereof. It is especially interesting whether an actual obligation to establish a competitive tender procedure follows from an obligation to advertise the contract. According to the opinion of Advocate General Sharpston in C-195/04, the Commission v Finland,40 the requirement of transparency does not necessarily result in publica39 See the Commission’s interpretative communication on public procurement outside the scope of the public procurement directive, section 2.1.1. 40 In the judgment of the Court of Justice of 26 April 2007, the Court of Justice rejected the case as the Commission had not clarified how Finland ought to have ignored the community law.

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tion despite the Court of Justice’s statement. The Advocate General bases this on the difference of the linguistic versions. It is furthermore the opinion of the Advocate General that she does not agree with the Commission in using detailed community requirements in connection with publication of contracts of low value which fall outside the scope of the public procurement directives. In support of this the Advocate General refers partly to the subsidiarity principle and partly to the fact that the introduction of such obligations create clear legal uncertainty.41 The Advocate General’s answer is that the threshold values of the public procurement directives must also work as threshold value for the application of the treaty obligations, including the rules on the freedom of movement, cf. point 85 in the opinion of the Advocate General. According to the Advocate General this means that contracts which fall below the threshold values must be subject to the level of the publicity requirements which the Member States find appropriate. This model cannot be accepted. Beyond the fact that this solution allows the scope of application for the TFEU’s provisions to be limited by secondary legal act, which in itself is a serious construction, it is not just the public procurement directives’ threshold values themselves which become significant for the delimitation of the TFEU’s provisions and the general principles. As the application of the threshold values depends on, i.a., the delimitation between services, goods and construction work this distinction also had to manifest itself at treaty level in order to be able to use the threshold values. The obvious way to delimit these types of tasks from each other is to seek inspiration in in the rules of the public procurement directives on distinction between these types of tasks, or even more easily: simply copying these rules for use within the TFEU’s area as well. If Advocate-General Sharpston’s opinion is chosen, this will give rise to a range of practical and theoretical problems relating to the relationship between the TFEU and the secondary regulation of the area for public procurement, i.e. the public procurement directives. In the light of these facts, the Advocate-General’s opinion can not be accepted. That said, it is not disallowed that the point made by the Advocate-General is right in so far as a separate de minimis assessment for the TFEU’s provisions on free movement causes an uncertain legal position. One of the major problems is exactly that there are no suitable tools making it possible to indicate the relevant level for European interest for a given procurement. According to the Coname case, the contract must be published, but this does not necessarily have to be combined with a tender. In C-458/03, Parking Brixen, however, it is stated that it is a duty to call for tenders.42 These statements, which appeared intermittently, are difficult to unite. In the Parking Brixen case, the Court of Justice refers to Coname, but not in relation to the procurement obligation. Potentially, the opinion in Parking Brixen can just be regarded as a remark which determines some sort of exposure to competition without actually requiring a tender. However, there is a chance that the focus on publication has automatically resulted in the assumption that this would start a tender. Moreover, it can be established that the Court of Justice was composed of five members in the Parking Brixen case whereas there were 13 members in the Coname Advocate General Sharpston’s opinion, points 87-89. See paragraph 50 in which it is stated: “It is for the concession-granting public authority to evaluate, subject to review by the competent courts, the appropriateness of the detailed arrangements of the call for competition to the particularities of the public service concession in question. However, a complete lack of any call for competition in the case of the award of a public service concession such as that at issue in the main proceedings does not comply with the requirements of Articles 49 TFEU and 56 TFEU any more than with the principles of equal treatment, non-discrimination and transparency.” (Our italics). Whereas the question is not relevant in regard to services concessions since these have been covered by the Concessions Directive 2014/23, the statement will presumably still have importance in regard to other situations exempted from the scope of the directives. 41

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case. The core grounds for the decision in both cases have subsequently been quoted in other cases of the Court. 43 Although it can be demonstrated that there is a difference in the wording between Coname and Parking Brixen, it is doubtful whether there actually is any difference between the obligations which can be derived from the two decisions. In other words, does it make any difference that a procurement obligation is expressly determined in Parking Brixen given that a publication together with the application of the general principles in reality triggers the initiation of a similar arrangement in case more enterprises are interested in the published contract? Undoubtedly, the purpose of publication is to inform the enterprises that procurement takes place so these enterprises can show their interest in being awarded the contract to the contracting entity In case more than one enterprise contacts the contracting authority, the contracting authority is obliged to make rules for the further development of the awarding procedure. The obligations in this situation (see section 0.3.2.4.4.) include, i.a., a listing of the rules governing award of the contract, equal treatment of all interested parties and presentation of criteria for any selection and the criteria for award of the contract. This description covers the type of procedure which is known from, i.a., the public procurement directives. It is incontrovertibly a similarity-based competitive procedure which is initiated via announcement, i.e. via a broad application to the public. Although the procedure is called a tender or something else, it is a fact that there is a clear obligation to make some kind of competitive procedure in connection with the award of the contract. De facto, Parking Brixen and Coname express uniform obligations for competitive tendering, the terminology is just different. A less comprehensive model than the outlined requirement for publication has been 41 introduced in the opinion of Advocate General Fennelly in C-324/98, Telaustria, and repeated in the opinion of Advocate General Sharpston in C-195/04, the Commission versus Finland. Advocate General Fennelly suggests that it would be adequate for the contracting entity to fulfill the transparency requirement that it contacts a range of enterprises, including some but not all from the contracting authority’s Member State in order to make the enterprises aware of the intended procurement. The Court of Justice has not decided expressly on this method, but with the apparent request for publication it must be assumed that the Court of Justice does not agree with this approach. Contrary to the Court of Justice, the Commission has strongly disapproved of Fennelly’s opinion. In the interpretative communication on public procurement outside the scope of the directive, the Commission states: “The Commission is of the view that the practice of contacting a number of potential tenderers would not be sufficient in this respect, even if the contracting entity includes undertakings from other Member States or attempts to reach all potential suppliers. Such a selective approach cannot exclude discrimination against potential tenderers from other Member States, in particular new entrants to the market.” 44 In addition to this model, the Commission rejects all forms of “passive” publicity, i.e. where a contracting entity abstains from active advertising but replies to requests for information from applicants who found out by their own means about the intended contract award. The next question is which medium complies with the request for publication accord- 42 ing to the Court of Justice’s practice. The Court of Justice has not decided expressly on this matter.

43 The result in the Parking Brixen case is for example repeated in C-410/04, Comune di Bari, paragraph 22, where the result in the Coname case is met again in, i.a., the advocate-general’s opinion in C-507/03, the Commission v Republic of Ireland. 44 Interpretative communication section 2.1.1.

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Based on the Court of Justice’s opinion about the purpose of the transparency obligation, namely to make participation possible for any potential tenderer within EU, it must basically be assumed that the medium for publication must cover the entire EU. This means that there is only few available media to be used. The obvious choice is the Official Journal of the European Union providing the opportunity to make announcements which are not mandatory, see the comment on Article 51, para. 6. Such an announcement, however, requires more preparatory work compared to an announcement in regional journals. Furthermore, for many minor contracts that fall below the threshold values, such an announcement is not proportionate to the expected group of interested entities. These announcements are primarily read by enterprises which are interested in larger tasks. There is an actual risk that the local enterprises, which typically are more interested in the minor contracts, do not regard the Official Journal of the European Union as their primary (or preferred) information channel. A more practical approach will imply the use of media which do not cover the entire EU area, but which has a certain regional coverage. In its interpretative communication, the Commission has assessed a range of different types of media in relation to compulsory disclosure. The Commission suggests that the choice of media must reflect the significance of the contract for the internal market. Before a publication, it is thus the contracting entity’s responsibility to assess the size of the interest and in continuation hereof to choose the right medium.45 It is the opinion of the Commission that publication on the internet is a relevant option for the contracting entity. The Commission especially emphasizes publication on the contracting entity’s own website, for example as part of the contracting entity’s buyer profile, or web portals intended for publication of public contracts. Such web portals may have different functions providing the enterprises with the possibility of becoming acquainted with procurement which has the special features which the enterprise in question finds interesting. In addition to the internet, the Commission also finds it legitimate to publish in national official journals/law journals, national journals specializing in public procurement announcements, newspapers with national/regional coverage and even in the circumstances local means of publication.46 It must be presumed that especially the last mentioned only can be used in cases where the contracting entity estimates a very limited European interest. In reality, it is probably only very few foreign enterprises which are updated about other local markets via local journals etc. It is vital that any potential tenderer/applicant can size up an adequate impression of the contract to be able to decide whether he will show interest in the contract. 47 It may be discussed whether all the above-mentioned means of publication comply with this as, e.g., a publication of the intention about awarding contract in a national journal has a limited range with respect to enterprises from other countries. 43 In relation to the content of such announcements, the Court of Justice has not expressed itself clearly. The Commission has expressed its opinion in its interpretative communication, but bases its acceptance of the opinion of the Court of Justice opinion in paragraph 21 in the Coname case according to which there is no requirement of a ”formal” tender. As mentioned above, the Court of Justice has not been clear about this (cf. the subsequent opinions in Parking Brixen and above in this section). And as mentioned as well, in case several enterprises show interest the contracting authority would Section 2.1.2. of the interpretative communication. The Commission defines local media as local papers, municipal advertising journals and even notice boards, cf. interpretative communication outside the scope of the directives, section 2.1.2. 47 The Telaustria case, paragraph 62, and the Parking Brixen case, paragraph 49. 45

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have to establish some sort of competition about the contract. On this basis, the Commission concludes that the content of such announcements can be limited to a short description of the most important information about the specific contract and information about the award method and an invitation to contact the contracting entity. If there is a selection process, the contracting authority also has to state how the enterprises are selected.48 This must be presumed to require a specification of the procedure for the selection as well the criteria for the selection. As mentioned above, not all assignments need to be published. An announcement is 44 not necessary if no type of joint European interest in the assignment can be expected due to a low value. As a supplement to this, the Commission presumes that in situations where no competitive situation can be established, then there is no obligation to publish. According to the Commission, the most important cases concern situations of extreme urgency due to unforeseeable events not predicted by the contracting entity. 49 The same applies for those contracts which for technical or artistic reasons or for reasons connected with the protection of exclusive rights can be executed only by one particular economic operator.50 Thus, the Commission links the directives’ derogations with the derogations which must apply for primary community law. It is vital to emphasize that the scope of the primary EU law should not be limited via the secondary EU law. The following could be considered: What is the significance in relation to the strength of the obligations which are imposed through the TFEU’s rules and the general principles that, in general, there is a difference in the strength of the obligations pursuant to the Public Sector Directive and the Utilities Directive, respectively, with the most lenient rules being found in the latter directive. A picture that does not appear to be clearer when also including the defense and security Directive 2009/81 and the Concessions Directive 2014/23. Those circumstances must be assumed to have no or very little significance in relation to the determination of the obligations according to the TFEU. The reason for this is that the more lenient rules in the Utilities Directive are due to the fact that this directive partly targets public units partly private units where the Public Sector Directive solely targets public entities. On application of the TFEU for units included by the Utilities Directive, there will (depending on which TFEU provision it concerns) be a distinction between public and private units. Private units will not be included by the provisions. There is, however, no reason to believe that public units included by the utilities directive will be subject to other obligations than public units included by the Public Sector Directive. The differences between the entity’s obligations in relation to the secondary regulation level cannot be expected to be significant in relation to the obligations on the basis of the primary EU law (i.e. the TFEU and the general principles). 0.3.2.4.4. Transparency regarding award of contract The next step in the process is the contracting authority’s obligations during the ten- 45 dering procedure itself. The Court of Justice has commented less on this part of the process compared to the question of publication.51 In its interpretative communication on award of public contracts outside the scope of the Public Sector Directive, the Commission has also assessed the demands to be made to the contracting entity in connection 48 The Commission’s interpretative communication on contracts outside the scope of the directive, section 2.1.3. 49 Situations equivalent to the ones covered by the Public Sector Directive Article 32. 50 The Commission’s interpretative communication and award of public contract outside the scope of the directive, section 2.1.4. 51 See especially case C-234/03, Contse.

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with the procedure itself. It is no surprise that the general principles (involving procurement rules) also apply to this part of the procurement. Pursuant to the principle of transparency, the procedure for the assignment must be described for the participating enterprises. This also applies in relation to the criteria for any selection of the enterprises and the criteria for the assignment of the task. Likewise, the principle of equal treatment, the principle of non-discrimination, the proportionality principle and the principle on mutual recognition must be observed by contracts outside the scope of the directives. It is the intention that all enterprises interested in the contract should be enabled to compete on equal and fair footing.52 The Commission states that observance of these principles imply equal access for economic actors from all Member States, equal recognition of certificates and other documentation of formal qualifications, adequate deadlines and a transparent and objective approach to the process. 46 Such a competitive procedure allows the contracting entity to assess partly the enterprises and partly the tenders themselves. The approach outside the directives will be more lenient than the one found in the procurement directives. The contracting entity must be assumed to have a large margin on determination of these criteria compared to what is the case according to the public procurement directives. As part of the contracting entity’s selection of enterprises for further participation in the competitive process the Commission considers the same requirements, as stated in Article 65 of the Public Sector Directive, to be in force outside the scope of the directives. Procurement outside the scope of the directives must be based on a transparent and non-discriminatory procedure and by this the Commission, as an example, indicates the objective criteria as the applicants’ experience with the sector in question, the applicants’ size and infrastructure or their technical and professional knowhow. According to the Commission, it is also possible to draw lots. It must be presumed that this is also possible with regard to procurement outside the scope of the directives whereas it is more doubtful within the scope of the directive (for further information, see the comment on Article 65 in Part I). 47 On the award of the contract, the basic principles are the most important requirements – for example all tenderers must get access to the same amount of information and no tenderer may get any unjustified advantages in connection with the award.53 48 In addition to the conditions mentioned in the Commission’s communication, a number of other procurement-related elements which have not been considered exist. For example; it is not clear whether it is required to reject a company which has acted as advisor (incapacity), whether negotiation is possible and whether the contracting entity may annul an initiated tender. These elements are important within the field of the public procurement directives, and as a result they are an incorporated practice for most contracting entities when awarding contracts. Thus, it is interesting to see how these elements are coped with in relation to award of contracts outside the scope of the public procurement directives. It must be assumed that negotiations can be conducted in connection with procurement outside the scope of the directive as the prohibition against negotiations, which within the scope of the directives is linked with the principle of equal treatment, does not mean that the principle of equal treatment in itself prohibits negotiations (if this was the case, the procedures on negotiated procedures and competitive dialogue would conflict with the principle of equal treatment). The general principles and the provisions of the TFEU set a limit as to how the contracting entity may behave in relation to negotiations (as is the case within the scope of the directive with ne52 The Commission’s interpretative communication on award of public contracts outside the scope of the directive, section 2.2.1. 53 Interpretative communication on award of public contracts outside the scope of the directive, section 2.2.3.

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gotiated procedure, competitive dialogue and innovation partnerships). On annulment the answer is found in the present case law of the Court of Justice, see Hospital Ingenieure, in which the Court of Justice stated that it is the general principles and the TFEU’s rules which set the limit for an annulment. As a consequence the answer is that (of course) a contracting entity may cancel a competition about a contract as long as there is transparency and as long as there is no discrimination. As regards the question about incapacity the Court of Justice (in C-21/03 and 34/03, Fabricom, see the commentary to Articles 40 and 41 in Part I) has made a link between counseling and the discrimination which is also relevant in relation to the application of the TFEU’s rules. It might be established that in cases where the TFEU constitutes the basis of regulation, the opportunity for negotiation will generally be better than within the scope of the directives where it may be expected that the opportunity to annul and handle incapacity will probably be similar to the situation within the scope of the public procurement directives. Only few decisions exist where the obligations outside the scope of the public pro- 49 curement directives have been examined. Compared to publication more clarifying case law is needed.54 In C-234/03, Contse, the Court of Justice had to decide on a tender which was not subject to the services directive then in force. The tender concerned services of home respiratory treatments and other assisted breathing techniques. The tendering specifications laid down admission conditions and evaluation criteria. The admission conditions stipulated that the tenderer must have at least one office open to the public for a minimum of eight hours a day, morning and afternoon, five days a week, in the provincial capital concerned. The evaluation criteria concerned a number of economic and technical characteristics for which points were awarded. In this case, out of a maximum of 140 points which might be awarded, 40 related to the financial aspect of the tender and 100 concerned its technical evaluation criteria. Several questions were submitted to the Court of Justice. First, the Court of Justice was asked whether, i.a., the provisions in Articles 18, 49 and 56 of the TFEU preclude a contracting authority from laying down, in the tendering specifications, the special administrative provisions and the technical characteristics for a public contract for the provision of health services of home respiratory treatments and other assisted breathing techniques an admission condition which requires the tenderer at the time the tender is submitted to have an office open to the public in the capital of the province where the service is to be provided. Second, the Court of Justice was asked whether the same rules which precluded a determination of evaluation criteria which prioritized tenders from companies which 1) exercises control of own oxygen producing, conditioning and bottling plants situated within 1,000 kilometers of the province where the service was provided, 2) which already exercised control of offices open to the public in other specified towns in that province, or which 3) already provided the service in question. In paragraph 79 the Court of Justice established that “Article 49 EC [Article 56 TFEU] precludes a contracting authority from providing in the tendering specifications for a public contract for health services of home respiratory treatment and other assisted breathing techniques, first, for an admission condition which requires an undertaking submitting a tender to have, at the time the tender is submitted, an office open to the public in the capital of the province where the service is to be supplied and, second, for evaluation criteria which reward, by awarding extra points, the existence at the time the tender is submitted of oxygen production, conditioning and bottling plants situated 54 Among previous decisions are case 45/87, The European Commission v Republic of Ireland (Dundalk), case C-243/89, the Commission v Kingdom of Denmark (the Storebaelt case), and C-359/93, the Commission v Kingdom of Holland (UNIX).

Michael Steinicke

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0. Introduction

within 1,000 kilometres of that province or offices open to the public in other specified towns in that province, and which, in the case of a tie between a number of tenders, favor the undertaking which was already providing the service concerned, in so far as those elements are applied in a discriminatory manner, are not justified by imperative requirements in the general interest, are not suitable for securing the attainment of the objective which they pursue or go beyond what is necessary to attain it, which is a matter for the national court to determine.” 0.3.3. Other sources of law 50

In addition to the TFEU and the public procurement directives a number of other European rules exist and influence public procurement within EU. A range of soft law sources are relied on within EU law. Regarding the procurement rules, i.a. a joint declaration on the possibilities of negotiating among the parties has been passed, and likewise the possibilities of technical dialogue are regulated by use of recitals. It must be emphasized that neither declarations nor recitals in the public procurement directives may be assumed to have the same legal value as the text of the directive. At the same time it is evident that declarations and recitals are significant as an interpretative contribution when applying and interpreting the provisions of the directives.55 Relevant soft law is included below in connection with the relevant provisions in the directive. The interpretation by the Court of Justice of the public procurement rules constitutes an authoritative interpretation of the rules. Thus case law from national enforcement entities must respect the case law of the EU Court of Justice. 0.3.4. International law 0.3.4.1. Government Procurement Agreement

51

Outside the EU there is also a range of public procurement rules which are significant for public procurement made by EU Member States. The most important set of rules is the World Trade Organizations’ public procurement rules Government Procurement Agreement (hereinafter: GPA).56 This set of rules is significant in several different situations where tenderers from other members of the agreement, (non-EU members) participate in tenders outside the scope of EU. In the template for the contract notice, the contracting entity must consider whether the contract which has been tendered is included by the GPA agreement. If this is the case, it will be possible for enterprises from other signatory states of the GPA agreement to participate in the competition about the contract. This also means that the GPA agreement must be complied with in relation to these enterprises. Basically, however, most rules in the public procurement directives and the GPA, respectively, are more or less identical and consequently compliance with the EU rules ensures compliance with the GPA rules. The fact that the contract is included by the GPA agreement has no significance for the enterprises from the other EU countries. Besides the GPA rules there are a number of additional provisions or requirements when initiating a tendering procedure in accordance with other customary organizations, e.g. tenders in connection with the World Bank’s financing of projects.57 The public procurement directives include a range of rules which regulate the relationship between the directives and the GPA See for example C-243/89, the Commission v Denmark (the Storebaelt case). About GPA, see Hoekman og Mavroidis (eds.), Law and Policy in Public Procurement; Sue Arrowsmith, The Government Procurement in the WTO; Michael Steinicke in Birgitte Egelund Olsen et al., WTO in a European Perspective, chap. 12. 55

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rules. Thus, there is a connection between some of the rules of the public procurement directives and the GPA provisions. Below, the GPA provisions are shortly introduced. A comparison of the public procurement directives and the GPA shows significant similarities between the two (or five) sets or rules. That goes, for example, for the threshold values in the so-called Special Drawing Rights (SDR) which is a common entity for the public procurement directives and GPA.58 In addition, the directives have been adjusted to conform to the GPA agreement in a substantive sense. An important addition has been the rules on technical dialogue which was incorporated into the new public procurement directives (previously established in 97/52/EC and 98/4/EC). It is characteristic of the GPA that this agreement, contrary to the public procurement directives, to some extent is a bit more »loose«, i.e. in practice independent from the basic agreement which WTO is based upon, namely the General Agreement on Tariffs and Trade (GATT) which in connection with the reception of the WTO was modified compared to the original agreement from 1947. The present agreement is often called GATT 94. The GPA rules are thus not subject to the most important principles for the WTO collaboration as they are stated in GATT 94.59 The consequence is, however, less significant as provisions have been incorporated into the GPA itself which correspond with these principal rules. WTO is based on four pillars:60 1) the unconditional most-favoured-nation obligation, 2) tariff bindings, 3) the national treatment obligation, and 4) the elimination of quantitative restrictions. In relation to the contract award situation the two most important principles are the most-favoured-nation principle and national treatment obligation. The most-favorednation principle (MFN) is available in the GATT 1994 article I and requires import from a WTO state to be treated in the same non-discriminatory way as it treats import from other WTO states. The provision is unconditional which means that the obligation is used with regard to import from another WTO state irrespective of the origin of the product. A requirement corresponding to the GATT Article 1 is available in the Government Procurement Agreement, cf. below. The national treatment obligation requires imported products to be treated in the same way as nationally produced products, cf. GATT 1994, Article III. A provision which corresponds to this is available in Government Procurement Agreement, Article III, see below. Most WTO agreements are characterized as multilateral agreements (all Member States have accepted the agreement). The GPA agreement is characterized as plurilateral agreement. This means that only WTO Member States which explicitly have accepted the GPA agreement may rely on this agreement. As regards the GPA agreement, the concept of a contracting entity primarily includes national bodies. According to the public procurement directives, the concept of contracting entity is wider (see the comment on Article 4 in the Utilities Directive 2014/25 in Part II). To the contrary there seems to be much consistence between the contracts which are put up for tender according to the two sets of rules. There is also consistency 57 About World Bank tender requirements in connection with public projects, see www.worldbank.org/ html/opr/procure/index. Under UN there is also a model showing how to draw up national or regional tenders; it is not an obligation to follow the model, see UNCITRAL Model Law on Public Procurement of Works, Services and Goods. The Model Law is available on www.uncitral.org. 58 Despite the focus on the WTO rules, the legislator actually succeeded in determining that the threshold values for the EU rules were too high in relation to GPA in connection with the new directive. The error was corrected with regulation 1874/2004 of 28 October 2004. 59 These exclusions are available in GATT 94 art. III: 8(a) and art. XVIII: 2. 60 Bhala and Kennedy, World Trade Law, p. 4 and 59 et seqq. About the foundation of WTO in general, see Matsushita, Schoenbaum and Mavroidis, The World Trade Organization (2003).

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between the rules on technical dialogue,61 but there are some differences between the GPA rules on negotiation where the negotiation is allowed to a larger extent in connection with the restricted procedure (cf. Article XIV) and the equivalent European rules according to which the negotiation is not allowed in connection with public procurement and restricted tender (see the comment on the principle of equal treatment, Article 18, Part I of this commentary). Regarding the selection criteria for contractors and award criteria there is some degree of uniformity between GPA and the public procurement directives. But there are differences particularly regarding the selection criteria. The primary difference regarding the award criteria is as follows: whereas an agreement according to the public procurement directives can be awarded according to the criterion the economically most advantageous offer (which covers three different types of award criteria), the GPA rules only require that the award must be based on the most advantageous offer. With the recent development in the award criteria within the EU procurement rules (introducing the best relation between price and quality) the difference is probably just one of words more than substance. Both sets of rules contain rules on the application of standards including a prohibition against application of reference products unless special circumstances are met. Moreover the GPA agreement is characterized by a number of provisions which do not exist in the public procurement directives. The GPA, i.a., requires special considerations in connection with developing countries, cf. Article V. The GPA agreement does not include any specific rules on establishment of an enforcement regime, but violation of GPA can be brought before the ordinary enforcement regime for violation of the WTO rules. The rules are described in an appendix to the WTO agreement Dispute Settlement Understanding (DSU). In connection with the most recent public procurement directive there is a range of rules which do not exist in the GPA and where it is doubtful whether the rules in question are in accordance with the GPA. For example, it is unclear whether tenders according to the GPA can be terminated by means of an electronic auction.

61 The rules on technical dialogue in recital 8 in the preamble to the previous public procurement directive (2004/18) was incorporated with a view to harmonize with GPA. The provisions are found in the current Public Sector Directive Articles 40 and 41.

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PART I The Public Sector Directive 2014/24/EU DIRECTIVE 2014/24/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 53(1), Article 62 and Article 114 thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Economic and Social Committee1, Having regard to the opinion of the Committee of the Regions2, Acting in accordance with the ordinary legislative procedure3, Whereas: (1) The award of public contracts by or on behalf of Member States’ authorities has to comply with the principles of the Treaty on the Functioning of the European Union (TFEU), and in particular the free movement of goods, freedom of establishment and the freedom to provide services, as well as the principles deriving therefrom, such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency. However, for public contracts above a certain value, provisions should be drawn up coordinating national procurement procedures so as to ensure that those principles are given practical effect and public procurement is opened up to competition.

(2)

Public procurement plays a key role in the Europe 2020 strategy, set out in the Commission Communication of 3 March 2010 entitled ‘Europe 2020, a strategy for smart, sustainable and inclusive growth’ (‘Europe 2020 strategy for smart, sustainable and inclusive growth’), as one of the market-based instruments to be used to achieve smart, sustainable and inclusive growth while ensuring the most efficient use of public funds. For that purpose, the public procurement rules adopted pursuant to Directive 2004/17/EC of the European Parliament and of the Council4 and Directive 2004/18/EC of the European Parliament and of the Council5 should be revised and modernised in order to increase the efficiency of public spending, facilitating in particular the participation of small and medium-sized enterprises (SMEs) in public procurement, and to enable procurers to make better use of public procurement in support of common societal goals. There is also a need to clarify basic notions and concepts to ensure legal certainty and to incorporate certain aspects of related well-established caselaw of the Court of Justice of the European Union.

OJ C 191, 29.6.2012, p. 84. OJ C 391, 18.12.2012, p. 49. 3 Position of the European Parliament of 15 January 2014 (not yet published in the Official Journal), and decision of the Council of 11 February 2014. 4 Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors (OJ L 134, 30.4.2004, p. 1). 5 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 (OJ L 134, 30.4.2004, p. 114). 1

2

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DIRECTIVE 2014/24/EU (3)

(4)

(5)

When implementing this Directive, the United Nations Convention on the Rights of Persons with Disabilities6 should be taken into account, in particular in connection with the choice of means of communications, technical specifications, award criteria and contract performance conditions. The increasingly diverse forms of public action have made it necessary to define more clearly the notion of procurement itself; that clarification should not however broaden the scope of this Directive compared to that of Directive 2004/18/EC. The Union rules on public procurement are not intended to cover all forms of disbursement of public funds, but only those aimed at the acquisition of works, supplies or services for consideration by means of a public contract. It should be clarified that such acquisitions of works, supplies or services should be subject to this Directive whether they are implemented through purchase, leasing or other contractual forms. The notion of acquisition should be understood broadly in the sense of obtaining the benefits of the works, supplies or services in question, not necessarily requiring a transfer of ownership to the contracting authorities. Furthermore, the mere financing, in particular through grants, of an activity, which is frequently linked to the obligation to reimburse the amounts received where they are not used for the purposes intended, does not usually fall within the scope of the public procurement rules. Similarly, situations where all operators fulfilling certain conditions are entitled to perform a given task, without any selectivity, such as customer choice and service voucher systems, should not be understood as being procurement but simple authorisation schemes (for instance licences for medicines or medical services). It should be recalled that nothing in this Directive obliges Member States to contract out or externalise the provision of services that they wish to pro-

PART I The Public Sector Directive 2014/24/EU

(6)

(7)

vide themselves or to organise by means other than public contracts within the meaning of this Directive. The provision of services based on laws, regulations or employment contracts should not be covered. In some Member States, this might for example be the case for certain administrative and government services such as executive and legislative services or the provision of certain services to the community, such as foreign affairs services or justice services or compulsory social security services. It is also appropriate to recall that this Directive should not affect the social security legislation of the Member States. Nor should it deal with the liberalisation of services of general economic interest, reserved to public or private entities, or with the privatisation of public entities providing services. It should equally be recalled that Member States are free to organise the provision of compulsory social services or of other services such as postal services either as services of general economic interest or as non-economic services of general interest or as a mixture thereof. It is appropriate to clarify that non-economic services of general interest should not fall within the scope of this Directive. It should finally be recalled that this Directive is without prejudice to the freedom of national, regional and local authorities to define, in conformity with Union law, services of general economic interest, their scope and the characteristics of the service to be provided, including any conditions regarding the quality of the service, in order to pursue their public policy objectives. This Directive should also be without prejudice to the power of national, regional and local authorities to provide, commission and finance services of general economic interest in accordance with Article 14 TFEU and Protocol No 26 on Services of General Interest annexed to the TFEU and to the Treaty on European Union (TEU). In

6 Approved by Council Decision 2010/48/EC of 26 November 2009 concerning the conclusion, by the European Community, of the United Nations Convention on the Rights of Persons with Disabilities (OJ L 23, 27.1.2010, p. 35).

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PART I The Public Sector Directive 2014/24/EU addition, this Directive does not deal with the funding of services of general economic interest or with systems of aid granted by Member States, in particular in the social field, in accordance with Union rules on competition. (8) A contract should be deemed to be a public works contract only if its subject-matter specifically covers the execution of activities listed in Annex II, even if the contract covers the provision of other services necessary for the execution of such activities. Public service contracts, in particular in the sphere of property management services, may, in certain circumstances, include works. However, in so far as such works are incidental to the principal subject-matter of the contract, and are a possible consequence thereof or a complement thereto, the fact that such works are included in the contract does not justify the qualification of the public service contract as a public works contract. However, in view of the diversity of public works contracts, contracting authorities should be able to make provision for contracts for the design and execution of work to be awarded either separately or jointly. This Directive is not intended to prescribe either joint or separate contract awards. (9) The realisation of a work corresponding to the requirements specified by a contracting authority requires that the authority in question must have taken measures to define the type of the work or, at the very least, have had a decisive influence on its design. Whether the contractor realises all or part of the work by his own means or ensures their realisation by other means should not change the classification of the contract as a works contract, as long as the contractor assumes a direct or indirect obligation that is legally enforceable to ensure that the works will be realised. (10) The notion of ‘contracting authorities’ and in particular that of ‘bodies governed by public law’ have been examined repeatedly in the case-law of the Court of Justice of the European Union. To clarify that the scope of this Directive ratione personae should remain unaltered, it is appropriate to maintain the definitions on which the Court

DIRECTIVE 2014/24/EU based itself and to incorporate a certain number of clarifications given by that case-law as a key to the understanding of the definitions themselves, without the intention of altering the understanding of the concepts as elaborated by the case-law. For that purpose, it should be clarified that a body which operates in normal market conditions, aims to make a profit, and bears the losses resulting from the exercise of its activity should not be considered as being a ‘body governed by public law’ since the needs in the general interest, that it has been set up to meet or been given the task of meeting, can be deemed to have an industrial or commercial character. Similarly, the condition relating to the origin of the funding of the body considered, has also been examined in the case-law, which has clarified inter alia that being financed for ‘the most part’ means for more than half, and that such financing may include payments from users which are imposed, calculated and collected in accordance with rules of public law. (11) In the case of mixed contracts, the applicable rules should be determined with respect to the main subject of the contract where the different parts which constitute the contract are objectively not separable. It should therefore be clarified how contracting authorities should determine whether the different parts are separable or not. Such clarification should be based on the relevant case-law of the Court of Justice of the European Union. The determination should be carried out on a case-by-case basis, in which the expressed or presumed intentions of the contracting authority to regard the various aspects making up a mixed contract as indivisible should not be sufficient, but should be supported by objective evidence capable of justifying them and of establishing the need to conclude a single contract. Such a justified need to conclude a single contract could for instance be present in the case of the construction of one single building, a part of which is to be used directly by the contracting authority concerned and another part to be operated

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DIRECTIVE 2014/24/EU on a concessions basis, for instance to provide parking facilities to the public. It should be clarified that the need to conclude a single contract may be due to reasons both of a technical nature and of an economic nature. (12) In the case of mixed contracts which can be separated, contracting authorities are always free to award separate contracts for the separate parts of the mixed contract, in which case the provisions applicable to each separate part should be determined exclusively with respect to the characteristics of that specific contract. On the other hand, where contracting authorities choose to include other elements in the procurement, whatever their value and whatever the legal regime the added elements would otherwise have been subject to, the main principle should be that, where a contract should be awarded pursuant to the provisions of this Directive, if awarded on its own, then this Directive should continue to apply to the entire mixed contract. (13) However, special provision should be made for mixed contracts involving defence or security aspects or parts not falling within the scope of the TFEU. In such cases, non-application of this Directive should be possible provided that the award of a single contract is justified for objective reasons and that the decision to award a single contract is not taken for the purpose of excluding contracts from the application of this Directive or of Directive 2009/81/EC of the European Parliament and of the Council7. It should be clarified that contracting authorities should not be prevented from choosing to apply this Directive to certain mixed contracts instead of applying Directive 2009/81/EC. (14) It should be clarified that the notion of ‘economic operators’ should be interpreted in a broad manner so as to include any persons and/or entities which offer the execution of works, the supply of products or the provision of services on the market, irrespective of the legal

PART I The Public Sector Directive 2014/24/EU form under which they have chosen to operate. Thus, firms, branches, subsidiaries, partnerships, cooperative societies, limited companies, universities, public or private, and other forms of entities than natural persons should all fall within the notion of economic operator, whether or not they are ‘legal persons’ in all circumstances. (15) It should be clarified that groups of economic operators, including where they have come together in the form of a temporary association, may participate in award procedures without it being necessary for them to take on a specific legal form. To the extent this is necessary, for instance where joint and several liability is required, a specific form may be required when such groups are awarded the contract. It should also be clarified that contracting authorities should be able to set out explicitly how groups of economic operators are to meet the requirements concerning economic and financial standing as set out in this Directive, or the criteria relating to technical and professional ability, which are required of economic operators participating on their own. The performance of contracts by groups of economic operators may necessitate setting conditions which are not imposed on individual participants. Such conditions, which should be justified by objective reasons and be proportionate, could for instance include requiring the appointment of a joint representation or a lead partner for the purposes of the procurement procedure or requiring information on their constitution. (16) Contracting authorities should make use of all possible means at their disposal under national law in order to prevent distortions in public procurement procedures stemming from conflicts of interest. This could include

7 Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC (OJ L 216, 20.8.2009, p. 76).

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PART I The Public Sector Directive 2014/24/EU procedures to identify, prevent and remedy conflicts of interests. (17) Council Decision 94/800/EC8 approved in particular the World Trade Organisation Agreement on Government Procurement (the ‘GPA’). The aim of the GPA is to establish a multilateral framework of balanced rights and obligations relating to public contracts with a view to achieving the liberalisation and expansion of world trade. For contracts covered by Annexes 1, 2, 4 and 5 and the General Notes to the European Union’s Appendix I to the GPA, as well as by other relevant international agreements by which the Union is bound, contracting authorities should fulfil the obligations under those agreements by applying this Directive to economic operators of third countries that are signatories to the agreements. (18) The GPA applies to contracts above certain thresholds, set in the GPA and expressed as special drawing rights. The thresholds laid down by this Directive should be aligned to ensure that they correspond to the euro equivalents of the thresholds of the GPA. Provision should also be made for periodic reviews of the thresholds expressed in euros so as to adjust them, by means of a purely mathematical operation, to possible variations in the value of the euro in relation to those special drawing rights. Apart from those periodic mathematical adjustments, an increase in the thresholds set in the GPA should be explored during the next round of negotiations thereof. (19) It should be clarified that, for the estimation of the value of a contract, all revenues have to be taken into account, whether received from the contracting authority or from third parties. It should also be clarified that, for the purpose of estimating the thresholds, the notion of similar supplies should be understood as products which are in-

DIRECTIVE 2014/24/EU tended for identical or similar uses, such as supplies of a range of foods or of various items of office furniture. Typically, an economic operator active in the field concerned would be likely to carry such supplies as part of his normal product range. (20) For the purposes of estimating the value of a given procurement, it should be clarified that it should be allowed to base the estimation of the value on a subdivision of the procurement only where justified by objective reasons. For instance, it could be justified to estimate contract values at the level of a separate operational unit of the contracting authority, such as for instance schools or kindergartens, provided that the unit in question is independently responsible for its procurement. This can be assumed where the separate operational unit independently runs the procurement procedures and makes the buying decisions, has a separate budget line at its disposal for the procurements concerned, concludes the contract independently and finances it from a budget which it has at its disposal. A subdivision is not justified where the contracting authority merely organises a procurement in a decentralised way. (21) Public contracts that are awarded by contracting authorities operating in the water, energy, transport and postal services sectors and that fall within the scope of those activities are covered by Directive 2014/25/EU of the European Parliament and of the Council9. However, contracts awarded by contracting authorities in the context of their operation of maritime, coastal or river transport services fall within the scope of this Directive. (22) Being addressed to Member States, this Directive does not apply to procurement carried out by international organisations on their own behalf and for their own account. There is, however, a need to clarify to what extent this Di-

8 Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the Agreements reached in the Uruguay Round multilateral negotiations (1986 to 1994) (OJ L 336, 23.12.1994, p. 1). 9 Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors (see page 243 of this Official Journal).

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DIRECTIVE 2014/24/EU rective should be applied to procurement governed by specific international rules. (23) The awarding of public contracts for certain audiovisual and radio media services by media providers should allow aspects of cultural or social significance to be taken into account, which renders the application of procurement rules inappropriate. For those reasons, an exception should therefore be made for public service contracts, awarded by the media service providers themselves, for the purchase, development, production or co-production of off-the-shelf programmes and other preparatory services, such as those relating to scripts or artistic performances necessary for the production of the programme. It should also be clarified that that exclusion should apply equally to broadcast media services and on-demand services (non-linear services). However, that exclusion should not apply to the supply of technical equipment necessary for the production, coproduction and broadcasting of such programmes. (24) It should be recalled that arbitration and conciliation services and other similar forms of alternative dispute resolution are usually provided by bodies or individuals which are agreed on, or selected, in a manner which cannot be governed by procurement rules. It should be clarified that this Directive does not apply to service contracts for the provision of such services, whatever their denomination under national law. (25) A certain number of legal services are rendered by service providers that are designated by a court or tribunal of a Member State, involve representation of clients in judicial proceedings by lawyers, must be provided by notaries or are connected with the exercise of official authority. Such legal services are usually provided by bodies or individuals designated or selected in a manner which cannot be governed by procurement rules, such as for instance the designation of State Attorneys in certain

PART I The Public Sector Directive 2014/24/EU Member States. Those legal services should therefore be excluded from the scope of this Directive. (26) It is appropriate to specify that the notion of financial instruments as referred to in this Directive is given the same meaning as in other internal market legislation and, in view of the recent creation of the European Financial Stability Facility and the European Stability Mechanism, it should be stipulated that operations conducted with that Facility and that Mechanism should be excluded from the scope of this Directive. It should finally be clarified that loans, whether or not they are in connection with the issuing of securities or other financial instruments or other operations therewith, should be excluded from the scope of this Directive. (27) It should be recalled that Article 5(1) of Regulation (EC) No 1370/2007 of the European Parliament and of the Council10 explicitly provides that Directives 2004/17/EC and 2004/18/EC apply, respectively, to service contracts and public service contracts for public passenger transport services by bus or tramway, whereas Regulation (EC) No 1370/2007 applies to service concessions for public passenger transport by bus or tramway. It should furthermore be recalled that that Regulation continues to apply to public service contracts as well as to service concessions for public passenger transport by rail or metro. To clarify the relationship between this Directive and Regulation (EC) No 1370/2007, it should be provided explicitly that this Directive should not be applicable to public service contracts for the provision of public passenger transport services by rail or metro, the award of which should continue to be subject to that Regulation. In so far as Regulation (EC) No 1370/2007 leaves it to national law to depart from the rules laid down in that Regulation, Member States should be able to continue to provide in their national law that public service contracts for public passenger transport services

10 Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70 (OJ L 315, 3.12.2007, p. 1)

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PART I The Public Sector Directive 2014/24/EU by rail or metro are to be awarded by a contract award procedure following their general public procurement rules. (28) This Directive should not apply to certain emergency services where they are performed by non-profit organisations or associations, since the particular nature of those organisations would be difficult to preserve if the service providers had to be chosen in accordance with the procedures set out in this Directive. However, the exclusion should not be extended beyond that strictly necessary. It should therefore be set out explicitly that patient transport ambulance services should not be excluded. In that context it is furthermore necessary to clarify that CPV Group 601 ‘Land Transport Services’ does not cover ambulance services, to be found in CPV class 8514. It should therefore be clarified that services, which are covered by CPV code 85143000-3, consisting exclusively of patient transport ambulance services should be subject to the special regime set out for social and other specific services (the ‘light regime’). Consequently, mixed contracts for the provision of ambulance services in general would also be subject to the light regime if the value of the patient transport ambulance services were greater than the value of other ambulance services. (29) It is appropriate to recall that this Directive applies only to contracting authorities of Member States. Consequently, political parties in general, not being contracting authorities, are not subject to its provisions. However, political parties in some Member States might fall within the notion of bodies governed by public law. However, certain services (such as propaganda film and video-tape production) are so inextricably connected to the political views of the service provider when provided in the context of an election campaign, that the service providers are normally selected in a manner which cannot be governed by procurement rules. Finally, it should be recalled that the statute and funding of European political parties and European political foun-

DIRECTIVE 2014/24/EU dations are subject to rules other than those laid down in this Directive. (30) In certain cases, a contracting authority or an association of contracting authorities may be the sole source for a particular service, in respect of the provision of which it enjoys an exclusive right pursuant to laws, regulations or published administrative provisions which are compatible with the TFEU. It should be clarified that this Directive need not apply to the award of public service contracts to that contracting authority or association. (31) There is considerable legal uncertainty as to how far contracts concluded between entities in the public sector should be covered by public procurement rules. The relevant case-law of the Court of Justice of the European Union is interpreted differently between Member States and even between contracting authorities. It is therefore necessary to clarify in which cases contracts concluded within the public sector are not subject to the application of public procurement rules. Such clarification should be guided by the principles set out in the relevant case-law of the Court of Justice of the European Union. The sole fact that both parties to an agreement are themselves public authorities does not as such rule out the application of procurement rules. However, the application of public procurement rules should not interfere with the freedom of public authorities to perform the public service tasks conferred on them by using their own resources, which includes the possibility of cooperation with other public authorities. It should be ensured that any exempted public-public cooperation does not result in a distortion of competition in relation to private economic operators in so far as it places a private provider of services in a position of advantage visà-vis its competitors. (32) Public contracts awarded to controlled legal persons should not be subject to the application of the procedures provided for by this Directive if the contracting authority exercises a control over the legal person concerned which is similar to that which it exercises over

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DIRECTIVE 2014/24/EU its own departments, provided that the controlled legal person carries out more than 80 % of its activities in the performance of tasks entrusted to it by the controlling contracting authority or by other legal persons controlled by that contracting authority, regardless of the beneficiary of the contract performance. The exemption should not extend to situations where there is direct participation by a private economic operator in the capital of the controlled legal person since, in such circumstances, the award of a public contract without a competitive procedure would provide the private economic operator with a capital participation in the controlled legal person an undue advantage over its competitors. However, in view of the particular characteristics of public bodies with compulsory membership, such as organisations responsible for the management or exercise of certain public services, this should not apply in cases where the participation of specific private economic operators in the capital of the controlled legal person is made compulsory by a national legislative provision in conformity with the Treaties, provided that such participation is non-controlling and non-blocking and does not confer a decisive influence on the decisions of the controlled legal person. It should further be clarified that the decisive element is only the direct private participation in the controlled legal person. Therefore, where there is private capital participation in the controlling contracting authority or in the controlling contracting authorities, this does not preclude the award of public contracts to the controlled legal person, without applying the procedures provided for by this Directive as such participations do not adversely affect competition between private economic operators. It should also be clarified that contracting authorities such as bodies governed by public law, that may have private capital participation, should be in a position to avail themselves of the exemption for horizontal cooperation. Consequently, where all other conditions in relation to horizontal coopera-

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PART I The Public Sector Directive 2014/24/EU tion are met, the horizontal cooperation exemption should extend to such contracting authorities where the contract is concluded exclusively between contracting authorities. (33) Contracting authorities should be able to choose to provide jointly their public services by way of cooperation without being obliged to use any particular legal form. Such cooperation might cover all types of activities related to the performance of services and responsibilities assigned to or assumed by the participating authorities, such as mandatory or voluntary tasks of local or regional authorities or services conferred upon specific bodies by public law. The services provided by the various participating authorities need not necessarily be identical; they might also be complementary. Contracts for the joint provision of public services should not be subject to the application of the rules set out in this Directive provided that they are concluded exclusively between contracting authorities, that the implementation of that cooperation is governed solely by considerations relating to the public interest and that no private service provider is placed in a position of advantage vis-à-vis its competitors. In order to fulfil those conditions, the cooperation should be based on a cooperative concept. Such cooperation does not require all participating authorities to assume the performance of main contractual obligations, as long as there are commitments to contribute towards the cooperative performance of the public service in question. In addition, the implementation of the cooperation, including any financial transfers between the participating contracting authorities, should be governed solely by considerations relating to the public interest. (34) Certain cases exist where a legal entity acts, under the relevant provisions of national law, as an instrument or technical service to determined contracting authorities, is obliged to carry out orders given to it by those contracting authorities and has no influence on the remuneration for its performance. In

PART I The Public Sector Directive 2014/24/EU view of its non-contractual nature, such a purely administrative relationship should not fall within the scope of public procurement procedures. (35) The co-financing of research and development (R&D) programmes by industry sources should be encouraged. It should consequently be clarified that this Directive applies only where there is no such co-financing and where the outcome of the R&D activities go to the contracting authority concerned. This should not exclude the possibility that the service provider, having carried out those activities, could publish an account thereof as long as the contracting authority retains the exclusive right to use the outcome of the R&D in the conduct of its own affairs. However fictitious sharing of the results of the R&D or purely symbolic participation in the remuneration of the service provider should not prevent the application of this Directive. (36) Employment and occupation contribute to integration in society and are key elements in guaranteeing equal opportunities for all. In this context, sheltered workshops can play a significant role. The same is true for other social businesses whose main aim is to support the social and professional integration or reintegration of disabled and disadvantaged persons, such as the unemployed, members of disadvantaged minorities or otherwise socially marginalised groups. However, such workshops or businesses might not be able to obtain contracts under normal conditions of competition. Consequently, it is appropriate to provide that Member States should be able to reserve the right to participate in award procedures for public contracts or for certain lots thereof to such workshops or businesses or reserve performance of contracts to the context of sheltered employment programmes. (37) With a view to an appropriate integration of environmental, social and labour requirements into public procurement procedures it is of particular importance that Member States and

DIRECTIVE 2014/24/EU contracting authorities take relevant measures to ensure compliance with obligations in the fields of environmental, social and labour law that apply at the place where the works are executed or the services provided and result from laws, regulations, decrees and decisions, at both national and Union level, as well as from collective agreements, provided that such rules, and their application, comply with Union law. Equally, obligations stemming from international agreements ratified by all Member States and listed in Annex X should apply during contract performance. However, this should in no way prevent the application of terms and conditions of employment which are more favourable to workers. The relevant measures should be applied in conformity with the basic principles of Union law, in particular with a view to ensuring equal treatment. Such relevant measures should be applied in accordance with Directive 96/71/EC of the European Parliament and of the Council11 and in a way that ensures equal treatment and does not discriminate directly or indirectly against economic operators and workers from other Member States. (38) Services should be considered to be provided at the place at which the characteristic performances are executed. When services are provided at a distance, for example services provided by call centres, those services should be considered to be provided at the place where the services are executed, irrespective of the places and Member States to which the services are directed. (39) The relevant obligations could be mirrored in contract clauses. It should also be possible to include clauses ensuring compliance with collective agreements in compliance with Union law in public contracts. Non-compliance with the relevant obligations could be considered to be grave misconduct on the part of the economic operator concerned, liable to exclusion of that economic op-

11 Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services (OJ L 18, 21.1.1997, p. 1).

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DIRECTIVE 2014/24/EU erator from the procedure for the award of a public contract. (40) Control of the observance of the environmental, social and labour law provisions should be performed at the relevant stages of the procurement procedure, when applying the general principles governing the choice of participants and the award of contracts, when applying the exclusion criteria and when applying the provisions concerning abnormally low tenders. The necessary verification for that purpose should be carried out in accordance with the relevant provisions of this Directive, in particular those governing means of proof and self-declarations. (41) Nothing in this Directive should prevent the imposition or enforcement of measures necessary to protect public policy, public morality, public security, health, human and animal life, the preservation of plant life or other environmental measures, in particular with a view to sustainable development, provided that those measures are in conformity with the TFEU. (42) There is a great need for contracting authorities to have additional flexibility to choose a procurement procedure, which provides for negotiations. A greater use of those procedures is also likely to increase cross-border trade, as the evaluation has shown that contracts awarded by negotiated procedure with prior publication have a particularly high success rate of cross-border tenders. Member States should be able to provide for the use of the competitive procedure with negotiation or the competitive dialogue, in various situations where open or restricted procedures without negotiations are not likely to lead to satisfactory procurement outcomes. It should be recalled that use of the competitive dialogue has significantly increased in terms of contract values over the past years. It has shown itself to be of use in cases where contracting authorities are unable to define the means of satisfying their needs or of assessing what the market can offer in terms of technical, financial or legal solutions. This situation may arise in particular with innovative projects, the implementation of major integrated

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PART I The Public Sector Directive 2014/24/EU transport infrastructure projects, large computer networks or projects involving complex and structured financing. Where relevant, contracting authorities should be encouraged to appoint a project leader to ensure good cooperation between the economic operators and the contracting authority during the award procedure. (43) For works contracts, such situations include works that are not standard buildings or where works includes design or innovative solutions. For services or supplies that require adaptation or design efforts, the use of a competitive procedure with negotiation or competitive dialogue is likely to be of value. Such adaptation or design efforts are particularly necessary in the case of complex purchases such as sophisticated products, intellectual services, for example some consultancy services, architectural services or engineering services, or major information and communications technology (ICT) projects. In those cases, negotiations may be necessary to guarantee that the supply or service in question corresponds to the needs of the contracting authority. In respect of off-the-shelf services or supplies that can be provided by many different operators on the market, the competitive procedure with negotiation and competitive dialogue should not be used. (44) The competitive procedure with negotiation should also be available in cases where an open or restricted procedure resulted only in irregular or unacceptable tenders. In such cases, contracting authorities should be allowed to conduct negotiations with the aim of obtaining regular and acceptable tenders. (45) The competitive procedure with negotiation should be accompanied by adequate safeguards ensuring observance of the principles of equal treatment and transparency. In particular, contracting authorities should indicate beforehand the minimum requirements which characterise the nature of the procurement and which should not be changed in the negotiations. Award criteria and their weighting should remain stable throughout the entire procedure and should not be subject to negotiations,

PART I The Public Sector Directive 2014/24/EU in order to guarantee equal treatment of all economic operators. Negotiations should aim at improving the tenders so as to allow contracting authorities to buy works, supplies and services perfectly adapted to their specific needs. Negotiations may concern all characteristics of the purchased works, supplies and services including, for instance, quality, quantities, commercial clauses as well as social, environmental and innovative aspects, in so far as they do not constitute minimum requirements. It should be clarified that the minimum requirements to be set by the contracting authority are those conditions and characteristics (particularly physical, functional and legal) that any tender should meet or possess in order to allow the contracting authority to award the contract in accordance with the chosen award criteria. In order to ensure transparency and traceability of the process, all stages should be duly documented. Furthermore, all tenders throughout the procedure should be submitted in writing. (46) Contracting authorities should be allowed to shorten certain deadlines applicable to open and restricted procedures and to competitive procedures with negotiation where the deadlines in question would be impracticable because of a state of urgency which should be duly substantiated by the contracting authorities. It should be clarified that this need not be an extreme urgency brought about by events unforeseeable for and not attributable to the contracting authority. (47) Research and innovation, including eco-innovation and social innovation, are among the main drivers of future growth and have been put at the centre of the Europe 2020 strategy for smart, sustainable and inclusive growth. Public authorities should make the best strategic use of public procurement to spur innovation. Buying innovative products, works and services plays a key role in improving the efficiency and quality of public services while addressing major societal challenges. It contributes to achieving best value for public money as well as wider economic,

DIRECTIVE 2014/24/EU environmental and societal benefits in terms of generating new ideas, translating them into innovative products and services and thus promoting sustainable economic growth. It should be recalled that a series of procurement models have been outlined in the Commission Communication of 14 December 2007 entitled ‘Precommercial Procurement: Driving innovation to ensure sustainable high quality public services in Europe’, which deals with the procurement of those R&D services not falling within the scope of this Directive. Those models would continue to be available, but this Directive should also contribute to facilitating public procurement of innovation and help Member States in achieving the Innovation Union targets. (48) Because of the importance of innovation, contracting authorities should be encouraged to allow variants as often as possible. The attention of those authorities should consequently be drawn to the need to define the minimum requirements to be met by variants before indicating that variants may be submitted. (49) Where a need for the development of an innovative product or service or innovative works and the subsequent purchase of the resulting supplies, services or works cannot be met by solutions already available on the market, contracting authorities should have access to a specific procurement procedure in respect of contracts falling within the scope of this Directive. This specific procedure should allow contracting authorities to establish a long-term innovation partnership for the development and subsequent purchase of a new, innovative product, service or works provided that such innovative product or service or innovative works can be delivered to agreed performance levels and costs, without the need for a separate procurement procedure for the purchase. The innovation partnership should be based on the procedural rules that apply to the competitive procedure with negotiation and contracts should be awarded on the sole basis of the best price-quality ratio, which is

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DIRECTIVE 2014/24/EU most suitable for comparing tenders for innovative solutions. Whether in respect of very large projects or smaller innovative projects, the innovation partnership should be structured in such a way that it can provide the necessary ‘market-pull’, incentivising the development of an innovative solution without foreclosing the market. Contracting authorities should therefore not use innovation partnerships in such a way as to prevent, restrict or distort competition. In certain cases, setting up innovation partnerships with several partners could contribute to avoiding such effects. (50) In view of the detrimental effects on competition, negotiated procedures without prior publication of a contract notice should be used only in very exceptional circumstances. This exception should be limited to cases where publication is either not possible, for reasons of extreme urgency brought about by events unforeseeable for and not attributable to the contracting authority, or where it is clear from the outset that publication would not trigger more competition or better procurement outcomes, not least because there is objectively only one economic operator that can perform the contract. This is the case for works of art, where the identity of the artist intrinsically determines the unique character and value of the art object itself. Exclusivity can also arise from other reasons, but only situations of objective exclusivity can justify the use of the negotiated procedure without publication, where the situation of exclusivity has not been created by the contracting authority itself with a view to the future procurement procedure. Contracting authorities relying on this exception should provide reasons why there are no reasonable alternatives or substitutes such as using alternative distribution channels including outside the Member State of the contracting authority or considering functionally comparable works, supplies and services. Where the situation of exclusivity is due to technical reasons, they should be rigorously defined and justified on a

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PART I The Public Sector Directive 2014/24/EU case-by-case basis. They could include, for instance, near technical impossibility for another economic operator to achieve the required performance or the necessity to use specific know-how, tools or means which only one economic operator has at its disposal. Technical reasons may also derive from specific interoperability requirements which must be fulfilled in order to ensure the functioning of the works, supplies or services to be procured. Finally, a procurement procedure is not useful where supplies are purchased directly on a commodity market, including trading platforms for commodities such as agricultural products, raw materials and energy exchanges, where the regulated and supervised multilateral trading structure naturally guarantees market prices. (51) It should be clarified that the provisions concerning protection of confidential information do not in any way prevent public disclosure of non-confidential parts of concluded contracts, including any subsequent changes. (52) Electronic means of information and communication can greatly simplify the publication of contracts and increase the efficiency and transparency of procurement processes. They should become the standard means of communication and information exchange in procurement procedures, as they greatly enhance the possibilities of economic operators to participate in procurement procedures across the internal market. For that purpose, transmission of notices in electronic form, electronic availability of the procurement documents and – after a transition period of 30 months – fully electronic communication, meaning communication by electronic means at all stages of the procedure, including the transmission of requests for participation and, in particular, the transmission of the tenders (electronic submission) should be made mandatory. Member States and contracting authorities should remain free to go further if they so wish. It should also be clarified that mandatory use of electronic means of communications pursuant to this Directive should not, however, oblige contracting au-

PART I The Public Sector Directive 2014/24/EU thorities to carry out electronic processing of tenders, nor should it mandate electronic evaluation or automatic processing. Furthermore, pursuant to this Directive, no elements of the public procurement process after the award of the contract should be covered by the obligation to use electronic means of communication, nor should internal communication within the contracting authority. (53) Contracting authorities should, except in certain specific situations, use electronic means of communication which are non-discriminatory, generally available and interoperable with the ICT products in general use and which do not restrict economic operators’ access to the procurement procedure. The use of such means of communication should also take accessibility for persons with disabilities into due account. It should be clarified that the obligation to use electronic means at all stages of the public procurement procedure would be appropriate neither where the use of electronic means would require specialised tools or file formats that are not generally available nor where the communications concerned could only be handled using specialised office equipment. Contracting authorities should therefore not be obliged to require the use of electronic means of communication in the submission process in certain cases, which should be listed exhaustively. This Directive stipulates that such cases should include situations which would require the use of specialised office equipment not generally available to the contracting authorities such as wide-format printers. In some procurement procedures the procurement documents might require the submission of a physical or scale model which cannot be submitted to the contracting authorities using electronic means. In such situations, the model should be transmitted to the contracting authorities by post or other suitable carrier. It should however be clarified that the use of other means of communication should be limited to those elements of the tender for which electronic means of communications are not required.

DIRECTIVE 2014/24/EU It is appropriate to clarify that, where necessary for technical reasons, contracting authorities should be able to set a maximum limit to the size of the files that may be submitted. (54) There can be exceptional cases in which contracting authorities should be allowed not to use electronic means of communication where not using such means of communication is necessary in order to protect the particularly sensitive nature of information. It should be clarified that, where the use of electronic tools which are not generally available can offer the necessary level of protection, such electronic tools should be used. Such might for instance be the case where contracting authorities require the use of dedicated secure means of communication to which they offer access. (55) Differing technical formats or processes and messaging standards could potentially create obstacles to interoperability, not only within each Member State but also and especially between the Member States. For example, in order to participate in a procurement procedure in which use of electronic catalogues, which is a format for the presentation and organisation of information in a manner that is common to all the participating bidders and which lends itself to electronic treatment, is permitted or required, economic operators would, in the absence of standardisation, be required to customise their own catalogues to each procurement procedure, which would entail providing very similar information in different formats depending on the specifications of the contracting authority concerned. Standardising the catalogue formats would thus improve the level of interoperability, enhance efficiency and would also reduce the effort required of economic operators. (56) When considering whether there is a need to ensure or enhance interoperability between differing technical formats or process and messaging standards by rendering the use of specific standards mandatory, and if so which standards to impose, the Commission should take the utmost account of the opinions of the stakeholders concerned.

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DIRECTIVE 2014/24/EU It should also consider the extent to which a given standard has already been used in practice by economic operators and contracting authorities and how well it has worked. Before making the use of any particular technical standard mandatory, the Commission should also carefully consider the costs that this might entail, in particular in terms of adaptations to existing e-procurement solutions, including infrastructure, processes or software. Where the standards concerned are not developed by an international, European or national standardisation organisation, they should meet the requirements applicable to ICT standards as set out in Regulation (EU) 1025/2012 of the European Parliament and of the Council12. (57) Before specifying the level of security required for the electronic means of communications to be used at the various stages of the award procedure, Member States and contracting authorities should evaluate the proportionality between on the one hand the requirements aimed at ensuring correct and reliable identification of the senders of the communication concerned as well as the integrity of its content, and on the other hand the risk of problems such as in situations where messages are sent by a different sender than that indicated. All other things being equal, this would mean that the level of security required of, for instance, an email requesting confirmation of the exact address at which an information meeting will be held would not need to be set at the same level as for the tender itself which constitutes a binding offer for the economic operator. Similarly, the evaluation of proportionality could result in lower levels of security being required in connection with the resubmission of electronic catalogues or the submission of tenders in the context of mini-competitions under a framework

PART I The Public Sector Directive 2014/24/EU agreement or the access to procurement documents. (58) While essential elements of a procurement procedure such as the procurement documents, requests for participation, confirmation of interest and tenders should always be made in writing, oral communication with economic operators should otherwise continue to be possible, provided that its content is documented to a sufficient degree. This is necessary to ensure an adequate level of transparency that allows for a verification of whether the principle of equal treatment has been adhered to. In particular, it is essential that oral communications with tenderers which could have an impact on the content and assessment of the tenders be documented to a sufficient extent and by appropriate means, such as written or audio records or summaries of the main elements of the communication. (59) There is a strong trend emerging across Union public procurement markets towards the aggregation of demand by public purchasers, with a view to obtaining economies of scale, including lower prices and transaction costs, and to improving and professionalising procurement management. This can be achieved by concentrating purchases either by the number of contracting authorities involved or by volume and value over time. However, the aggregation and centralisation of purchases should be carefully monitored in order to avoid excessive concentration of purchasing power and collusion, and to preserve transparency and competition, as well as market access opportunities for SMEs. (60) The instrument of framework agreements has been widely used and is considered as an efficient procurement technique throughout Europe. It should therefore be maintained largely as it is. However, certain aspects need

12 Regulation (EU) No 1025/2012 of the European Parliament and of the Council of 25 October 2012 on European standardisation, amending Council Directives 89/686/EEC and 93/15/EEC and Directives 94/9/EC, 94/25/EC, 95/16/EC, 97/23/EC, 98/34/EC, 2004/22/EC, 2007/23/EC, 2009/23/EC and 2009/105/EC of the European Parliament and of the Council and repealing Council Decision 87/95/EEC and Decision No 1673/2006/EC of the European Parliament and of the Council (OJ L 316, 14.11.2012, p. 12).

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PART I The Public Sector Directive 2014/24/EU to be clarified, in particular that framework agreements should not be used by contracting authorities which are not identified in them. For that purpose, the contracting authorities that are parties to a specific framework agreement from the outset should be clearly indicated, either by name or by other means, such as a reference to a given category of contracting authorities within a clearly delimited geographical area, so that the contracting authorities concerned can be easily and unequivocally identified. Likewise, a framework agreement should not be open to entry of new economic operators once it has been concluded. This implies for instance that where a central purchasing body uses an overall register of the contracting authorities or categories thereof, such as the local authorities in a given geographical area, that are entitled to have recourse to framework agreements it concludes, that central purchasing body should do so in a way that makes it possible to verify not only the identity of the contracting authority concerned but also the date from which it acquires the right to have recourse to the framework agreement concluded by the central purchasing body as that date determines which specific framework agreements that contracting authority should be allowed to use. (61) The objective conditions for determining which of the economic operators party to the framework agreement should perform a given task, such as supplies or services intended for use by natural persons, may, in the context of framework agreements setting out all the terms, include the needs or the choice of the natural persons concerned. Contracting authorities should be given additional flexibility when procuring under framework agreements, which are concluded with more than one economic operator and which set out all the terms. In such cases, contracting authorities should be allowed to obtain specific works, supplies or services, that are covered by the framework agreement, either by requiring them from one of the economic operators, determined in

DIRECTIVE 2014/24/EU accordance with objective criteria and on the terms already set out, or by awarding a specific contract for the works, supplies or services concerned following a mini-competition among the economic operators parties to the framework agreement. To ensure transparency and equal treatment, contracting authorities should indicate in the procurement documents for the framework agreement the objective criteria that will govern the choice between those two methods of performing the framework agreement. Such criteria could for instance relate to the quantity, value or characteristics of the works, supplies or services concerned, including the need for a higher degree of service or an increased security level, or to developments in price levels compared to a predetermined price index. Framework agreements should not be used improperly or in such a way as to prevent, restrict or distort competition. Contracting authorities should not be obliged pursuant to this Directive to procure works, supplies or services that are covered by a framework agreement, under that framework agreement. (62) It should also be clarified that, while contracts based on a framework agreement are to be awarded before the end of the term of the framework agreement itself, the duration of the individual contracts based on a framework agreement does not need to coincide with the duration of that framework agreement, but might, as appropriate, be shorter or longer. In particular, it should be allowed to set the length of individual contracts based on a framework agreement taking account of factors such as the time needed for their performance, where maintenance of equipment with an expected useful life of more than four years is included or where extensive training of staff to perform the contract is needed. It should also be clarified that there might be exceptional cases in which the length of the framework agreements themselves should be allowed to be longer than four years. Such cases, which should be duly justified, in particular by the subject of the framework agreement, might for instance arise

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DIRECTIVE 2014/24/EU where economic operators need to dispose of equipment the amortisation period of which is longer than four years and which must be available at any time over the entire duration of the framework agreement. (63) In view of the experience acquired, there is also a need to adjust the rules governing dynamic purchasing systems to enable contracting authorities to take full advantage of the possibilities afforded by that instrument. The systems need to be simplified; in particular they should be operated in the form of a restricted procedure, hence eliminating the need for indicative tenders, which have been identified as one of the major burdens associated with dynamic purchasing systems. Thus any economic operator that submits a request to participate and meets the selection criteria should be allowed to take part in procurement procedures carried out through the dynamic purchasing system over its period of validity. This purchasing technique allows the contracting authority to have a particularly broad range of tenders and hence to ensure optimum use of public funds through broad competition in respect of commonly used or off-the-shelf products, works or services which are generally available on the market. (64) The examination of those requests to participate should normally be performed within a maximum of 10 working days, given that the evaluation of the selection criteria will take place on the basis of the simplified requirements for documentation that are set out in this Directive. However, when a dynamic purchasing system is first set up, contracting authorities might, in response to the first publication of the contract notice or the invitation to confirm interest, be faced with such a large number of requests for participation that they would need more time to examine the requests. That should be admissible, provided that no specific procurement is launched before all the requests have been examined. Contracting authorities should be free to organise the way in which they intend to examine the requests for participation, for instance by deciding to conduct

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PART I The Public Sector Directive 2014/24/EU such examinations only once a week, provided the deadlines for the examination of each request of admission are observed. (65) At any time during the period of validity of the dynamic purchasing system, contracting authorities should be free to require economic operators to submit a renewed and updated self-declaration on the fulfilment of criteria for qualitative selection, within an adequate time limit. It should be recalled that the possibility foreseen in the general provisions on means of proof of this Directive to ask economic operators to submit supporting documents and the obligation to do so of the tenderer to which it has decided to award the contract also apply in the particular context of dynamic purchasing systems. (66) In order to further the possibilities of SMEs to participate in a large-scale dynamic purchasing system, for instance one that is operated by a central purchasing body, the contracting authority concerned should be able to articulate the system in objectively defined categories of products, works or services. Such categories should be defined by reference to objective factors which might for instance include the maximum allowable size of specific contracts to be awarded within the category concerned or a specific geographic area in which specific contracts are to be performed. Where a dynamic purchasing system is divided into categories, the contracting authority should apply selection criteria that are proportionate to the characteristics of the category concerned. (67) It should be clarified that electronic auctions are typically not suitable for certain public works contracts and certain public service contracts having as their subject-matter intellectual performances, such as the design of works, because only the elements suitable for automatic evaluation by electronic means, without any intervention or appreciation by the contracting authority, namely elements which are quantifiable so that they can be expressed in figures or percentages, may be the object of electronic auctions.

PART I The Public Sector Directive 2014/24/EU It should, however, also be clarified that electronic auctions may be used in a procurement procedure for the purchase of a specific intellectual property right. It is also appropriate to recall that while contracting authorities remain free to reduce the number of candidates or tenderers as long as the auction has not yet started, no further reduction of the number of tenderers participating in the electronic auction should be allowed after the auction has started. (68) New electronic purchasing techniques are constantly being developed, such as electronic catalogues. Electronic catalogues are a format for the presentation and organisation of information in a manner that is common to all the participating bidders and which lends itself to electronic treatment. An example could be tenders presented in the form of a spreadsheet. Contracting authorities should be able to require electronic catalogues in all available procedures where the use of electronic means of communication is required. Electronic catalogues help to increase competition and streamline public purchasing, particularly in terms of savings in time and money. Certain rules should however be laid down to ensure that the use of the new techniques complies with this Directive and with the principles of equal treatment, non-discrimination and transparency. Thus, the use of electronic catalogues for the presentation of tenders should not entail the possibility of economic operators limiting themselves to the transmission of their general catalogue. Economic operators should still have to adapt their general catalogues in view of the specific procurement procedure. Such adaptation ensures that the catalogue that is transmitted in response to a given procurement procedure contains only products, works or services that the economic operators estimated – after an active examination – correspond to the requirements of the contracting authority. In so doing, economic operators should be allowed to copy information contained in their general catalogue, but they should not be allowed to submit the general catalogue as such.

DIRECTIVE 2014/24/EU Furthermore, where sufficient guarantees are offered in respect of ensuring traceability, equal treatment and predictability, contracting authorities should be allowed to generate tenders in relation to specific purchases on the basis of previously transmitted electronic catalogues, in particular where competition has been reopened under a framework agreement or where a dynamic purchasing system is being used. Where tenders have been generated by the contracting authority, the economic operator concerned should be given the possibility to verify that the tender thus constituted by the contracting authority does not contain any material errors. Where material errors are present, the economic operator should not be bound by the tender generated by the contracting authority unless the error is corrected. In line with the requirements of the rules for electronic means of communication, contracting authorities should avoid unjustified obstacles to economic operators’ access to procurement procedures in which tenders are to be presented in the form of electronic catalogues and which guarantee compliance with the general principles of nondiscrimination and equal treatment. (69) Centralised purchasing techniques are increasingly used in most Member States. Central purchasing bodies are responsible for making acquisitions, managing dynamic purchasing systems or awarding public contracts/framework agreements for other contracting authorities, with or without remuneration. The contracting authorities for whom a framework agreement is concluded should be able to use it for individual or repetitive purchases. In view of the large volumes purchased, such techniques may help increase competition and should help to professionalise public purchasing. Provision should therefore be made for a Union definition of central purchasing bodies dedicated to contracting authorities and it should be clarified that central purchasing bodies operate in two different manners. Firstly, they should be able to act as wholesalers by buying, stocking and re-

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DIRECTIVE 2014/24/EU selling or, secondly, they should be able to act as intermediaries by awarding contracts, operating dynamic purchasing systems or concluding framework agreements to be used by contracting authorities. Such an intermediary role might in some cases be carried out by conducting the relevant award procedures autonomously, without detailed instructions from the contracting authorities concerned; in other cases, by conducting the relevant award procedures under the instructions of the contracting authorities concerned, on their behalf and for their account. Furthermore, rules should be laid down for allocating responsibility for the observance of the obligations pursuant to this Directive, as between the central purchasing body and the contracting authorities procuring from or through it. Where the central purchasing body has sole responsibility for the conduct of the procurement procedures, it should also be solely and directly responsible for the legality of the procedures. Where a contracting authority conducts certain parts of the procedure, for instance the reopening of competition under a framework agreement or the award of individual contracts based on a dynamic purchasing system, it should continue to be responsible for the stages it conducts. (70) Contracting authorities should be allowed to award a public service contract for the provision of centralised purchasing activities to a central purchasing body without applying the procedures provided for in this Directive. It should also be permitted for such public service contracts to include the provision of ancillary purchasing activities. Public service contracts for the provision of ancillary purchasing activities should, when performed otherwise than by a central purchasing body in connection with its provision of central purchasing activities to the contracting authority concerned, be awarded in accordance with this Directive. It should also be recalled that this Directive should not apply where centralised or ancillary purchasing activities are provided other than through a contract for pecuniary interest which constitutes

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PART I The Public Sector Directive 2014/24/EU procurement within the meaning of this Directive. (71) Strengthening the provisions concerning central purchasing bodies should in no way prevent the current practices of occasional joint procurement, i.e. less institutionalised and systematic common purchasing or the established practice of having recourse to service providers that prepare and manage procurement procedures on behalf and for the account of a contracting authority and under its instructions. On the contrary, certain features of joint procurement should be clarified because of the important role joint procurement may play, not least in connection with innovative projects. Joint procurement can take many different forms, ranging from coordinated procurement through the preparation of common technical specifications for works, supplies or services that will be procured by a number of contracting authorities, each conducting a separate procurement procedure, to situations where the contracting authorities concerned jointly conduct one procurement procedure either by acting together or by entrusting one contracting authority with the management of the procurement procedure on behalf of all contracting authorities. Where several contracting authorities are jointly conducting a procurement procedure, they should be jointly responsible for fulfilling their obligations under this Directive. However, where only parts of the procurement procedure are jointly conducted by the contracting authorities, joint responsibility should apply only to those parts of the procedure that have been carried out together. Each contracting authority should be solely responsible in respect of procedures or parts of procedures it conducts on its own, such as the awarding of a contract, the conclusion of a framework agreement, the operation of a dynamic purchasing system, the reopening of competition under a framework agreement or the determination of which of the economic operators party to a framework agreement shall perform a given task.

PART I The Public Sector Directive 2014/24/EU (72) Electronic means of communication are particularly well suited to supporting centralised purchasing practices and tools because of the possibility they offer to re-use and automatically process data and to minimise information and transaction costs. The use of such electronic means of communication should therefore, as a first step, be rendered compulsory for central purchasing bodies, while also facilitating converging practices across the Union. This should be followed by a general obligation to use electronic means of communication in all procurement procedures after a transition period of 30 months. (73) Joint awarding of public contracts by contracting authorities from different Member States currently encounters specific legal difficulties concerning conflicts of national laws. Despite the fact that Directive 2004/18/EC implicitly allowed for cross-border joint public procurement, contracting authorities are still facing considerable legal and practical difficulties in purchasing from central purchasing bodies in other Member States or jointly awarding public contracts. In order to allow contracting authorities to derive maximum benefit from the potential of the internal market in terms of economies of scale and risk-benefit sharing, not least for innovative projects involving a greater amount of risk than reasonably bearable by a single contracting authority, those difficulties should be remedied. Therefore new rules on cross-border joint procurement should be established in order to facilitate cooperation between contracting authorities and enhancing the benefits of the internal market by creating cross-border business opportunities for suppliers and service providers. Those rules should determine the conditions for cross-border utilisation of central purchasing bodies and designate the applicable public procurement legislation, including the applicable legislation on remedies, in cases of cross-border joint procedures, complementing the conflict of

DIRECTIVE 2014/24/EU law rules of Regulation (EC) No 593/2008 of the European Parliament and the Council13. In addition, contracting authorities from different Member States should be able to set up joint entities established under national or Union law. Specific rules should be established for such forms of joint procurement. However, contracting authorities should not make use of the possibilities for cross-border joint procurement for the purpose of circumventing mandatory public law rules, in conformity with Union law, which are applicable to them in the Member State where they are located. Such rules might include, for example, provisions on transparency and access to documents or specific requirements for the traceability of sensitive supplies. (74) The technical specifications drawn up by public purchasers need to allow public procurement to be open to competition as well as to achieve objectives of sustainability. To that end, it should be possible to submit tenders that reflect the diversity of technical solutions standards and technical specifications in the marketplace, including those drawn up on the basis of performance criteria linked to the life cycle and the sustainability of the production process of the works, supplies and services. Consequently, technical specifications should be drafted in such a way as to avoid artificially narrowing down competition through requirements that favour a specific economic operator by mirroring key characteristics of the supplies, services or works habitually offered by that economic operator. Drawing up the technical specifications in terms of functional and performance requirements generally allows that objective to be achieved in the best way possible. Functional and performancerelated requirements are also appropriate means to favour innovation in public procurement and should be used as widely as possible. Where reference is made to a European standard or, in the absence thereof, to a national standard,

13 Regulation (EC) No 593/2008 of the European Parliament and the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) (OJ L 177, 4.7.2008, p. 6).

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DIRECTIVE 2014/24/EU tenders based on equivalent arrangements should be considered by contracting authorities. It should be the responsibility of the economic operator to prove equivalence with the requested label. To prove equivalence, it should be possible to require tenderers to provide third-party verified evidence. However, other appropriate means of proof such as a technical dossier of the manufacturer should also be allowed where the economic operator concerned has no access to such certificates or test reports, or no possibility of obtaining them within the relevant time limits, provided that the economic operator concerned thereby proves that the works, supplies or services meet the requirements or criteria set out in the technical specifications, the award criteria or the contract performance conditions. (75) Contracting authorities that wish to purchase works, supplies or services with specific environmental, social or other characteristics should be able to refer to particular labels, such as the European Eco-label, (multi-)national eco-labels or any other label provided that the requirements for the label are linked to the subject-matter of the contract, such as the description of the product and its presentation, including packaging requirements. It is furthermore essential that those requirements are drawn up and adopted on the basis of objectively verifiable criteria, using a procedure in which stakeholders, such as government bodies, consumers, manufacturers, distributors and environmental organisations, can participate, and that the label is accessible and available to all interested parties. It should be clarified that stakeholders could be public or private bodies, businesses or any sort of non-governmental organisation (an organisation that is not a part of a government and is not a conventional business). It should equally be clarified that specific national or government bodies or organisations can be involved in setting up label requirements that may be used in connection with procurement by public authorities without those bodies

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PART I The Public Sector Directive 2014/24/EU or organisations losing their status as third parties. References to labels should not have the effect of restricting innovation. (76) For all procurement intended for use by persons, whether general public or staff of the contracting authority, it is necessary for contracting authorities to lay down technical specifications so as to take into account accessibility criteria for people with disabilities or design for all users, except in duly justified cases. (77) When drawing up technical specifications, contracting authorities should take into account requirements ensuing from Union law in the field of data protection law, in particular in relation to the design of the processing of personal data (data protection by design). (78) Public procurement should be adapted to the needs of SMEs. Contracting authorities should be encouraged to make use of the Code of Best Practices set out in the Commission Staff Working Document of 25 June 2008 entitled ‘European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts’, providing guidance on how they may apply the public procurement framework in a way that facilitates SME participation. To that end and to enhance competition, contracting authorities should in particular be encouraged to divide large contracts into lots. Such division could be done on a quantitative basis, making the size of the individual contracts better correspond to the capacity of SMEs, or on a qualitative basis, in accordance with the different trades and specialisations involved, to adapt the content of the individual contracts more closely to the specialised sectors of SMEs or in accordance with different subsequent project phases. The size and subject-matter of the lots should be determined freely by the contracting authority, which, in accordance with the relevant rules on the calculation of the estimated value of procurement, should also be allowed to award some of the lots without applying the procedures of this Directive. The contracting authority should have a duty to consider the appropriateness of divid-

PART I The Public Sector Directive 2014/24/EU ing contracts into lots while remaining free to decide autonomously on the basis of any reason it deems relevant, without being subject to administrative or judicial supervision. Where the contracting authority decides that it would not be appropriate to divide the contract into lots, the individual report or the procurement documents should contain an indication of the main reasons for the contracting authority’s choice. Such reasons could for instance be that the contracting authority finds that such division could risk restricting competition, or risk rendering the execution of the contract excessively technically difficult or expensive, or that the need to coordinate the different contractors for the lots could seriously risk undermining the proper execution of the contract. Member States should remain free to go further in their efforts to facilitate the involvement of SMEs in the public procurement market, by extending the scope of the obligation to consider the appropriateness of dividing contracts into lots to smaller contracts, by requiring contracting authorities to provide a justification for a decision not to divide contracts into lots or by rendering a division into lots obligatory under certain conditions. With the same purpose, Member States should also be free to provide mechanisms for direct payments to subcontractors. (79) Where contracts are divided into lots, contracting authorities should, for instance in order to preserve competition or to ensure reliability of supply, be allowed to limit the number of lots for which an economic operator may tender; they should also be allowed to limit the number of lots that may be awarded to any one tenderer. However, the objective of facilitating greater access to public procurement by SMEs might be hampered if contracting authorities would be obliged to award the contract lot by lot even where this would entail having to accept substantially less advantageous solutions compared to an award grouping several or all of the lots. Where the possibility to apply such a method has been clearly indicated beforehand, it should there-

DIRECTIVE 2014/24/EU fore be possible for contracting authorities to conduct a comparative assessment of the tenders in order to establish whether the tenders submitted by a particular tenderer for a specific combination of lots would, taken as whole, fulfil the award criteria laid down in accordance with this Directive with regard to those lots better than the tenders for the individual lots concerned seen in isolation. If so, the contracting authority should be allowed to award a contract combining the lots in question to the tenderer concerned. It should be clarified that contracting authorities should conduct such a comparative assessment by first determining which tenders best fulfil the award criteria laid down for each individual lot and then comparing it with the tenders submitted by a particular tenderer for a specific combination of lots, taken as a whole. (80) In order to make procedures faster and more efficient, time limits for participation in procurement procedures should be kept as short as possible without creating undue barriers to access for economic operators from across the internal market and in particular SMEs. It should therefore be kept in mind that, when fixing the time limits for the receipt of tenders and requests to participate, contracting authorities should take account in particular of the complexity of the contract and the time required to draw up tenders, even if this entails setting time limits that are longer than the minima provided for under this Directive. The use of electronic means of information and communication, in particular full electronic availability to economic operators, tenderers and candidates of procurement documents and electronic transmission of communications leads, on the other hand, to increased transparency and time savings. Therefore, provision should be made for reducing the minimum time limits in line with the rules set by the GPA and subject to the condition that they are compatible with the specific mode of transmission envisaged at Union level. Furthermore, contracting authorities should have the opportunity to further shorten the time

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DIRECTIVE 2014/24/EU limits for receipt of requests to participate and of tenders in cases where a state of urgency renders the regular time limits impracticable, but does not make a regular procedure with publication impossible. Only in exceptional situations where extreme urgency brought about by events unforeseeable by the contracting authority concerned that are not attributable to that contracting authority makes it impossible to conduct a regular procedure even with shortened time limits, contracting authorities should, in so far as strictly necessary, have the possibility to award contracts by negotiated procedure without prior publication. This might be case where natural catastrophes require immediate action. (81) It should be clarified that the need to ensure that economic operators have sufficient time in which to draw up responsive tenders may entail that the time limits which were set initially may have to be extended. This would, in particular, be the case where significant changes are made to the procurement documents. It should also be specified that, in that case, significant changes should be understood as covering changes, in particular to the technical specifications, in respect of which economic operators would need additional time in order to understand and respond appropriately. It should, however, be clarified that such changes should not be so substantial that the admission of candidates other than those initially selected would have been allowed for or additional participants in the procurement procedure would have been attracted. That could, in particular, be the case where the changes render the contract or the framework agreement materially different in character from the one initially set out in the procurement documents. (82) It should be clarified that the information concerning certain decisions taken during a procurement procedure, including the decision not to award a contract or not to conclude a frame-

PART I The Public Sector Directive 2014/24/EU work agreement, should be sent by the contracting authorities, without candidates or tenderers having to request such information. It should also be recalled that Council Directive 89/665/EEC14 provides for an obligation for contracting authorities, again without candidates or tenderer having to request it, to provide the candidates and tenderers concerned with a summary of the relevant reasons for some of the central decisions that are taken in the course of a procurement procedure. It should finally be clarified that candidates and tenderers should be able to request more detailed information concerning those reasons, which contracting authorities should be required to give except where there would be serious grounds for not doing so. Those grounds should be set out in this Directive. To ensure the necessary transparency in the context of procurement procedures involving negotiations and dialogues with tenderers, tenderers having made an admissible tender should, except where there would be serious grounds for not doing so, also be enabled to request information on the conduct and progress of the procedure. (83) Overly demanding requirements concerning economic and financial capacity frequently constitute an unjustified obstacle to the involvement of SMEs in public procurement. Any such requirements should be related and proportionate to the subject-matter of the contract. In particular, contracting authorities should not be allowed to require economic operators to have a minimum turnover that would be disproportionate to the subject-matter of the contract; the requirement should normally not exceed at the most twice the estimated contract value. However, in duly justified circumstances, it should be possible to apply higher requirements. Such circumstances might relate to the high risks attached to the performance of the contract or the fact that its timely and correct performance is

14 Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts (OJ L 395, 30.12.1989, p. 33).

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PART I The Public Sector Directive 2014/24/EU critical, for instance because it constitutes a necessary preliminary for the performance of other contracts. In such duly justified cases contracting authorities should remain free to decide autonomously whether higher minimum turnover requirements would be appropriate and pertinent without being subject to administrative or judicial supervision. Where higher minimum turnover requirements are to be applied, contracting authorities should remain free to set the level as long as it is related and proportionate to the subject-matter of the contract. Where the contracting authority decides that the minimum turnover requirement should be set at a level higher than twice the estimated contract value, the individual report or the procurement documents should contain an indication of the main reasons for the contracting authority’s choice. Contracting authorities should also be able to request information on the ratios, for instance, between assets and liabilities in the annual accounts. A positive ratio showing higher levels of assets than of liabilities could provide additional evidence that the financial capacity of economic operators is sufficient. (84) Many economic operators, and not least SMEs, find that a major obstacle to their participation in public procurement consists in administrative burdens deriving from the need to produce a substantial number of certificates or other documents related to exclusion and selection criteria. Limiting such requirements, for example through use of a European Single Procurement Document (ESPD) consisting of an updated self-declaration, could result in considerable simplification for the benefit of both contracting authorities and economic operators. The tenderer to which it has been decided to award the contract should, however, be required to provide the relevant evidence and contracting authorities should not conclude contracts with tenderers unable to do so. Contracting authorities should also be entitled to request all or part of the supporting documents at any moment where they

DIRECTIVE 2014/24/EU consider this to be necessary in view of the proper conduct of the procedure. This might in particular be the case in two-stage procedures – restricted procedures, competitive procedures with negotiation, competitive dialogues and innovation partnerships – in which the contracting authorities make use of the possibility to limit the number of candidates invited to submit a tender. Requiring submission of the supporting documents at the moment of selection of the candidates to be invited could be justified to avoid that contracting authorities invite candidates which later prove unable to submit the supporting documents at the award stage, depriving otherwise qualified candidates from participation. It should be set out explicitly that the ESPD should also provide the relevant information in respect of entities on whose capacities an economic operator relies, so that the verification of the information regarding such entities can be carried out together with and on the same conditions as the verification in respect of the main economic operator. (85) It is important that the decisions of contracting authorities should be based on recent information, in particular as regards exclusion grounds, given that important changes can intervene quite rapidly, for instance in the event of financial difficulties which would render the economic operator unsuitable or, conversely, because an outstanding debt on social contributions would meanwhile have been paid. It is therefore preferable that, whenever possible, contracting authorities should verify such information by accessing relevant databases, which should be national in the sense of being administered by public authorities. At the current stage of development, there might still be cases where doing so is not yet possible because of technical reasons. The Commission should therefore envisage promoting measures that could facilitate easy recourse to up-to-date information electronically, such as strengthening tools offering access to virtual company dossiers, or means of facilitating interoperability between databases or other such flanking measures.

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DIRECTIVE 2014/24/EU It should also be provided that contracting authorities should not ask for still up-to-date documents, which they already possess from earlier procurement procedures. However, it should also be ensured that contracting authorities will not be faced with disproportionate archiving and filing burdens in this context. Consequently, implementation of this duty should only be applicable once the use of electronic means of communication is obligatory, as electronic document management will render the task much easier for contracting authorities. (86) Further simplification for both economic operators and contracting authorities could be obtained by means of a standard form for self-declarations, which could reduce problems linked to the precise drafting of formal statements and declarations of consent as well as language issues. (87) The Commission provides and manages an electronic system, e-Certis, which is currently updated and verified on a voluntary basis by national authorities. The aim of e-Certis is to facilitate the exchange of certificates and other documentary evidence frequently required by contracting authorities. Experience acquired so far indicates that voluntary updating and verification is insufficient to ensure that e-Certis can deliver its full potential for simplifying and facilitating documentary exchanges for the benefit of SMEs in particular. Maintenance should therefore be rendered obligatory in a first step. Recourse to e-Certis will be made mandatory at a later stage. (88) Contracting authorities should be able to require that environmental management measures or schemes be applied during the performance of a public contract. Environmental management schemes, whether or not they are registered under Union instruments such as Regulation (EC) No 1221/2009 of the European Parliament and of the Council15, can demonstrate that the econo-

PART I The Public Sector Directive 2014/24/EU mic operator has the technical capability to perform the contract. This includes Ecolabel certificates involving environmental management criteria. Where an economic operator has no access to such environmental management registration schemes or no possibility of obtaining them within the relevant time limits, it should be allowed to submit a description of the environmental management measures implemented, provided that the economic operator concerned demonstrates that those measures ensure the same level of environmental protection as the measures required under the environmental management. (89) The notion of award criteria is central to this Directive. It is therefore important that the relevant provisions be presented in as simple and streamlined a way as possible. This can be obtained by using the terminology ‘most economically advantageous tender’ as the overriding concept, since all winning tenders should finally be chosen in accordance with what the individual contracting authority considers to be the economically best solution among those offered. In order to avoid confusion with the award criterion that is currently known as the ‘most economically advantageous tender’ in Directives 2004/17/EC and 2004/18/EC, a different terminology should be used to cover that concept, the ‘best price-quality ratio’. Consequently, it should be interpreted in accordance with the case-law relating to those Directives, except where there is a clearly materially different solution in this Directive. (90) Contracts should be awarded on the basis of objective criteria that ensure compliance with the principles of transparency, non-discrimination and equal treatment, with a view to ensuring an objective comparison of the relative value of the tenders in order to determine, in conditions of effective competition, which tender is the most economically advantageous tender. It

15 Regulation (EC) No 1221/2009 of the European Parliament and of the Council of 25 November 2009 on the voluntary participation by organisations in a Community eco-management and audit scheme (EMAS), repealing Regulation (EC) No 761/2001 and Commission Decisions 2001/681/EC and 2006/193/EC (OJ L 342, 22.12.2009, p. 1).

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PART I The Public Sector Directive 2014/24/EU should be set out explicitly that the most economically advantageous tender should be assessed on the basis of the best price-quality ratio, which should always include a price or cost element. It should equally be clarified that such assessment of the most economically advantageous tender could also be carried out on the basis of either price or cost effectiveness only. It is furthermore appropriate to recall that contracting authorities are free to set adequate quality standards by using technical specifications or contract performance conditions. In order to encourage a greater quality orientation of public procurement, Member States should be permitted to prohibit or restrict use of price only or cost only to assess the most economically advantageous tender where they deem this appropriate. To ensure compliance with the principle of equal treatment in the award of contracts, contracting authorities should be obliged to create the necessary transparency to enable all tenderers to be reasonably informed of the criteria and arrangements which will be applied in the contract award decision. Contracting authorities should therefore be obliged to indicate the contract award criteria and the relative weighting given to each of those criteria. Contracting authorities should, however, be permitted to derogate from that obligation to indicate the weighting of the criteria in duly justified cases for which they must be able to give reasons, where the weighting cannot be established in advance, in particular because of the complexity of the contract. In such cases, they should indicate the criteria in decreasing order of importance. (91) Article 11 TFEU requires that environmental protection requirements be integrated into the definition and implementation of the Union policies and activities, in particular with a view to promoting sustainable development. This Directive clarifies how the contracting authorities can contribute to the protection of the environment and the promotion of sustainable development, whilst ensuring that they can ob-

DIRECTIVE 2014/24/EU tain the best value for money for their contracts. (92) When assessing the best price-quality ratio contracting authorities should determine the economic and qualitative criteria linked to the subject-matter of the contract that they will use for that purpose. Those criteria should thus allow for a comparative assessment of the level of performance offered by each tender in the light of the subject-matter of the contract, as defined in the technical specifications. In the context of the best price-quality ratio, a non-exhaustive list of possible award criteria which include environmental and social aspects is set out in this Directive. Contracting authorities should be encouraged to choose award criteria that allow them to obtain high-quality works, supplies and services that are optimally suited to their needs. The chosen award criteria should not confer an unrestricted freedom of choice on the contracting authority and they should ensure the possibility of effective and fair competition and be accompanied by arrangements that allow the information provided by the tenderers to be effectively verified. To identify the most economically advantageous tender, the contract award decision should not be based on noncost criteria only. Qualitative criteria should therefore be accompanied by a cost criterion that could, at the choice of the contracting authority, be either the price or a cost-effectiveness approach such as life-cycle costing. However, the award criteria should not affect the application of national provisions determining the remuneration of certain services or setting out fixed prices for certain supplies. (93) Where national provisions determine the remuneration of certain services or set out fixed prices for certain supplies, it should be clarified that it remains possible to assess value for money on the basis of other factors than solely the price or remuneration. Depending on the service or product concerned, such factors could, for instance, include conditions of delivery and payment, aspects of after-sale service (e.g. the extent of advisory and replacement ser-

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DIRECTIVE 2014/24/EU vices) or environmental or social aspects (e.g. whether books were stamped on recycled paper or paper from sustainable timber, the cost imputed to environmental externalities or whether the social integration of disadvantaged persons or members of vulnerable groups amongst the persons assigned to performing the contract has been furthered). Given the numerous possibilities of evaluating value for money on the basis of substantive criteria, recourse to drawing of lots as the sole means of awarding the contract should be avoided. (94) Wherever the quality of the staff employed is relevant to the level of performance of the contract, contracting authorities should also be allowed to use as an award criterion the organisation, qualification and experience of the staff assigned to performing the contract in question, as this can affect the quality of contract performance and, as a result, the economic value of the tender. This might be the case, for example, in contracts for intellectual services such as consultancy or architectural services. Contracting authorities which make use of this possibility should ensure, by appropriate contractual means, that the staff assigned to contract performance effectively fulfil the specified quality standards and that such staff can only be replaced with the consent of the contracting authority which verifies that the replacement staff affords an equivalent level of quality. (95) It is of utmost importance to fully exploit the potential of public procurement to achieve the objectives of the Europe 2020 strategy for smart, sustainable and inclusive growth. In this context, it should be recalled that public procurement is crucial to driving innovation, which is of great importance for future growth in Europe. In view of the important differences between individual sectors and markets, it would however not be appropriate to set general mandatory requirements for envi-

PART I The Public Sector Directive 2014/24/EU ronmental, social and innovation procurement. The Union legislature has already set mandatory procurement requirements for obtaining specific goals in the sectors of road transport vehicles (Directive 2009/33/EC of the European Parliament and the Council16) and office equipment (Regulation (EC) No 106/2008 of the European Parliament and the Council17). In addition, the definition of common methodologies for life cycle costing has significantly advanced. It therefore appears appropriate to continue on that path, leaving it to sectorspecific legislation to set mandatory objectives and targets in function of the particular policies and conditions prevailing in the relevant sector and to promote the development and use of European approaches to life-cycle costing as a further underpinning for the use of public procurement in support of sustainable growth. (96) Those sector-specific measures should be complemented by an adaptation of Directives 2004/17/EC and 2004/18/EC empowering contracting authorities to pursue the objectives of the Europe 2020 strategy for smart, sustainable and inclusive growth in their purchasing strategies. It should hence be made clear that, except where it is assessed on the basis of price only, contracting authorities can determine the most economically advantageous tender and the lowest cost using a life-cycle costing approach. The notion of life-cycle costing includes all costs over the life cycle of works, supplies or services. This means internal costs, such as research to be carried out, development, production, transport, use, maintenance and end-of-life disposal costs but can also include costs imputed to environmental externalities, such as pollution caused by extraction of the raw materials used in the product or caused by the product itself or its manufacturing, provided they can be monetised

16 Directive 2009/33/EC of the European Parliament and the Council of 23 April 2009 on the promotion of clean and energy-efficient road transport vehicles (OJ L 120, 15.5.2009, p. 5). 17 Regulation (EC) No 106/2008 of the European Parliament and the Council of 15 January 2008 on a Community energy-efficiency labelling programme for office equipment (OJ L 39, 13.2.2008, p. 1).

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PART I The Public Sector Directive 2014/24/EU and monitored. The methods which contracting authorities use for assessing costs imputed to environmental externalities should be established in advance in an objective and non-discriminatory manner and be accessible to all interested parties. Such methods can be established at national, regional or local level, but they should, to avoid distortions of competition through tailormade methodologies, remain general in the sense that they should not be set up specifically for a particular public procurement procedure. Common methodologies should be developed at Union level for the calculation of life-cycle costs for specific categories of supplies or services. Where such common methodologies are developed, their use should be made compulsory. Furthermore, the feasibility of establishing a common methodology on social life cycle costing should be examined, taking into account existing methodologies such as the Guidelines for Social Life Cycle Assessment of Products adopted within the framework of the United Nations Environment Programme. (97) Furthermore, with a view to the better integration of social and environmental considerations in the procurement procedures, contracting authorities should be allowed to use award criteria or contract performance conditions relating to the works, supplies or services to be provided under the public contract in any respect and at any stage of their life cycles from extraction of raw materials for the product to the stage of disposal of the product, including factors involved in the specific process of production, provision or trading and its conditions of those works, supplies or services or a specific process during a later stage of their life cycle, even where such factors do not form part of their material substance. Criteria and conditions referring to such a production or provision process are for example that the manufacturing of the purchased products did not involve toxic chemicals, or that the purchased services are provided using energy-efficient machines. In accordance with the case-law

DIRECTIVE 2014/24/EU of the Court of Justice of the European Union, this also includes award criteria or contract performance conditions relating to the supply or utilisation of fair trade products in the course of the performance of the contract to be awarded. Criteria and conditions relating to trading and its conditions can for instance refer to the fact that the product concerned is of fair trade origin, including the requirement to pay a minimum price and price premium to producers. Contract performance conditions pertaining to environmental considerations might include, for example, the delivery, package and disposal of products, and in respect of works and services contracts, waste minimisation or resource efficiency. However, the condition of a link with the subject-matter of the contract excludes criteria and conditions relating to general corporate policy, which cannot be considered as a factor characterising the specific process of production or provision of the purchased works, supplies or services. Contracting authorities should hence not be allowed to require tenderers to have a certain corporate social or environmental responsibility policy in place. (98) It is essential that award criteria or contract performance conditions concerning social aspects of the production process relate to the works, supplies or services to be provided under the contract. In addition, they should be applied in accordance with Directive 96/71/EC, as interpreted by the Court of Justice of the European Union and should not be chosen or applied in a way that discriminates directly or indirectly against economic operators from other Member States or from third countries parties to the GPA or to Free Trade Agreements to which the Union is party. Thus, requirements concerning the basic working conditions regulated in Directive 96/71/EC, such as minimum rates of pay, should remain at the level set by national legislation or by collective agreements applied in accordance with Union law in the context of that Directive. Contract performance conditions might also be intended to favour the

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DIRECTIVE 2014/24/EU implementation of measures for the promotion of equality of women and men at work, the increased participation of women in the labour market and the reconciliation of work and private life, the protection of the environment or animal welfare and, to comply in substance with fundamental International Labour Organisation (ILO) Conventions, and to recruit more disadvantaged persons than are required under national legislation. (99) Measures aiming at the protection of health of the staff involved in the production process, the favouring of social integration of disadvantaged persons or members of vulnerable groups amongst the persons assigned to performing the contract or training in the skills needed for the contract in question can also be the subject of award criteria or contract performance conditions provided that they relate to the works, supplies or services to be provided under the contract. For instance, such criteria or conditions might refer, amongst other things, to the employment of long-term job-seekers, the implementation of training measures for the unemployed or young persons in the course of the performance of the contract to be awarded. In technical specifications contracting authorities can provide such social requirements which directly characterise the product or service in question, such as accessibility for persons with disabilities or design for all users. (100) Public contracts should not be awarded to economic operators that have participated in a criminal organisation or have been found guilty of corruption, fraud to the detriment of the Union’s financial interests, terrorist offences, money laundering or terrorist financing. The non-payment of taxes or social security contributions should also lead to mandatory exclusion at the level of the Union. Member States should, however, be able to provide for a derogation from those mandatory exclusions in exceptional situations where overriding requirements in the general interest make a contract award indispensable. This might, for example, be the case where urgently needed vaccines or

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PART I The Public Sector Directive 2014/24/EU emergency equipment can only be purchased from an economic operator to whom one of the mandatory grounds for exclusion otherwise applies. (101) Contracting authorities should further be given the possibility to exclude economic operators which have proven unreliable, for instance because of violations of environmental or social obligations, including rules on accessibility for disabled persons or other forms of grave professional misconduct, such as violations of competition rules or of intellectual property rights. It should be clarified that grave professional misconduct can render an economic operator’s integrity questionable and thus render the economic operator unsuitable to receive the award of a public contract irrespective of whether the economic operator would otherwise have the technical and economical capacity to perform the contract. Bearing in mind that the contracting authority will be responsible for the consequences of its possible erroneous decision, contracting authorities should also remain free to consider that there has been grave professional misconduct, where, before a final and binding decision on the presence of mandatory exclusion grounds has been rendered, they can demonstrate by any appropriate means that the economic operator has violated its obligations, including obligations relating to the payment of taxes or social security contributions, unless otherwise provided by national law. They should also be able to exclude candidates or tenderers whose performance in earlier public contracts has shown major deficiencies with regard to substantive requirements, for instance failure to deliver or perform, significant shortcomings of the product or service delivered, making it unusable for the intended purpose, or misbehaviour that casts serious doubts as to the reliability of the economic operator. National law should provide for a maximum duration for such exclusions. In applying facultative grounds for exclusion, contracting authorities should pay particular attention to the principle of proportionality. Minor irregularities

PART I The Public Sector Directive 2014/24/EU should only in exceptional circumstances lead to the exclusion of an economic operator. However repeated cases of minor irregularities can give rise to doubts about the reliability of an economic operator which might justify its exclusion. (102) Allowance should, however, be made for the possibility that economic operators can adopt compliance measures aimed at remedying the consequences of any criminal offences or misconduct and at effectively preventing further occurrences of the misbehaviour. Those measures might consist in particular of personnel and organisational measures such as the severance of all links with persons or organisations involved in the misbehaviour, appropriate staff reorganisation measures, the implementation of reporting and control systems, the creation of an internal audit structure to monitor compliance and the adoption of internal liability and compensation rules. Where such measures offer sufficient guarantees, the economic operator in question should no longer be excluded on those grounds alone. Economic operators should have the possibility to request that compliance measures taken with a view to possible admission to the procurement procedure be examined. However, it should be left to Member States to determine the exact procedural and substantive conditions applicable in such cases. They should, in particular, be free to decide whether to allow the individual contracting authorities to carry out the relevant assessments or to entrust other authorities on a central or decentralised level with that task. (103) Tenders that appear abnormally low in relation to the works, supplies or services might be based on technically, economically or legally unsound assumptions or practices. Where the tenderer cannot provide a sufficient explanation, the contracting authority should be entitled to reject the tender. Rejection should be mandatory in cases where the contracting authority has established that the abnormally low price or costs proposed results from noncompliance with mandatory Union law or national law compatible with it in

DIRECTIVE 2014/24/EU the fields of social, labour or environmental law or international labour law provisions. (104) Contract performance conditions are for laying down specific requirements relating to the performance of the contract. Unlike contract award criteria which are the basis for a comparative assessment of the quality of tenders, contract performance conditions constitute fixed objective requirements that have no impact on the assessment of tenders. Contract performance conditions should be compatible with this Directive provided that they are not directly or indirectly discriminatory and are linked to the subject-matter of the contract, which comprises all factors involved in the specific process of production, provision or commercialisation. This includes conditions concerning the process of performance of the contract, but excludes requirements referring to a general corporate policy. The contract performance conditions should be indicated in the contract notice, the prior information notice used as a means of calling for competition or the procurement documents. (105) It is important that observance by subcontractors of applicable obligations in the fields of environmental, social and labour law, established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in this Directive, provided that such rules, and their application, comply with Union law, be ensured through appropriate actions by the competent national authorities within the scope of their responsibilities and remit, such as labour inspection agencies or environmental protection agencies. It is also necessary to ensure some transparency in the subcontracting chain, as this gives contracting authorities information on who is present at building sites on which works are being performed for them, or on which undertakings are providing services in or at buildings, infrastructures or areas, such as town halls, municipal schools, sports facilities, ports or motorways, for which the contracting authorities are responsible or over which they have

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DIRECTIVE 2014/24/EU a direct oversight. It should be clarified that the obligation to deliver the required information is in any case incumbent upon the main contractor, either on the basis of specific clauses, that each contracting authority would have to include in all procurement procedures, or on the basis of obligations which Member States would impose on main contractors by means of generally applicable provisions. It should also be clarified that the conditions relating to the enforcement of observance of applicable obligations in the fields of environmental, social and labour law, established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in this Directive, provided that such rules, and their application, comply with Union law, should be applied whenever the national law of a Member State provides for a mechanism of joint liability between subcontractors and the main contractor. Furthermore, it should be stated explicitly that Member States should be able to go further, for instance by extending the transparency obligations, by enabling direct payment to subcontractors or by enabling or requiring contracting authorities to verify that subcontractors are not in any of the situations in which exclusion of economic operators would be warranted. Where such measures are applied to subcontractors, coherence with the provisions applicable to main contractors should be ensured so that the existence of compulsory exclusion grounds would be followed by a requirement that the main contractor replace the subcontractor concerned. Where such verification shows the presence of noncompulsory grounds for exclusion, it should be clarified that contracting authorities are able to require the replacement. It should, however, also be set out explicitly that contracting authorities may be obliged to require the replacement of the subcontractor concerned where exclusion of main con-

PART I The Public Sector Directive 2014/24/EU tractors would be obligatory in such cases. It should also be set out explicitly that Member States remain free to provide for more stringent liability rules under national law or to go further under national law on direct payments to subcontractors. (106) It should be recalled that Council Regulation (EEC, Euratom) No 1182/7118 applies to the calculation of the time limits contained in this Directive. (107) It is necessary to clarify the conditions under which modifications to a contract during its performance require a new procurement procedure, taking into account the relevant case-law of the Court of Justice of the European Union. A new procurement procedure is required in case of material changes to the initial contract, in particular to the scope and content of the mutual rights and obligations of the parties, including the distribution of intellectual property rights. Such changes demonstrate the parties’ intention to renegotiate essential terms or conditions of that contract. This is the case in particular if the amended conditions would have had an influence on the outcome of the procedure, had they been part of the initial procedure. Modifications to the contract resulting in a minor change of the contract value up to a certain value should always be possible without the need to carry out a new procurement procedure. To this effect and in order to ensure legal certainty, this Directive should provide for de minimis thresholds, below which a new procurement procedure is not necessary. Modifications to the contract above those thresholds should be possible without the need to carry out a new procurement procedure to the extent they comply with the relevant conditions laid down in this Directive. (108) Contracting authorities may be faced with situations where additional works, supplies or services become necessary; in such cases a modification of the initial contract without a new procure-

18 Council Regulation (EEC, Euratom) No 1182/71 of 3 June 1971 determining the rules applicable to periods, dates and time limits (OJ - English special edition: Series V Volume 1952-1972 p. 88).

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PART I The Public Sector Directive 2014/24/EU ment procedure may be justified, in particular where the additional deliveries are intended either as a partial replacements or as the extension of existing services, supplies or installations where a change of supplier would oblige the contracting authority to acquire material, works or services having different technical characteristics which would result in incompatibility or disproportionate technical difficulties in operation and maintenance. (109) Contracting authorities can be faced with external circumstances that they could not foresee when they awarded the contract, in particular when the performance of the contract covers a long period. In this case, a certain degree of flexibility is needed to adapt the contract to those circumstances without a new procurement procedure. The notion of unforeseeable circumstances refers to circumstances that could not have been predicted despite reasonably diligent preparation of the initial award by the contracting authority, taking into account its available means, the nature and characteristics of the specific project, good practice in the field in question and the need to ensure an appropriate relationship between the resources spent in preparing the award and its foreseeable value. However, this cannot apply in cases where a modification results in an alteration of the nature of the overall procurement, for instance by replacing the works, supplies or services to be procured by something different or by fundamentally changing the type of procurement since, in such a situation, a hypothetical influence on the outcome may be assumed. (110) In line with the principles of equal treatment and transparency, the successful tenderer should not, for instance where a contract is terminated because of deficiencies in the performance, be replaced by another economic operator without reopening the contract to competition. However, the successful tenderer performing the contract should be able, in particular where the contract has been awarded to more than one undertaking, to undergo certain structural changes during the

DIRECTIVE 2014/24/EU performance of the contract, such as purely internal reorganisations, takeovers, mergers and acquisitions or insolvency. Such structural changes should not automatically require new procurement procedures for all public contracts performed by that tenderer. (111) Contracting authorities should, in the individual contracts themselves, have the possibility to provide for modifications to a contract by way of review or option clauses, but such clauses should not give them unlimited discretion. This Directive should therefore set out to what extent modifications may be provided for in the initial contract. It should consequently be clarified that sufficiently clearly drafted review or option clauses may for instance provide for price indexations or ensure that, for example, communications equipment to be delivered over a given period continues to be suitable, also in the case of changing communications protocols or other technological changes. It should also be possible under sufficiently clear clauses to provide for adaptations of the contract which are rendered necessary by technical difficulties which have appeared during operation or maintenance. It should also be recalled that contracts could, for instance, include both ordinary maintenance as well as provide for extraordinary maintenance interventions that might become necessary in order to ensure continuation of a public service. (112) Contracting authorities are sometimes faced with circumstances that require the early termination of public contracts in order to comply with obligations under Union law in the field of public procurement. Member States should therefore ensure that contracting authorities have the possibility, under the conditions determined by national law, to terminate a public contract during its term if so required by Union law. (113) The results of the Commission staff working paper of 27 June 2011 entitled ‘Evaluation Report: Impact and Effectiveness of EU Public Procurement Legislation’ suggested that the exclusion of certain services from the full application of Directive 2004/18/EC should be

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DIRECTIVE 2014/24/EU reviewed. As a result, the full application of this Directive should be extended to a number of services. (114) Certain categories of services continue by their very nature to have a limited cross-border dimension, namely such services that are known as services to the person, such as certain social, health and educational services. Those services are provided within a particular context that varies widely amongst Member States, due to different cultural traditions. A specific regime should therefore be established for public contracts for those services, with a higher threshold than that which applies to other services. Services to the person with values below that threshold will typically not be of interest to providers from other Member States, unless there are concrete indications to the contrary, such as Union financing for cross-border projects. Contracts for services to the person above that threshold should be subject to Union-wide transparency. Given the importance of the cultural context and the sensitivity of these services, Member States should be given wide discretion to organise the choice of the service providers in the way they consider most appropriate. The rules of this Directive take account of that imperative, imposing only the observance of basic principles of transparency and equal treatment and making sure that contracting authorities are able to apply specific quality criteria for the choice of service providers, such as the criteria set out in the voluntary European Quality Framework for Social Services, published by the Social Protection Committee. When determining the procedures to be used for the award of contracts for services to the person, Member States should take Article 14 TFEU and Protocol No 26 into account. In so doing, Member States should also pursue the objectives of simplification and of alleviating the administrative burden for contracting authorities and economic operators; it should be clarified that so doing might also entail relying on rules applicable to service contracts not subject to the specific regime.

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PART I The Public Sector Directive 2014/24/EU Member States and public authorities remain free to provide those services themselves or to organise social services in a way that does not entail the conclusion of public contracts, for example through the mere financing of such services or by granting licences or authorisations to all economic operators meeting the conditions established beforehand by the contracting authority, without any limits or quotas, provided that such a system ensures sufficient advertising and complies with the principles of transparency and non-discrimination. (115) Likewise, hotel and restaurant services are typically offered only by operators located in the specific place of delivery of those services and therefore also have a limited cross-border dimension. They should therefore only be covered by the light regime, as from a threshold of EUR 750 000. Large hotel and restaurant service contracts above that threshold can be of interest for various economic operators, such as travel agencies and other intermediaries, also on a cross-border basis. (116) Similarly, certain legal services concern exclusively issues of purely national law and are therefore typically offered only by operators located in the Member State concerned and consequently also have a limited cross-border dimension. They should therefore only be covered by the light regime, as from a threshold of EUR 750 000. Large legal service contracts above that threshold can be of interest for various economic operators, such as international law firms, also on a cross-border basis, in particular where they involve legal issues arising from or having as its background Union or other international law or involving more than one country. (117) Experience has shown that a series of other services, such as rescue services, firefighting services and prison services are normally only of cross-border interest as of such time as they acquire sufficient critical mass through their relatively high value. In so far as they are not excluded from the scope of this Directive, they should be included under light regime. To the extent that their provision is actually based on con-

PART I The Public Sector Directive 2014/24/EU tracts, other categories of services, such as government services or the provision of services to the community, they would normally only be likely to present a cross-border interest as from a threshold of EUR 750 000 and should consequently only then be subject to the light regime. (118) In order to ensure the continuity of public services, this Directive should allow that participation in procurement procedures for certain services in the fields of health, social and cultural services could be reserved for organisations which are based on employee ownership or active employee participation in their governance, and for existing organisations such as cooperatives to participate in delivering these services to end users. This provision is limited in scope exclusively to certain health, social and related services, certain education and training services, library, archive, museum and other cultural services, sporting services, and services for private households, and is not intended to cover any of the exclusions otherwise provided for by this Directive. Those services should only be covered by the light regime. (119) It is appropriate to identify those services by reference to specific positions of the Common Procurement Vocabulary (CPV) as adopted by Regulation (EC) No 2195/2002 of the European Parliament and of the Council19, which is a hierarchically structured nomenclature, divided into divisions, groups, classes, categories and subcategories. In order to avoid legal uncertainty, it should be clarified that reference to a division does not implicitly entail a reference to subordinate subdivisions. Such comprehensive coverage should instead be set out explicitly by mentioning all the relevant positions, where appropriate as a range of codes. (120) Design contests have traditionally mostly been used in the fields of town and country planning, architecture and engineering or data processing, It should, however, be recalled that these flexible instruments could be used also

DIRECTIVE 2014/24/EU for other purposes, such as to obtain plans for financial engineering that would optimise SME support in the context of the Joint European Resources for Micro to Medium Enterprises (JEREMIE) or other Union SME support programmes in a given Member State. The design contest used to acquire the plans for such financial engineering could also stipulate that the subsequent service contracts for the realisation of this financial engineering would be awarded to the winner or one of the winners of the design contest by a negotiated procedure without publication. (121) The evaluation has shown that there is still considerable room for improvement in the application of the Union public procurement rules. With a view to a more efficient and consistent application of the rules, it is essential to get a good overview on possible structural problems and general patterns in national procurement policies, in order to address possible problems in a more targeted way. That overview should be gained through appropriate monitoring, the results of which should be regularly published, in order to allow an informed debate on possible improvements of procurement rules and practice. Acquiring such a good overview could also allow insights on the application of public procurement rules in the context of the implementation of projects co-financed by the Union. Member States should remain free to decide how and by whom this monitoring should be carried out in practice; in so doing, they should also remain free to decide whether the monitoring should be based on a sample-based ex-post control or on a systematic, ex-ante control of public procurement procedures covered by this Directive. It should be possible to bring potential problems to the attention of the proper bodies; this should not necessarily require that those having performed the monitoring have standing before courts and tribunals.

19 Regulation (EC) No 2195/2002 of the European Parliament and of the Council of 5 November 2002 on the Common Procurement Vocabulary (CPV) (OJ L 340, 16.12.2002, p. 1).

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DIRECTIVE 2014/24/EU Better guidance, information and support to contracting authorities and economic operators could also greatly contribute to enhancing the efficiency of public procurement, through better knowledge, increased legal certainty and professionalisation of procurement practices. Such guidance should be made available to contracting authorities and economic operators wherever it appears necessary to improve correct application of the rules. The guidance to be provided could cover all matters relevant to public procurement, such as acquisition planning, procedures, choice of techniques and instruments and good practices in the conduct of the procedures. With regard to legal questions, guidance should not necessarily amount to a complete legal analysis of the issues concerned; it could be limited to a general indication of the elements that should be taken into consideration for the subsequent detailed analysis of the questions, for instance by pointing to case-law that could be relevant or to guidance notes or other sources having examined the specific question concerned. (122) Directive 89/665/EEC provides for certain review procedures to be available at least to any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement of Union law in the field of public procurement or national rules transposing that law. Those review procedures should not be affected by this Directive. However, citizens, concerned stakeholders, organised or not, and other persons or bodies which do not have access to review procedures pursuant to Directive 89/665/EEC do nevertheless have a legitimate interest, as taxpayers, in sound procurement procedures. They should therefore be given a possibility, otherwise than through the review system pursuant to Directive 89/665/EEC and without it necessarily involving them being given standing before courts and tribunals, to indicate possible violations of this Directive to a competent authority or structure. So as not to duplicate existing authorities or structures, Member States should be

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PART I The Public Sector Directive 2014/24/EU able to provide for recourse to general monitoring authorities or structures, sectoral oversight bodies, municipal oversight authorities, competition authorities, the ombudsman or national auditing authorities. (123) In order to fully exploit the potential of public procurement to achieve the objectives of the Europe 2020 strategy for smart, sustainable and inclusive growth, environmental, social and innovation procurement will also have to play its part. It is therefore important to obtain an overview of the developments in the field of strategic procurement so as to take an informed view on the general trends at the overall level in that area. Any already prepared, appropriate reports can of course be used in this context also. (124) Given the potential of SMEs for job creation, growth and innovation it is important to encourage their participation in public procurement, both through appropriate provisions in this Directive as well as through initiatives at the national level. The new provisions provided for in this Directive should contribute towards an improvement of the level of success, by which is understood the share of SMEs in the total value of contracts awarded. It is not appropriate to impose obligatory shares of success, however, the national initiatives to enhance SME participation should be closely monitored given its importance. (125) A series of procedures and working methods have already been established in respect of the Commission’s communications and contacts with Member States, such as communications and contacts relating to the procedures provided for under Articles 258 and 260 TFEU, the Internal Market Problem Solving Network (SOLVIT) and EU Pilot, which are not modified by this Directive. They should, however, be complemented by the designation of one single point of reference in each Member State for the cooperation with the Commission, which would function as sole entry point for matters concerning public procurement in the Member State concerned. This function may be performed by persons or structures

PART I The Public Sector Directive 2014/24/EU which are already regularly in contact with the Commission on issues relating to public procurement, such as national contact points, members of the Advisory Committee on Public Procurement, Members of the Procurement Network or national coordinating instances. (126) The traceability and transparency of decision-making in procurement procedures is essential for ensuring sound procedures, including efficiently fighting corruption and fraud. Contracting authorities should therefore keep copies of concluded high-value contracts, in order to be able to provide access to those documents to interested parties in accordance with applicable rules on access to documents. Furthermore, the essential elements and decisions of individual procurement procedures should be documented in a procurement report. To avoid administrative burdens wherever possible, it should be permitted for the procurement report to refer to information already contained in the relevant contract award notice. The electronic systems for publication of those notices, managed by the Commission, should also be improved with a view to facilitating the entry of data while making it easier to extract global reports and exchange data between systems. (127) In the interests of administrative simplification and in order to lessen the burden on Member States, the Commission should periodically examine whether the quality and completeness of the information contained in the notices which are published in connection with public procurement procedures is sufficient to allow the Commission to extract the statistical information that would otherwise have to be transmitted by the Member States. (128) Effective administrative cooperation is necessary for the exchange of information needed for conducting award procedures in cross-border situations, in particular with regard to the verification of the grounds for exclusion and the selection criteria, the application of

DIRECTIVE 2014/24/EU quality and environmental standards and of lists of approved economic operators. The exchange of information is subject to national laws on confidentiality. Hence, this Directive does not entail any obligation for Member States to exchange information that goes beyond what national contracting authorities can access. The Internal Market Information System (IMI) established by Regulation (EU) No 1024/2012 of the European Parliament and of the Council20 could provide a useful electronic means to facilitate and enhance administrative cooperation managing the exchange of information on the basis of simple and unified procedures overcoming language barriers. A pilot project should consequently be launched as soon as possible to test the suitability of an expansion of IMI to cover the exchange of information under this Directive. (129) In order to adapt to rapid technical, economic and regulatory developments, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of a number of non-essential elements of this Directive. Due to the need to comply with international agreements, the Commission should be empowered to modify the technical procedures for the calculation methods concerning thresholds as well as to periodically revise the thresholds themselves and to adapt Annex X; the lists of central government authorities are subject to variations due to administrative changes at national level. These are notified to the Commission, which should be empowered to adapt Annex I; references to the CPV nomenclature may undergo regulatory changes at Union level and it is necessary to reflect those changes into the text of this Directive; the technical details and characteristics of the devices for electronic receipt should be kept up to date with technological developments; it is also necessary to empower the Commission to make mandatory technical standards for elec-

20 Regulation (EU) No 1024/2012 of the European Parliament and of the Council of 25 October 2012 on administrative cooperation through the Internal Market Information System and repealing Commission Decision 2008/49/EC (‘the IMI Regulation’) (OJ L 316, 14.11.2012, p. 1).

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DIRECTIVE 2014/24/EU tronic communication to ensure the interoperability of technical formats, processes and messaging in procurement procedures conducted using electronic means of communication taking into account technological developments; the list of legal acts of the Union establishing common methodologies for the calculation of life-cycle costs should be quickly adapted to incorporate the measures adopted on a sectoral basis. In order to satisfy those needs, the Commission should be empowered to keep the list of legal acts including lifecycle costing methodologies up-to date. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level. When preparing and drawing up delegated acts, the Commission should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council. (130) In the application of this Directive the Commission should consult appropriate groups of experts in the field of eprocurement, ensuring a balanced composition of the main stakeholder groups. (131) In order to ensure uniform conditions for the implementation of this Directive, as for the drawing up of the standard forms for the publication of notices and a standard form for self-declarations, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council21. (132) The advisory procedure should be used for the adoption of the implementing acts concerning standard forms for the publication of notices, which do not have any impact either from the financial point of view or on the nature and scope of obligations stemming from this Directive. On the contrary, those acts are characterised by a mere administrative purpose and serve to facilitate

PART I The Public Sector Directive 2014/24/EU the application of the rules set out in this Directive. (133) The examination procedure should be used for the adoption of the standard form for self-declarations, due to the impact of those self-declarations on procurement and because they play a central role in the simplification of the documentation requirements in the procurement procedures. (134) The Commission should review the effects on the internal market resulting from the application of the thresholds and report thereon to the European Parliament and the Council. In so doing, it should take into account factors such as the level of cross-border procurement, SME participation, transaction costs and the cost-benefit tradeoff. In accordance with Article XXII(7) thereof, the GPA shall be the subject of further negotiations three years after its entry into force and periodically thereafter. In that context, the appropriateness of the level of thresholds should be examined, bearing in mind the impact of inflation in view of a long period without changes of the thresholds in the GPA; in the event that the level of thresholds should change as a consequence, the Commission should, where appropriate, adopt a proposal for a legal act amending the thresholds set out in this Directive. (135) Having regard to current discussions on horizontal provisions governing relations with third countries in the context of public procurement the Commission should closely monitor global trade conditions and assess the Union’s competitive position. (136) Since the objective of this Directive, namely the coordination of laws, regulations and administrative provisions of the Member States applying to certain public procurement procedures, cannot be sufficiently achieved by the Member States but can rather, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the

21 Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by the Member States of the Commission's exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).

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PART I The Public Sector Directive 2014/24/EU principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve that objective. (137) Directive 2004/18/EC should be repealed. (138) In accordance with the Joint Political Declaration of Member States and the Commission on explanatory documents of 28 September 2011, Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified, HAVE ADOPTED THIS DIRECTIVE: TITLE I: SCOPE, DEFINITIONS AND GENERAL PRINCIPLES

Article 11: Article 12:

SECTION 4: Specific situations Subsection 1: Subsidised contracts and research and development services Article 13: Article 14:

Article 15: Article 16: Article 17:

Defence and security Mixed procurement involving defence or security aspects Public contracts and design contests involving defence or security aspects which are awarded or organised pursuant to international rules

CHAPTER II: General rules

SECTION 1: Subject-matter and definitions Article 1: Article 2: Article 3:

Article 23: Article 24:

Subject-matter and scope Definitions Mixed procurement

Contracts subsidised by contracting authorities Research and development services

Subsection 2: Procurement involving defence and security aspects

Article 18: Article 19: Article 20: Article 21: Article 22:

CHAPTER I: Scope and definitions

Service contracts awarded on the basis of an exclusive right Public contracts between entities within the public sector

Principles of procurement Economic operators Reserved contracts Confidentiality Rules applicable to communication Nomenclatures Conflicts of interests

SECTION 2: Thresholds

TITLE II: RULES ON PUBLIC CONTRACTS

Article 4: Article 5:

CHAPTER I: Procedures

Article 6:

Threshold amounts Methods for calculating the estimated value of procurement Revision of the thresholds and of the list of central government authorities

SECTION 3: Exclusions Article 7: Article 8: Article 9: Article 10:

Contracts in the water, energy, transport and postal services sectors Specific exclusions in the field of electronic communications Public contracts awarded and design contests organised pursuant to international rules Specific exclusions for service contracts

Article 25: Article 26: Article 27: Article 28: Article 29: Article 30: Article 31: Article 32:

Conditions relating to the GPA and other international agreements Choice of procedures Open procedure Restricted procedure Competitive procedure with negotiation Competitive dialogue Innovation Partnership Use of the negotiated procedure without prior publication

CHAPTER II: Techniques and instruments for electronic and aggregated procurement Article 33: Article 34:

Framework agreements Dynamic purchasing systems

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Electronic auctions Electronic catalogues Centralised purchasing activities and central purchasing bodies Occasional joint procurement Procurement involving contracting authorities from different Member States

PART I The Public Sector Directive 2014/24/EU Article 64:

Subsection 2: Reduction of Numbers of Candidates, Tenders and Solutions Article 65:

CHAPTER III: Conduct of the procedure SECTION 1: Preparation Article 40: Article 41: Article 42: Article 43: Article 44: Article 45: Article 46: Article 47:

Preliminary market consultations Prior involvement of candidates or tenderers Technical specifications Labels Test reports, certification and other means of proof Variants Division of contracts into lots Setting time limits

SECTION 2: Publication and transparency Article 48: Article 49: Article 50: Article 51: Article 52: Article 53: Article 54: Article 55:

Prior information notices Contract notices Contract award notices Form and manner of publication of notices Publication at national level Electronic availability of procurement documents Invitations to candidates Informing candidates and tenderers

SECTION 3: Choice of participants and award of contracts Article 56:

General principles

Subsection 1: Criteria for qualitative selection Article 57: Article 58: Article 59: Article 60: Article 61: Article 62: Article 63:

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Exclusion grounds Selection criteria European Single Procurement Document Means of proof Online repository of certificates (e-Certis) Quality assurance standards and environmental management standards Reliance on the capacities of other entities

Official lists of approved economic operators and certification by bodies established under public or private law

Article 66:

Reduction of the number of otherwise qualified candidates to be invited to participate Reduction of the number of tenders and solutions

Subsection 3: Award of the Contract Article 67: Article 68: Article 69:

Contract award criteria Life-cycle costing Abnormally low tenders

CHAPTER IV: Contract performance Article 70: Article 71: Article 72: Article 73:

Conditions for performance of contracts Subcontracting Modification of contracts during their term Termination of contracts

TITLE III: PARTICULAR PROCUREMENT REGIMES CHAPTER I: Social and other specific services Article 74: Article 75: Article 76: Article 77:

Award of contracts for social and other specific services Publication of notices Principles of awarding contracts Reserved contracts for certain services

CHAPTER II: Rules governing design contests Article 78: Article 79: Article 80: Article 81: Article 82:

Scope Notices Rules on the organisation of design contests and the selection of participants Composition of the jury Decisions of the jury

TITLE IV: GOVERNANCE Article 83: Article 84:

Enforcement Individual reports on procedures for the award of contracts

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PART I The Public Sector Directive 2014/24/EU Article 85:

National reporting and statistical information Administrative cooperation

Part F:

TITLE V: DELEGATED POWERS, IMPLEMENTING POWERS AND FINAL PROVISIONS

Part G:

Article 86:

Article 87: Article 88: Article 89: Article 90: Article 91: Article 92: Article 93: Article 94:

Exercise of the delegation of powers Urgency procedure Committee procedure Transposition and transitional provisions Repeals Review Entry into force Addressees

ANNEXES: ANNEX I: ANNEX II: ANNEX III:

ANNEX IV:

ANNEX V: Part A:

Part B: Part C: Part D: Part E:

Part H:

Part I:

Part J: Central government authorities List of the activities referred to in point (6)(a) of article 2(1) List of products referred to in article 4(b) with regard to contracts awarded by contracting authorities in the field of defence Requirements relating to tools and devices for the electronic receipt of tenders, requests for participation as well as plans and projects in contests Information to be included in notices Information to be included in notices of the publication of a prior information notice on a buyer profile Information to be included in prior information notices (as referred to in article 48) Information to be included in contract notices (as referred to in article 49) Information to be included in contract award notices (as referred to in article 50) Information to be included in design contest notices (as referred to in article 79(1))

ANNEX VI:

ANNEX VII: ANNEX VIII: ANNEX IX:

ANNEX X:

ANNEX XI: ANNEX XII: ANNEX XIII: ANNEX XIV: ANNEX XV:

Information to be included in notices of the results of a contest (as referred to in article 79(2)) Information to be included in notices of modifications of a contract during its term (as referred to in article 72(1)) Information to be included in contract notices concerning contracts for social and other specific services (as referred to in article 75(1)) Information to be included in prior information notices for social and other specific services (as referred to in article 75(1)) Information to be included in contract award notices concerning contracts for social and other specific services (as referred to in article 75(2)) Information to be included in the procurement documents relating to electronic auctions (article 35(4)) Definition of certain technical specifications Features concerning publication Contents of the invitations to submit a tender, to participate in the dialogue or to confirm interest provided for under article 54 List of international social and environmental conventions referred to in article 18(2) Registers Means of proof of selection criteria List of eu legislation referred to in article 68(3) Services referred to in article 74 Correlation table

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TITLE I SCOPE, DEFINITIONS AND GENERAL PRINCIPLES

PART I The Public Sector Directive 2014/24/EU (1)

Chapter I Scope and definitions Section 1 Subject-matter and definitions Article 1 Subject-matter and scope 1. This Directive establishes rules on the procedures for procurement by contracting authorities with respect to public contracts as well as design contests, whose value is estimated to be not less than the thresholds laid down in Article 4. 2. Procurement within the meaning of this Directive is the acquisition by means of a public contract of works, supplies or services by one or more contracting authorities from economic operators chosen by those contracting authorities, whether or not the works, supplies or services are intended for a public purpose. 3. The application of this Directive is subject to Article 346 TFEU. 4. This Directive does not affect the freedom of Member States to define, in conformity with Union law, what they consider to be services of general economic interest, how those services should be organised and financed, in compliance with the State aid rules, and what specific obligations they should be subject to. Equally, this Directive does not affect the decision of public authorities whether, how and to what extent they wish to perform public functions themselves pursuant to Article 14 TFEU and Protocol No 26. 5. This Directive does not affect the way in which the Member States organise their social security systems. 6. Agreements, decisions or other legal instruments that organise the transfer of powers and responsibilities for the performance of public tasks between contracting authorities or groupings of contracting authorities and do not provide for remuneration to be given for contractual performance, are considered to be a matter of internal organisation of the Member State concerned and, as such, are not affected in any way by this Directive.

Article 2 Definitions 1. For the purposes of this Directive, the following definitions apply:

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(2)

(3)

(4)

(5)

(6)

‘contracting authorities’ means the State, regional or local authorities, bodies governed by public law or associations formed by one or more such authorities or one or more such bodies governed by public law; ‘central government authorities’ means the contracting authorities listed in Annex I and, in so far as corrections or amendments have been made at national level, their successor entities; ‘sub-central contracting authorities’ means all contracting authorities which are not central government authorities; ‘bodies governed by public law’ means bodies that have all of the following characteristics: (a) they are established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; (b) they have legal personality; and (c) they are financed, for the most part, by the State, regional or local authorities, or by other bodies governed by public law; or are subject to management supervision by those authorities or bodies; or have an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law; ‘public contracts’ means contracts for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities and having as their object the execution of works, the supply of products or the provision of services; ‘public works contracts’ means public contracts having as their object one of the following: (a) the execution, or both the design and execution, of works related to one of the activities within the meaning of Annex II; (b) the execution, or both the design and execution, of a work;

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PART I The Public Sector Directive 2014/24/EU

(7)

(8)

(9)

(10)

(11) (12)

(13)

(c) the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority exercising a decisive influence on the type or design of the work; ‘a work’ means the outcome of building or civil engineering works taken as a whole which is sufficient in itself to fulfil an economic or technical function; ‘public supply contracts’ means public contracts having as their object the purchase, lease, rental or hirepurchase, with or without an option to buy, of products. A public supply contract may include, as an incidental matter, siting and installation operations; ‘public service contracts’ means public contracts having as their object the provision of services other than those referred to in point 6; ‘economic operator’ means any natural or legal person or public entity or group of such persons and/or entities, including any temporary association of undertakings, which offers the execution of works and/or a work, the supply of products or the provision of services on the market; ‘tenderer’ means an economic operator that has submitted a tender; ‘candidate’ means an economic operator that has sought an invitation or has been invited to take part in a restricted procedure, in a competitive procedure with negotiation, in a negotiated procedure without prior publication, in a competitive dialogue or in an innovation partnership; ‘procurement document’ means any document produced or referred to by the contracting authority to describe or determine elements of the procurement or the procedure, including the contract notice, the prior information notice where it is used as a means of calling for competition, the technical specifications, the descriptive document, proposed conditions of contract, formats for the presentation of documents by candidates and tenderers, informa-

(14)

(15)

(16)

(17)

(18)

(19)

tion on generally applicable obligations and any additional documents; ‘centralised purchasing activities’ means activities conducted on a permanent basis, in one of the following forms: (a) the acquisition of supplies and/or services intended for contracting authorities, (b) the award of public contracts or the conclusion of framework agreements for works, supplies or services intended for contracting authorities; ‘ancillary purchasing activities’ means activities consisting in the provision of support to purchasing activities, in particular in the following forms: (a) technical infrastructure enabling contracting authorities to award public contracts or to conclude framework agreements for works, supplies or services; (b) advice on the conduct or design of public procurement procedures; (c) preparation and management of procurement procedures on behalf and for the account of the contracting authority concerned; ‘central purchasing body’ means a contracting authority providing centralised purchasing activities and, possibly, ancillary purchasing activities; ‘procurement service provider’ means a public or private body which offers ancillary purchasing activities on the market; ‘written’ or ‘in writing’ means any expression consisting of words or figures which can be read, reproduced and subsequently communicated, including information transmitted and stored by electronic means; ‘electronic means’ means electronic equipment for the processing (including digital compression) and storage of data which is transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means;

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DIRECTIVE 2014/24/EU (20) ‘life cycle’ means all consecutive and/or interlinked stages, including research and development to be carried out, production, trading and its conditions, transport, use and maintenance, throughout the existence of the product or the works or the provision of the service, from raw material acquisition or generation of resources to disposal, clearance and end of service or utilisation; (21) ‘design contests’ means those procedures which enable the contracting authority to acquire, mainly in the fields of town and country planning, architecture and engineering or data processing, a plan or design selected by a jury after being put out to competition with or without the award of prizes; (22) ‘innovation’ means the implementation of a new or significantly improved product, service or process, including but not limited to production, building or construction processes, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations inter alia with the purpose of helping to solve societal challenges or to support the Europe 2020 strategy for smart, sustainable and inclusive growth; (23) ‘label’ means any document, certificate or attestation confirming that the works, products, services, processes or procedures in question meet certain requirements; (24) ‘label requirements’ means the requirements to be met by the works, products, services, processes or procedures in question in order to obtain the label concerned. 2. For the purpose of this Article ‘regional authorities’ includes authorities listed non-exhaustively in NUTS 1 and 2, as referred to in Regulation (EC) No 1059/2003 of the European Parliament and of the Council1, while ‘local authorities’ includes all authorities of the administrative units falling under NUTS 3 and smaller admin-

PART I The Public Sector Directive 2014/24/EU istrative units, as referred to in Regulation (EC) No 1059/2003.

Article 3 Mixed procurement 1. Paragraph 2 shall apply to mixed contracts which have as their subject-matter different types of procurement all of which are covered by this Directive. Paragraphs 3 to 5 shall apply to mixed contracts which have as their subject-matter procurement covered by this Directive and procurement covered by other legal regimes. 2. Contracts which have as their subject two or more types of procurement (works, services or supplies) shall be awarded in accordance with the provisions applicable to the type of procurement that characterises the main subject of the contract in question. In the case of mixed contracts consisting partly of services within the meaning of Chapter I of Title III and partly of other services or of mixed contracts consisting partly of services and partly of supplies, the main subject shall be determined in accordance with which of the estimated values of the respective services or supplies is the highest. 3. Where the different parts of a given contract are objectively separable, paragraph 4 shall apply. Where the different parts of a given contract are objectively not separable, paragraph 6 shall apply. Where part of a given contract is covered by Article 346 TFEU or Directive 2009/81/EC, Article 16 of this Directive shall apply. 4. In the case of contracts which have as their subject-matter procurement covered by this Directive as well as procurement not covered by this Directive, contracting authorities may choose to award separate contracts for the separate parts or to award a single contract. Where contracting authorities choose to award separate contracts for separate parts, the decision as to which legal regime applies to any one of such separate contracts shall be taken on the basis of the characteristics of the separate part concerned.

1 Regulation (EC) No 1059/2003 of the European Parliament and of the Council of 26 May 2003 on the establishment of a common classification of territorial units for statistics (NUTS) (OJ L 154, 21.6.2003, p. 1).

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PART I The Public Sector Directive 2014/24/EU Where contracting authorities choose to award a single contract, this Directive shall, unless otherwise provided in Article 16, apply to the ensuing mixed contract, irrespective of the value of the parts that would otherwise fall under a different legal regime and irrespective of which legal regime those parts would otherwise have been subject to. In the case of mixed contracts containing elements of supply, works and service contracts and of concessions, the mixed contract shall be awarded in accordance with this Directive, provided that the estimated value of the part of the contract which constitutes a contract covered by this Directive, calculated in accordance with Article 5, is equal to or greater than the relevant threshold set out in Article 4. 5. In the case of contracts which have as their subject both procurement covered by this Directive and procurement for the pursuit of an activity which is subject to Directive 2014/25/EU, the applicable rules shall, notwithstanding paragraph 4 of this Article, be determined pursuant to Articles 5 and 6 of Directive 2014/25/EU. 6. Where the different parts of a given contract are objectively not separable, the applicable legal regime shall be determined on the basis of the main subject-matter of that contract.

Section 2 Thresholds Article 4 Threshold amounts This Directive shall apply to procurements with a value net of value-added tax (VAT) estimated to be equal to or greater than the following thresholds: (a) EUR 5 186 000 for public works contracts; (b) EUR 134 000 for public supply and service contracts awarded by central government authorities and design contests organised by such authorities; where public supply contracts are awarded by contracting authorities operating in the field of defence, that threshold shall apply only to contracts concerning products covered by Annex III; (c) EUR 207 000 for public supply and service contracts awarded by sub-central contracting authorities and design contests organised by such authorities; that threshold shall also apply to public sup-

DIRECTIVE 2014/24/EU ply contracts awarded by central government authorities that operate in the field of defence, where those contracts involve products not covered by Annex III; (d) EUR 750 000 for public service contracts for social and other specific services listed in Annex XIV.

Article 5 Methods for calculating the estimated value of procurement 1. The calculation of the estimated value of a procurement shall be based on the total amount payable, net of VAT, as estimated by the contracting authority, including any form of option and any renewals of the contracts as explicitly set out in the procurement documents. Where the contracting authority provides for prizes or payments to candidates or tenderers it shall take them into account when calculating the estimated value of the procurement. 2. Where a contracting authority is comprised of separate operational units, account shall be taken of the total estimated value for all the individual operational units. Notwithstanding the first subparagraph, where a separate operational unit is independently responsible for its procurement or certain categories thereof, the values may be estimated at the level of the unit in question. 3. The choice of the method used to calculate the estimated value of a procurement shall not be made with the intention of excluding it from the scope of this Directive. A procurement shall not be subdivided with the effect of preventing it from falling within the scope of this Directive, unless justified by objective reasons. 4. That estimated value shall be valid at the moment at which the call for competition is sent, or, in cases where a call for competition is not foreseen, at the moment at which the contracting authority commences the procurement procedure, for instance, where appropriate, by contacting economic operators in relation to the procurement. 5. With regard to framework agreements and dynamic purchasing systems, the value to be taken into consideration shall be the maximum estimated value net of VAT

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6.

7.

8.

9.

10.

11.

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of all the contracts envisaged for the total term of the framework agreement or the dynamic purchasing system. In the case of innovation partnerships, the value to be taken into consideration shall be the maximum estimated value net of VAT of the research and development activities to take place during all stages of the envisaged partnership as well as of the supplies, services or works to be developed and procured at the end of the envisaged partnership. With regard to public works contracts, the calculation of the estimated value shall take account of both the cost of the works and the total estimated value of the supplies and services that are made available to the contractor by the contracting authority provided that they are necessary for executing the works. Where a proposed work or a proposed provision of services may result in contracts being awarded in the form of separate lots, account shall be taken of the total estimated value of all such lots. Where the aggregate value of the lots is equal to or exceeds the threshold laid down in Article 4, this Directive shall apply to the awarding of each lot. Where a proposal for the acquisition of similar supplies may result in contracts being awarded in the form of separate lots, account shall be taken of the total estimated value of all such lots when applying points (b) and (c) of Article 4. Where the aggregate value of the lots is equal to or exceeds the threshold laid down in Article 4, this Directive shall apply to the awarding of each lot. Notwithstanding paragraphs 8 and 9, contracting authorities may award contracts for individual lots without applying the procedures provided for under this Directive, provided that the estimated value net of VAT of the lot concerned is less than EUR 80 000 for supplies or services or EUR 1 million for works. However, the aggregate value of the lots thus awarded without applying this Directive shall not exceed 20 % of the aggregate value of all the lots into which the proposed work, the proposed acquisition of similar supplies or the proposed provision of services has been divided. In the case of public supply or service contracts which are regular in nature or

PART I The Public Sector Directive 2014/24/EU which are intended to be renewed within a given period, the calculation of the estimated contract value shall be based on the following: (a) either the total actual value of the successive contracts of the same type awarded during the preceding 12 months or financial year adjusted, where possible, to take account of the changes in quantity or value which would occur in the course of the 12 months following the initial contract; (b) or the total estimated value of the successive contracts awarded during the 12 months following the first delivery, or during the financial year where that is longer than 12 months. 12. With regard to public supply contracts relating to the leasing, hire, rental or hire purchase of products, the value to be taken as a basis for calculating the estimated contract value shall be as follows: (a) in the case of fixed-term public contracts, where that term is less than or equal to 12 months, the total estimated value for the term of the contract or, where the term of the contract is greater than 12 months, the total value including the estimated residual value; (b) in the case of public contracts without a fixed term or the term of which cannot be defined, the monthly value multiplied by 48. 13. With regard to public service contracts, the basis for calculating the estimated contract value shall, where appropriate, be the following: (a) insurance services: the premium payable and other forms of remuneration; (b) banking and other financial services: the fees, commissions payable, interest and other forms of remuneration; (c) design contracts: fees, commissions payable and other forms of remuneration. 14. With regard to public service contracts which do not indicate a total price, the basis for calculating the estimated contract value shall be the following: (a) in the case of fixed-term contracts, where that term is less than or equal to 48 months: the total value for their full term;

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PART I The Public Sector Directive 2014/24/EU (b) in the case of contracts without a fixed term or with a term greater than 48 months: the monthly value multiplied by 48.

Article 6 Revision of the thresholds and of the list of central government authorities 1. Every two years from 30 June 2013, the Commission shall verify that the thresholds set out in points (a), (b) and (c) of Article 4 correspond to the thresholds established in the World Trade Organisation Agreement on Government Procurement (GPA) and shall, where necessary, revise them in accordance with this Article. In accordance with the calculation method set out in the GPA, the Commission shall calculate the value of these thresholds on the basis of the average daily value of the euro in terms of the special drawing rights (SDRs), over a period of 24 months terminating on 31 August preceding the revision with effect from 1 January. The value of the thresholds thus revised shall, where necessary, be rounded down to the nearest thousand euros so as to ensure that the thresholds in force provided for by the GPA, expressed in SDRs, are observed. 2. When carrying out the revision pursuant to paragraph 1 of this Article, the Commission shall, in addition, revise: (a) the threshold established in point (a) of the first paragraph of Article 13 by aligning it with the revised threshold applying to public works contracts; (b) the threshold established in point (b) of the first paragraph of Article 13 by aligning it with the revised threshold applying to public service contracts awarded by sub-central contracting authorities. 3. Every two years from 1 January 2014, the Commission shall determine the values, in the national currencies of the Member States, whose currency is not the euro, of the thresholds referred to in points (a), (b) and (c) of Article 4, revised pursuant to paragraph 1 of this Article. At the same time, the Commission shall determine the value, in the national currencies of the Member States, whose currency is not the euro, of the threshold referred to in point (d) of Article 4.

4.

5.

6.

7.

In accordance with the calculation method set out in the GPA, the determination of such values shall be based on the average daily values of those currencies corresponding to the applicable threshold expressed in euros over the 24 months terminating on 31 August preceding the revision with effect from 1 January. The Commission shall publish the revised thresholds referred to in paragraph 1, their corresponding values in the national currencies referred to in the first subparagraph of paragraph 3, and the value determined in accordance with the second subparagraph of paragraph 3 in the Official Journal of the European Union at the beginning of the month of November following their revision. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 to adapt the methodology set out in the second subparagraph of paragraph 1 of this Article to any change in the methodology provided in the GPA for the revision of the thresholds referred to in points (a), (b) and (c) of Article 4 and for the determination of the corresponding values in the national currencies of the Member States, whose currency is not the euro, as referred to in paragraph 3 of this Article. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 to revise the thresholds referred to in points (a), (b) and (c) of Article 4 pursuant to paragraph 1 of this Article and to revise the thresholds referred to in points (a) and (b) of the first paragraph of Article 13 pursuant to paragraph 2 of this Article. Where it is necessary to revise the thresholds referred to in points (a), (b) and (c) of Article 4 and the thresholds referred to in points (a) and (b) of the first paragraph of Article 13 and time constraints prevent the use of the procedure set in Article 87 and therefore imperative grounds of urgency so require, the procedure provided for in Article 88 shall apply to delegated acts adopted pursuant to the second subparagraph of paragraph 5 of this Article. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 to amend Annex I, in order to update the list of contracting authorities following notifications from Member

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DIRECTIVE 2014/24/EU States, where such amendments prove necessary to correctly identify contracting authorities.

Section 3 Exclusions Article 7 Contracts in the water, energy, transport and postal services sectors This Directive shall not apply to public contracts and design contests which, under Directive 2014/25/EU, are awarded or organised by contracting authorities exercising one or more of the activities referred to in Articles 8 to 14 of that Directive and are awarded for the pursuit of those activities, to public contracts excluded from the scope of that Directive under Articles 18, 23 and 34 thereof or, when awarded by a contracting authority which provides postal services within the meaning of point (b) of Article 13(2) of that Directive, to contracts awarded for the pursuit of the following activities: (a) added value services linked to and provided entirely by electronic means (including the secure transmission of coded documents by electronic means, address management services and transmission of registered electronic mail); (b) financial services which are covered by CPV codes 66100000-1 to 66720000-3 and by point (d) of Article 21 of Directive 2014/25/EU and including in particular postal money orders and postal giro transfers; (c) philatelic services; or (d) logistics services (services combining physical delivery and/or warehousing with other non-postal functions).

Article 8 Specific exclusions in the field of electronic communications This Directive shall not apply to public contracts and design contests for the principal purpose of permitting the contracting authorities to provide or exploit public communications networks or to provide to the public one or more electronic communications services. For the purposes of this Article, ‘public communications network’ and ‘electronic communications service’ shall have the same

PART I The Public Sector Directive 2014/24/EU meaning as in Directive 2002/21/EC of the European Parliament and of the Council1.

Article 9 Public contracts awarded and design contests organised pursuant to international rules 1. This Directive shall not apply to public contracts and design contests which the contracting authority is obliged to award or organise in accordance with procurement procedures different from those laid down in this Directive established by any of the following: (a) a legal instrument creating international law obligations, such as an international agreement, concluded in conformity with the Treaties, between a Member State and one or more third countries or subdivisions thereof and covering works, supplies or services intended for the joint implementation or exploitation of a project by their signatories; (b) an international organisation. The Member States shall communicate all legal instruments referred to in point (a) of the first subparagraph of this paragraph to the Commission, which may consult the Advisory Committee on Public Procurement referred to in Article 89. 2. This Directive shall not apply to public contracts and design contests which the contracting authority awards or organises in accordance with procurement rules provided by an international organisation or international financing institution, where the public contracts and design contests concerned are fully financed by that organisation or institution; in the case of public contracts and design contests co-financed for the most part by an international organisation or international financing institution the parties shall agree on applicable procurement procedures. 3. Article 17 shall apply to contracts and design contests involving defence or security aspects which are awarded or organised pursuant to international rules. Paragraphs 1 and 2 of this Article shall not apply to those contracts and design contests.

1 Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive) (OJ L 108, 24.4.2002, p. 33).

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PART I The Public Sector Directive 2014/24/EU

Article 10 Specific exclusions for service contracts This Directive shall not apply to public service contracts for: (a) the acquisition or rental, by whatever financial means, of land, existing buildings or other immovable property or concerning rights thereon; (b) the acquisition, development, production or co-production of programme material intended for audiovisual media services or radio media services, that are awarded by audiovisual or radio media service providers, or contracts for broadcasting time or programme provision that are awarded to audiovisual or radio media service providers. For the purposes of this point, ‘audiovisual media services’ and ‘media service providers’ shall, respectively, have the same meaning as pursuant to points (a) and (d) of Article 1(1) of Directive 2010/13/EU of the European Parliament and of the Council1. ‘Programme’ shall have the same meaning as pursuant to point (b) of Article 1(1) of that Directive, but shall also include radio programmes and radio programme materials. Furthermore, for the purposes of this provision, ‘programme material’ shall have the same meaning as ‘programme’; (c) arbitration and conciliation services; (d) any of the following legal services: (i) legal representation of a client by a lawyer within the meaning of Article 1 of Council Directive 77/249/EEC2 in: – an arbitration or conciliation held in a Member State, a third country or before an international arbitration or conciliation instance; or – judicial proceedings before the courts, tribunals or public authorities of a Member State or a

(e)

(f) (g) (h)

third country or before international courts, tribunals or institutions; (ii) legal advice given in preparation of any of the proceedings referred to in point (i) of this point or where there is a tangible indication and high probability that the matter to which the advice relates will become the subject of such proceedings, provided that the advice is given by a lawyer within the meaning of Article 1 of Directive 77/249/ EEC; (iii) document certification and authentication services which must be provided by notaries; (iv) legal services provided by trustees or appointed guardians or other legal services the providers of which are designated by a court or tribunal in the Member State concerned or are designated by law to carry out specific tasks under the supervision of such tribunals or courts; (v) other legal services which in the Member State concerned are connected, even occasionally, with the exercise of official authority; financial services in connection with the issue, sale, purchase or transfer of securities or other financial instruments within the meaning of Directive 2004/39/EC of the European Parliament and of the Council3, central bank services and operations conducted with the European Financial Stability Facility and the European Stability Mechanism; loans, whether or not in connection with the issue, sale, purchase or transfer of securities or other financial instruments; employment contracts; civil defence, civil protection, and danger prevention services that are provided by non-profit organisations or associations,

1 Directive 2010/13/EU of the European Parliament and of the Council of 10 March 2010 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services (Audiovisual Media Services Directive) (OJ L 95, 15.4.2010, p. 1). 2 Council Directive 77/249/EEC of 22 March 1977 to facilitate the effective exercise by lawyers of freedom to provide services (OJ L 78, 26.3.1977, p. 17). 3 Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (OJ L 145, 30.4.2004, p. 1).

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DIRECTIVE 2014/24/EU and which are covered by CPV codes 75250000-3, 75251000-0, 75251100-1, 75251110-4, 75251120-7, 75252000-7, 75222000-8, 98113100-9 and 85143000-3 except patient transport ambulance services; (i) public passenger transport services by rail or metro; (j) political campaign services covered by CPV codes 79341400-0, 92111230-3 and 92111240-6, when awarded by a political party in the context of an election campaign.

Article 11 Service contracts awarded on the basis of an exclusive right This Directive shall not apply to public service contracts awarded by a contracting authority to another contracting authority or to an association of contracting authorities on the basis of an exclusive right which they enjoy pursuant to a law, regulation or published administrative provision which is compatible with the TFEU.

Article 12 Public contracts between entities within the public sector 1. A public contract awarded by a contracting authority to a legal person governed by private or public law shall fall outside the scope of this Directive where all of the following conditions are fulfilled: (a) the contracting authority exercises over the legal person concerned a control which is similar to that which it exercises over its own departments; (b) more than 80 % of the activities of the controlled legal person are carried out in the performance of tasks entrusted to it by the controlling contracting authority or by other legal persons controlled by that contracting authority; and (c) there is no direct private capital participation in the controlled legal person with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person. A contracting authority shall be deemed to exercise over a legal person a control

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PART I The Public Sector Directive 2014/24/EU similar to that which it exercises over its own departments within the meaning of point (a) of the first subparagraph where it exercises a decisive influence over both strategic objectives and significant decisions of the controlled legal person. Such control may also be exercised by another legal person, which is itself controlled in the same way by the contracting authority. 2. Paragraph 1 also applies where a controlled legal person which is a contracting authority awards a contract to its controlling contracting authority, or to another legal person controlled by the same contracting authority, provided that there is no direct private capital participation in the legal person being awarded the public contract with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person. 3. A contracting authority, which does not exercise over a legal person governed by private or public law control within the meaning of paragraph 1, may nevertheless award a public contract to that legal person without applying this Directive where all of the following conditions are fulfilled. (a) the contracting authority exercises jointly with other contracting authorities a control over that legal person which is similar to that which they exercise over their own departments; (b) more than 80 % of the activities of that legal person are carried out in the performance of tasks entrusted to it by the controlling contracting authorities or by other legal persons controlled by the same contracting authorities; and (c) there is no direct private capital participation in the controlled legal person with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person. For the purposes of point (a) of the first subparagraph, contracting authorities exercise joint control over a

PART I The Public Sector Directive 2014/24/EU legal person where all of the following conditions are fulfilled: (i) the decision-making bodies of the controlled legal person are composed of representatives of all participating contracting authorities. Individual representatives may represent several or all of the participating contracting authorities; (ii) those contracting authorities are able to jointly exert decisive influence over the strategic objectives and significant decisions of the controlled legal person; and (iii) the controlled legal person does not pursue any interests which are contrary to those of the controlling contracting authorities. 4. A contract concluded exclusively between two or more contracting authorities shall fall outside the scope of this Directive where all of the following conditions are fulfilled: (a) the contract establishes or implements a cooperation between the participating contracting authorities with the aim of ensuring that public services they have to perform are provided with a view to achieving objectives they have in common; (b) the implementation of that cooperation is governed solely by considerations relating to the public interest; and (c) the participating contracting authorities perform on the open market less than 20 % of the activities concerned by the cooperation. 5. For the determination of the percentage of activities referred to in point (b) of the first subparagraph of paragraph 1, point (b) of the first subparagraph of paragraph 3 and point (c) of paragraph 4, the average total turnover, or an appropriate alternative activity-based measure such as costs incurred by the relevant legal person or contracting authority with respect to services, supplies and works for the three years preceding the contract award shall be taken into consideration. Where, because of the date on which the relevant legal person or contracting authority was created or commenced activities or because of a reorganisation of its

DIRECTIVE 2014/24/EU activities, the turnover, or alternative activity based measure such as costs, are either not available for the preceding three years or no longer relevant, it shall be sufficient to show that the measurement of activity is credible, particularly by means of business projections.

Section 4 Specific situations Subsection 1 Subsidised contracts and research and development services Article 13 Contracts subsidised by contracting authorities This Directive shall apply to the awarding of the following contracts: (a) works contracts which are subsidised directly by contracting authorities by more than 50 % and the estimated value of which, net of VAT, is equal to or greater than EUR 5 186 000, where those contracts involve one of the following activities: (i) civil engineering activities as listed in Annex II, (ii) building work for hospitals, facilities intended for sports, recreation and leisure, school and university buildings and buildings used for administrative purposes; (b) service contracts which are subsidised directly by contracting authorities by more than 50 % and the estimated value of which, net of VAT, is equal to or greater than EUR 207 000 and which are connected to a works contract as referred to in point (a). The contracting authorities providing the subsidies referred to in points (a) and (b) of the first subparagraph shall ensure compliance with this Directive where they do not themselves award the subsidised contract or where they award that contract for and on behalf of other entities.

Article 14 Research and development services This Directive shall only apply to public service contracts for research and development services which are covered by CPV codes 73000000-2 to 73120000-9, 73300000-5, 73420000-2 and 73430000-5 provided that both of the following conditions are fulfilled:

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DIRECTIVE 2014/24/EU (a) the benefits accrue exclusively to the contracting authority for its use in the conduct of its own affairs, and (b) the service provided is wholly remunerated by the contracting authority.

Subsection 2 Procurement involving defence or security aspects Article 15 Defence and security 1. This Directive shall apply to the awarding of public contracts and to design contests organised in the fields of defence and security, with the exception of the following contracts: (a) contracts falling within the scope of Directive 2009/81/EC; (b) contracts to which Directive 2009/81/EC does not apply pursuant to Articles 8, 12 and 13 thereof. 2. This Directive shall not apply to public contracts and design contests not otherwise exempted under paragraph 1, to the extent that the protection of the essential security interests of a Member State cannot be guaranteed by less intrusive measures, for instance by imposing requirements aimed at protecting the confidential nature of information which the contracting authority makes available in a contract award procedure as provided for in this Directive. Furthermore, and in conformity with point (a) of Article 346(1) TFEU, this Directive shall not apply to public contracts and design contests not otherwise exempted under paragraph 1 of this Article to the extent that the application of this Directive would oblige a Member State to supply information the disclosure of which it considers contrary to the essential interests of its security. 3. Where the procurement and performance of the public contract or design contest are declared to be secret or must be accompanied by special security measures in accordance with the laws, regulations or administrative provisions in force in a Member State, this Directive shall not apply provided that the Member State has determined that the essential interests concerned cannot be guaranteed by less intrusive measures, such as those referred to in the first subparagraph of paragraph 2.

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Article 16 Mixed procurement involving defence or security aspects 1. In the case of mixed contracts which have as their subject-matter procurement covered by this Directive as well as procurement covered by Article 346 TFEU or Directive 2009/81/EC, this Article shall apply. 2. Where the different parts of a given public contract are objectively separable, contracting authorities may choose to award separate contracts for the separate parts or to award a single contract. Where contracting authorities choose to award separate contracts for separate parts, the decision of which legal regime applies to any one of such separate contracts shall be taken on the basis of the characteristics of the separate part concerned. Where contracting authorities choose to award a single contract, the following criteria shall apply to determine the applicable legal regime: (a) where part of a given contract is covered by Article 346 TFEU, the contract may be awarded without applying this Directive, provided that the award of a single contract is justified for objective reasons; (b) where part of a given contract is covered by Directive 2009/81/EC, the contract may be awarded in accordance with that Directive, provided that the award of a single contract is justified for objective reasons. This point shall be without prejudice to the thresholds and exclusions for which that Directive provides. The decision to award a single contract shall not, however, be taken for the purpose of excluding contracts from the application of either this Directive or Directive 2009/81/EC. 3. Point (a) of the third subparagraph of paragraph 2 shall apply to mixed contracts to which both point (a) and point (b) of that subparagraph could otherwise apply. 4. Where the different parts of a given contract are objectively not separable, the contract may be awarded without applying this Directive where it includes elements to which Article 346 TFEU applies; otherwise it may be awarded in accordance with Directive 2009/81/EC.

PART I The Public Sector Directive 2014/24/EU

Article 17 Public contracts and design contests involving defence or security aspects which are awarded or organised pursuant to international rules 1. This Directive shall not apply to public contracts and design contests involving defence or security aspects which the contracting authority is obliged to award or organise in accordance with procurement procedures different from those laid down in this Directive established by any of the following: (a) an international agreement or arrangement, concluded in conformity with the Treaties, between a Member State and one or more third countries or subdivisions thereof and covering works, supplies or services intended for the joint implementation or exploitation of a project by their signatories; (b) an international agreement or arrangement relating to the stationing of troops and concerning the undertakings of a Member State or a third country; (c) an international organisation. All agreements or arrangements referred to in point (a) of the first subparagraph of this paragraph shall be communicated to the Commission, which may consult the Advisory Committee on Public Procurement referred to in Article 89. 2. This Directive shall not apply to public contracts and design contests involving defence or security aspects which the contracting authority awards in accordance with procurement rules provided by an international organisation or international financing institution, where the public contracts and design contests concerned are fully financed by this organisation or institution. In the case of public contracts and design contests co-financed for the most part by an international organisation or international financing institution the parties shall agree on applicable procurement procedures.

Chapter II General rules Article 18 Principles of procurement 1. Contracting authorities shall treat economic operators equally and without dis-

DIRECTIVE 2014/24/EU crimination and shall act in a transparent and proportionate manner. The design of the procurement shall not be made with the intention of excluding it from the scope of this Directive or of artificially narrowing competition. Competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators. 2. Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X.

Article 19 Economic operators 1. Economic operators that, under the law of the Member State in which they are established, are entitled to provide the relevant service, shall not be rejected solely on the ground that, under the law of the Member State in which the contract is awarded, they would be required to be either natural or legal persons. However, in the case of public service and public works contracts as well as public supply contracts covering in addition services or siting and installation operations, legal persons may be required to indicate, in the tender or the request to participate, the names and relevant professional qualifications of the staff to be responsible for the performance of the contract in question. 2. Groups of economic operators, including temporary associations, may participate in procurement procedures. They shall not be required by contracting authorities to have a specific legal form in order to submit a tender or a request to participate. Where necessary, contracting authorities may clarify in the procurement documents how groups of economic operators are to meet the requirements as to economic and financial standing or technical and professional ability referred to in Article 58 provided that this is justified by objective reasons and is proportionate.

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DIRECTIVE 2014/24/EU Member States may establish standard terms for how groups of economic operators are to meet those requirements. Any conditions for the performance of a contract by such groups of economic operators, which are different from those imposed on individual participants, shall also be justified by objective reasons and shall be proportionate. 3. Notwithstanding paragraph 2, contracting authorities may require groups of economic operators to assume a specific legal form once they have been awarded the contract, to the extent that such a change is necessary for the satisfactory performance of the contract.

Article 20 Reserved contracts 1. Member States may reserve the right to participate in public procurement procedures to sheltered workshops and economic operators whose main aim is the social and professional integration of disabled or disadvantaged persons or may provide for such contracts to be performed in the context of sheltered employment programmes, provided that at least 30 % of the employees of those workshops, economic operators or programmes are disabled or disadvantaged workers. 2. The call for competition shall make reference to this Article.

Article 21 Confidentiality 1. Unless otherwise provided in this Directive or in the national law to which the contracting authority is subject, in particular legislation concerning access to information, and without prejudice to the obligations relating to the advertising of awarded contracts and to the information to candidates and tenderers set out in Articles 50 and 55, the contracting authority shall not disclose information forwarded to it by economic operators which they have designated as confidential, including, but not limited to, technical or trade secrets and the confidential aspects of tenders. 2. Contracting authorities may impose on economic operators requirements aimed at protecting the confidential nature of information which the contracting authori-

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PART I The Public Sector Directive 2014/24/EU ties make available throughout the procurement procedure.

Article 22 Rules applicable to communication 1. Member States shall ensure that all communication and information exchange under this Directive, in particular electronic submission, are performed using electronic means of communication in accordance with the requirements of this Article. The tools and devices to be used for communicating by electronic means, as well as their technical characteristics, shall be non-discriminatory, generally available and interoperable with the ICT products in general use and shall not restrict economic operators’ access to the procurement procedure. Notwithstanding the first subparagraph, contracting authorities shall not be obliged to require electronic means of communication in the submission process in the following situations: (a) due to the specialised nature of the procurement, the use of electronic means of communication would require specific tools, devices or file formats that are not generally available or supported by generally available applications; (b) the applications supporting file formats that are suitable for the description of the tenders use file formats that cannot be handled by any other open or generally available applications or are under a proprietary licensing scheme and cannot be made available for downloading or remote use by the contracting authority; (c) the use of electronic means of communication would require specialised office equipment that is not generally available to contracting authorities; (d) the procurement documents require the submission of physical or scale models which cannot be transmitted using electronic means. In respect of communications for which electronic means of communication are not used pursuant to the second subparagraph, communication shall be carried out by post or other suitable carrier or by a combination of post or other suitable carrier and electronic means.

PART I The Public Sector Directive 2014/24/EU Notwithstanding the first subparagraph of this paragraph, contracting authorities are not obliged to require electronic means of communication in the submission process to the extent that the use of means of communication other than electronic means is necessary either because of a breach of security of the electronic means of communications or for the protection of the particularly sensitive nature of information requiring such a high level of protection that it cannot be properly ensured by using electronic tools and devices that are either generally available to economic operators or can be made available to them by alternative means of access within the meaning of paragraph 5. It shall be the responsibility of the contracting authorities requiring, in accordance with the second subparagraph of this paragraph, means of communication other than electronic means in the submission process to indicate in the individual report referred to in Article 84 the reasons for this requirement. Where applicable, contracting authorities shall indicate in the individual report the reasons why use of means of communication other than electronic means has been considered necessary in application of the fourth subparagraph of this paragraph. 2. Notwithstanding paragraph 1, oral communication may be used in respect of communications other than those concerning the essential elements of a procurement procedure, provided that the content of the oral communication is documented to a sufficient degree. For this purpose, the essential elements of a procurement procedure include the procurement documents, requests for participation, confirmations of interest and tenders. In particular, oral communications with tenderers which could have a substantial impact on the content and assessment of the tenders shall be documented to a sufficient extent and by appropriate means, such as written or audio records or summaries of the main elements of the communication. 3. In all communication, exchange and storage of information, contracting authorities shall ensure that the integrity of data and the confidentiality of tenders and requests to participate are preserved. They shall examine the content of tenders and

DIRECTIVE 2014/24/EU requests to participate only after the time limit set for submitting them has expired. 4. For public works contracts and design contests, Member States may require the use of specific electronic tools, such as of building information electronic modelling tools or similar. In such cases the contracting authorities shall offer alternative means of access, as provided for in paragraph 5, until such time as those tools become generally available within the meaning of the second sentence of the first subparagraph of paragraph 1. 5. Contracting authorities may, where necessary, require the use of tools and devices which are not generally available, provided that the contracting authorities offer alternative means of access. Contracting authorities shall be deemed to offer suitable alternative means of access in any of the following situations, where they: (a) offer unrestricted and full direct access free of charge by electronic means to those tools and devices from the date of publication of the notice in accordance with Annex VIII or from the date when the invitation to confirm interest is sent. The text of the notice or the invitation to confirm interest shall specify the internet address at which those tools and devices are accessible; (b) ensure that tenderers having no access to the tools and devices concerned, or no possibility of obtaining them within the relevant time limits, provided that the lack of access is not attributable to the tenderer concerned, may access the procurement procedure through the use of provisional tokens made available free of charge online; or (c) support an alternative channel for electronic submission of tenders. 6. In addition to the requirements set out in Annex IV, the following rules shall apply to tools and devices for the electronic transmission and receipt of tenders and for the electronic receipt of requests to participate: (a) information on specifications for the electronic submission of tenders and requests to participate, including encryption and time-stamping, shall be available to interested parties;

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DIRECTIVE 2014/24/EU (b) Member States, or contracting authorities acting within an overall framework established by the Member State concerned, shall specify the level of security required for the electronic means of communication in the various stages of the specific procurement procedure; that level shall be proportionate to the risks attached; (c) where Member States, or contracting authorities acting within an overall framework established by the Member State concerned, conclude that the level of risks, assessed under point (b) of this paragraph, is such that advanced electronic signatures as defined by Directive 1999/93/EC of the European Parliament and of the Council1 are required, contracting authorities shall accept advanced electronic signatures supported by a qualified certificate, taking into account whether those certificates are provided by a certificate services provider, which is on a trusted list provided for in Commission Decision 2009/767/EC2, created with or without a secure signature creation device, subject to compliance with the following conditions: (i) the contracting authorities shall establish the required advanced signature format on the basis of formats established in Commission Decision 2011/130/EU3 and shall put in place necessary measures to be able to process these formats technically; in case a different format of electronic signature is used, the electronic signature or the electronic document carrier shall include information on existing validation possibilities, which shall be under the responsibility of the Member State. The validation possibilities shall allow the

PART I The Public Sector Directive 2014/24/EU contracting authority to validate online, free of charge and in a way that is understandable for non-native speakers, the received electronic signature as an advanced electronic signature supported by a qualified certificate. Member States shall notify information on the provider of validation services to the Commission, which shall make the information received from the Member States available to the public on the Internet; (ii) where a tender is signed with the support of a qualified certificate that is included on a trusted list, the contracting authorities shall not apply additional requirements that may hinder the use of those signatures by tenderers. In respect of documents used in the context of a procurement procedure that are signed by a competent authority of a Member State or by another issuing entity, the competent issuing authority or entity may establish the required advanced signature format in accordance with the requirements set out in Article 1(2) of Decision 2011/130/EU. They shall put in place the necessary measures to be able to process that format technically by including the information required for the purpose of processing the signature in the document concerned. Such documents shall contain in the electronic signature or in the electronic document carrier information on existing validation possibilities that allow the validation of the received electronic signature online, free of charge and in a way that is understandable for non-native speakers.

1 Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures (OJ L 13, 19.1.2000, p. 12). 2 Commission Decision 2009/767/EC of 16 October 2009 setting out measures facilitating the use of procedures by electronic means through the points of single contact under Directive 2006/123/EC of the European Parliament and of the Council on services in the internal market (OJ L 274, 20.10.2009, p. 36). 3 Commission Decision 2011/130/EU of 25 February 2011 establishing minimum requirements for the cross-border processing of documents signed electronically by competent authorities under Directive 2006/123/EC of the European Parliament and of the Council on services in the internal market (OJ L 53, 26.2.2011, p. 66).

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PART I The Public Sector Directive 2014/24/EU 7. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 to amend the technical details and characteristics set out in Annex IV to take account of technical developments. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 to amend the list set out in points (a) to (d) of the second subparagraph of paragraph 1 of this Article where technological developments render continued exceptions from the use of electronic means of communication inappropriate or, exceptionally, where new exceptions must be provided for because of technological developments. To ensure the interoperability of technical formats as well as of process and messaging standards, especially in a cross-border context, the Commission shall be empowered to adopt delegated acts in accordance with Article 87 to establish the mandatory use of such specific technical standards, in particular with regard to the use of electronic submission, electronic catalogues and means for electronic authentication, only where technical standards have been thoroughly tested and proved their usefulness in practice. Before making the use of any technical standard mandatory, the Commission shall also carefully consider the costs that this may entail, in particular in terms of adaptations to existing e-procurement solutions, including infrastructure, processes or software.

Article 23 Nomenclatures 1. Any references to nomenclatures in the context of public procurement shall be made using the Common Procurement Vocabulary (CPV) as adopted by Regulation (EC) No 2195/2002. 2. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 to adapt the CPV codes referred to in this Directive, whenever changes in the CPV nomenclature must be reflected in this Directive and they do not imply a modification of the scope of this Directive.

Article 24 Conflicts of interest Member States shall ensure that contracting authorities take appropriate measures to ef-

DIRECTIVE 2014/24/EU fectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators. The concept of conflicts of interest shall at least cover any situation where staff members of the contracting authority or of a procurement service provider acting on behalf of the contracting authority who are involved in the conduct of the procurement procedure or may influence the outcome of that procedure have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure.

TITLE II RULES ON PUBLIC CONTRACTS Chapter I Procedures Article 25 Conditions relating to the GPA and other international agreements In so far as they are covered by Annexes 1, 2, 4 and 5 and the General Notes to the European Union’s Appendix I to the GPA and by the other international agreements by which the Union is bound, contracting authorities shall accord to the works, supplies, services and economic operators of the signatories to those agreements treatment no less favourable than the treatment accorded to the works, supplies, services and economic operators of the Union.

Article 26 Choice of procedures 1. When awarding public contracts, contracting authorities shall apply the national procedures adjusted to be in conformity with this Directive, provided that, without prejudice to Article 32, a call for competition has been published in accordance with this Directive. 2. Member States shall provide that contracting authorities may apply open or restricted procedures as regulated in this Directive. 3. Member States shall provide that contracting authorities may apply innovation partnerships as regulated in this Directive. 4. Member States shall provide that contracting authorities may apply a competitive

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DIRECTIVE 2014/24/EU procedure with negotiation or a competitive dialogue in the following situations: (a) with regard to works, supplies or services fulfilling one or more of the following criteria: (i) the needs of the contracting authority cannot be met without adaptation of readily available solutions; (ii) they include design or innovative solutions; (iii) the contract cannot be awarded without prior negotiations because of specific circumstances related to the nature, the complexity or the legal and financial make-up or because of the risks attaching to them; (iv) the technical specifications cannot be established with sufficient precision by the contracting authority with reference to a standard, European Technical Assessment, common technical specification or technical reference within the meaning of points 2 to 5 of Annex VII; (b) with regard to works, supplies or services where, in response to an open or a restricted procedure, only irregular or unacceptable tenders are submitted. In such situations contracting authorities shall not be required to publish a contract notice where they include in the procedure all of, and only, the tenderers which satisfy the criteria set out in Articles 57 to 64 and which, during the prior open or restricted procedure, submitted tenders in accordance with the formal requirements of the procurement procedure. In particular, tenders which do not comply with the procurement documents, which were received late, where there is evidence of collusion or corruption, or which have been found by the contracting authority to be abnormally low, shall be considered as being irregular. In particular tenders submitted by tenderers that do not have the required qualifications, and tenders whose price exceeds the contracting authority’s budget as determined and documented prior to the launching of the procurement procedure shall be considered as unacceptable.

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PART I The Public Sector Directive 2014/24/EU 5. The call for competition shall be made by means of a contract notice pursuant to Article 49. Where the contract is awarded by restricted procedure or competitive procedure with negotiation, Member States may provide, notwithstanding the first subparagraph of this paragraph, that sub-central contracting authorities or specific categories thereof may make the call for competition by means of a prior information notice pursuant to Article 48(2). Where the call for competition is made by means of a prior information notice pursuant to Article 48(2), economic operators having expressed their interest following the publication of the prior information notice shall subsequently be invited to confirm their interest in writing by means of an invitation to confirm interest in conformity with Article 54. 6. In the specific cases and circumstances referred to expressly in Article 32, Member States may provide that contracting authorities may apply a negotiated procedure without prior publication of a call for competition. Member States shall not allow the application of that procedure in any other cases than those referred to in Article 32.

Article 27 Open procedure 1. In open procedures, any interested economic operator may submit a tender in response to a call for competition. The minimum time limit for the receipt of tenders shall be 35 days from the date on which the contract notice was sent. The tender shall be accompanied by the information for qualitative selection that is requested by the contracting authority. 2. Where contracting authorities have published a prior information notice which was not itself used as a means of calling for competition, the minimum time limit for the receipt of tenders, as laid down in the second subparagraph of paragraph 1 of this Article, may be shortened to 15 days, provided that all of the following conditions are fulfilled: (a) the prior information notice included all the information required for the contract notice in section I of part B of Annex V, in so far as that informa-

PART I The Public Sector Directive 2014/24/EU tion was available at the time the prior information notice was published; (b) the prior information notice was sent for publication between 35 days and 12 months before the date on which the contract notice was sent. 3. Where a state of urgency duly substantiated by the contracting authority renders impracticable the time limit laid down in the second subparagraph of paragraph 1, it may fix a time limit which shall be not less than 15 days from the date on which the contract notice was sent. 4. The contracting authority may reduce by five days the time limit for receipt of tenders set out in the second subparagraph of paragraph 1 of this Article where it accepts that tenders may be submitted by electronic means in accordance with the first subparagraph of Article 22(1), and Article 22(5) and (6).

Article 28 Restricted procedure 1. In restricted procedures, any economic operator may submit a request to participate in response to a call for competition containing the information set out in Annex V parts B or C as the case may be by providing the information for qualitative selection that is requested by the contracting authority. The minimum time limit for receipt of requests to participate shall be 30 days from the date on which the contract notice or, where a prior information notice is used as a means of calling for competition, the invitation to confirm interest was sent. 2. Only those economic operators invited to do so by the contracting authority following its assessment of the information provided may submit a tender. Contracting authorities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 65. The minimum time limit for the receipt of tenders shall be 30 days from the date on which the invitation to tender was sent. 3. Where contracting authorities have published a prior information notice which was not itself used as a means of calling for competition, the minimum time limit for the receipt of tenders as laid down in the second subparagraph of paragraph 2 of this Article may be shortened to 10

DIRECTIVE 2014/24/EU days, provided that all of the following conditions are fulfilled: (a) the prior information notice included all the information required in section I of part B of Annex V, in so far as that information was available at the time the prior information notice was published; (b) the prior information notice was sent for publication between 35 days and 12 months before the date on which the contract notice was sent. 4. Member States may provide that all or specific categories of sub-central contracting authorities may set the time limit for the receipt of tenders by mutual agreement between the contracting authority and the selected candidates, provided that all selected candidates have the same time to prepare and submit their tenders. In the absence of agreement on the time limit for the receipt of tenders, the time limit shall be at least 10 days from the date on which the invitation to tender was sent. 5. The time limit for receipt of tenders provided for in paragraph 2 of this Article may be reduced by five days where the contracting authority accepts that tenders may be submitted by electronic means in conformity with Article 22(1), (5) and (6). 6. Where a state of urgency duly substantiated by the contracting authorities renders impracticable the time limits laid down in this Article, they may fix: (a) a time limit for the receipt of requests to participate which shall not be less than 15 days from the date on which the contract notice was sent; (b) a time limit for the receipt of tenders which shall not be less than 10 days from the date on which the invitation to tender was sent.

Article 29 Competitive procedure with negotiation 1. In competitive procedures with negotiation, any economic operator may submit a request to participate in response to a call for competition containing the information set out in Annex V parts B and C by providing the information for qualitative selection that is requested by the contracting authority. In the procurement documents, contracting authorities shall identify the subject-

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matter of the procurement by providing a description of their needs and the characteristics required of the supplies, works or services to be procured and specify the contract award criteria. They shall also indicate which elements of the description define the minimum requirements to be met by all tenders. The information provided shall be sufficiently precise to enable economic operators to identify the nature and scope of the procurement and decide whether to request to participate in the procedure. The minimum time limit for receipt of requests to participate shall be 30 days from the date on which the contract notice or, where a prior information notice is used as a means of calling for competition, the invitation to confirm interest was sent. The minimum time limit for the receipt of initial tenders shall be 30 days from the date on which the invitation was sent. Article 28(3) to (6) shall apply. Only those economic operators invited by the contracting authority following its assessment of the information provided may submit an initial tender which shall be the basis for the subsequent negotiations. Contracting authorities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 65. Unless otherwise provided for in paragraph 4, contracting authorities shall negotiate with tenderers the initial and all subsequent tenders submitted by them, except for the final tenders within the meaning of paragraph 7, to improve the content thereof. The minimum requirements and the award criteria shall not be subject to negotiations. Contracting authorities may award contracts on the basis of the initial tenders without negotiation where they have indicated, in the contract notice or in the invitation to confirm interest, that they reserve the possibility of doing so. During the negotiations, contracting authorities shall ensure the equal treatment of all tenderers. To that end, they shall not provide information in a discriminatory manner which may give some tenderers an advantage over others. They shall inform all tenderers, whose tenders have not been eliminated pursuant to paragraph 6, in

PART I The Public Sector Directive 2014/24/EU writing of any changes to the technical specifications or other procurement documents, other than those setting out the minimum requirements. Following these changes, contracting authorities shall provide sufficient time for tenderers to modify and re-submit amended tenders, as appropriate. In accordance with Article 21, contracting authorities shall not reveal to the other participants confidential information communicated by a candidate or a tenderer participating in the negotiations without its agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. 6. Competitive procedures with negotiation may take place in successive stages in order to reduce the number of tenders to be negotiated by applying the award criteria specified in the contract notice, in the invitation to confirm interest or in another procurement document. In the contract notice, the invitation to confirm interest or in another procurement document, the contracting authority shall indicate whether it will use that option. 7. Where the contracting authority intends to conclude the negotiations, it shall inform the remaining tenderers and set a common deadline to submit any new or revised tenders. It shall verify that the final tenders are in conformity with the minimum requirements and comply with Article 56(1), assess the final tenders on the basis of the award criteria and award the contract in accordance with Articles 66 to 69.

Article 30 Competitive dialogue 1. In competitive dialogues, any economic operator may submit a request to participate in response to a contract notice by providing the information for qualitative selection that is requested by the contracting authority. The minimum time limit for receipt of requests to participate shall be 30 days from the date on which the contract notice was sent. Only those economic operators invited by the contracting authority following the assessment of the information provided may

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participate in the dialogue. Contracting authorities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 65. The contract shall be awarded on the sole basis of the award criterion of the best price-quality ratio in accordance with Article 67(2). Contracting authorities shall set out their needs and requirements in the contract notice and they shall define these needs and requirements in that notice and/or in a descriptive document. At the same time and in the same documents, they shall also set out and define the chosen award criteria and set out an indicative timeframe. Contracting authorities shall open, with the participants selected in accordance with the relevant provisions of Articles 56 to 66, a dialogue the aim of which shall be to identify and define the means best suited to satisfying their needs. They may discuss all aspects of the procurement with the chosen participants during this dialogue. During the dialogue, contracting authorities shall ensure equality of treatment among all participants. To that end, they shall not provide information in a discriminatory manner which may give some participants an advantage over others. In accordance with Article 21, contracting authorities shall not reveal to the other participants solutions proposed or other confidential information communicated by a candidate or tenderer participating in the dialogue without its agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. Competitive dialogues may take place in successive stages in order to reduce the number of solutions to be discussed during the dialogue stage by applying the award criteria laid down in the contract notice or in the descriptive document. In the contract notice or the descriptive document, the contracting authority shall indicate whether it will use that option. The contracting authority shall continue the dialogue until it can identify the solution or solutions which are capable of meeting its needs. Having declared that the dialogue is concluded and having so informed the re-

DIRECTIVE 2014/24/EU maining participants, contracting authorities shall ask each of them to submit their final tenders on the basis of the solution or solutions presented and specified during the dialogue. Those tenders shall contain all the elements required and necessary for the performance of the project. Those tenders may be clarified, specified and optimised at the request of the contracting authority. However, such clarification, specification, optimisation or additional information may not involve changes to the essential aspects of the tender or of the public procurement, including the needs and requirements set out in the contract notice or in the descriptive document, where variations to those aspects, needs and requirements are likely to distort competition or have a discriminatory effect. 7. Contracting authorities shall assess the tenders received on the basis of the award criteria laid down in the contract notice or in the descriptive document. At the request of the contracting authority, negotiations with the tenderer identified as having submitted the tender presenting the best price-quality ratio in accordance with Article 67 may be carried out to confirm financial commitments or other terms contained in the tender by finalising the terms of the contract provided this does not have the effect of materially modifying essential aspects of the tender or of the public procurement, including the needs and requirements set out in the contract notice or in the descriptive document and does not risk distorting competition or causing discrimination. 8. Contracting authorities may specify prizes or payments to the participants in the dialogue.

Article 31 Innovation partnership 1. In innovation partnerships, any economic operator may submit a request to participate in response to a contract notice by providing the information for qualitative selection that is requested by the contracting authority. In the procurement documents, the contracting authority shall identify the need for an innovative product, service or works that cannot be met by purchasing products, services or works already avail-

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DIRECTIVE 2014/24/EU able on the market. It shall indicate which elements of this description define the minimum requirements to be met by all tenders. The information provided shall be sufficiently precise to enable economic operators to identify the nature and scope of the required solution and decide whether to request to participate in the procedure. The contracting authority may decide to set up the innovation partnership with one partner or with several partners conducting separate research and development activities. The minimum time limit for receipt of requests to participate shall be 30 days from the date on which the contract notice is sent. Only those economic operators invited by the contracting authority following the assessment of the information provided may participate in the procedure. Contracting authorities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 65. The contracts shall be awarded on the sole basis of the award criterion of the best price-quality ratio in accordance with Article 67. 2. The innovation partnership shall aim at the development of an innovative product, service or works and the subsequent purchase of the resulting supplies, services or works, provided that they correspond to the performance levels and maximum costs agreed between the contracting authorities and the participants. The innovation partnership shall be structured in successive phases following the sequence of steps in the research and innovation process, which may include the manufacturing of the products, the provision of the services or the completion of the works. The innovation partnership shall set intermediate targets to be attained by the partners and provide for payment of the remuneration in appropriate instalments. Based on those targets, the contracting authority may decide after each phase to terminate the innovation partnership or, in the case of an innovation partnership with several partners, to reduce the number of partners by terminating individual contracts, provided that the contracting authority has indicated in the procurement

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documents those possibilities and the conditions for their use. Unless otherwise provided for in this Article, contracting authorities shall negotiate with tenderers the initial and all subsequent tenders submitted by them, except for the final tender, to improve the content thereof. The minimum requirements and the award criteria shall not be subject to negotiations. During the negotiations, contracting authorities shall ensure the equal treatment of all tenderers. To that end, they shall not provide information in a discriminatory manner which may give some tenderers an advantage over others. They shall inform all tenderers whose tenders have not been eliminated, pursuant to paragraph 5, in writing of any changes to the technical specifications or other procurement documents other than those setting out the minimum requirements. Following those changes, contracting authorities shall provide sufficient time for tenderers to modify and re-submit amended tenders, as appropriate. In accordance with Article 21, contracting authorities shall not reveal to the other participants confidential information communicated by a candidate or tenderer participating in the negotiations without its agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. Negotiations during innovation partnership procedures may take place in successive stages in order to reduce the number of tenders to be negotiated by applying the award criteria specified in the contract notice, in the invitation to confirm interest or in the procurement documents. In the contract notice, the invitation to confirm interest or in the procurement documents, the contracting authority shall indicate whether it will use that option. In selecting candidates, contracting authorities shall in particular apply criteria concerning the candidates’ capacity in the field of research and development and of developing and implementing innovative solutions. Only those economic operators invited by the contracting authority following its assessment of the requested information

PART I The Public Sector Directive 2014/24/EU may submit research and innovation projects aimed at meeting the needs identified by the contracting authority that cannot be met by existing solutions. In the procurement documents, the contracting authority shall define the arrangements applicable to intellectual property rights. In the case of an innovation partnership with several partners, the contracting authority shall not, in accordance with Article 21, reveal to the other partners solutions proposed or other confidential information communicated by a partner in the framework of the partnership without that partner’s agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. 7. The contracting authority shall ensure that the structure of the partnership and, in particular, the duration and value of the different phases reflect the degree of innovation of the proposed solution and the sequence of the research and innovation activities required for the development of an innovative solution not yet available on the market. The estimated value of supplies, services or works shall not be disproportionate in relation to the investment required for their development.

Article 32 Use of the negotiated procedure without prior publication 1. In the specific cases and circumstances laid down in paragraphs 2 to 5, Member States may provide that contracting authorities may award public contracts by a negotiated procedure without prior publication. 2. The negotiated procedure without prior publication may be used for public works contracts, public supply contracts and public service contracts in any of the following cases: (a) where no tenders or no suitable tenders or no requests to participate or no suitable requests to participate have been submitted in response to an open procedure or a restricted procedure, provided that the initial conditions of the contract are not substantially altered and that a report is sent

DIRECTIVE 2014/24/EU to the Commission where it so requests. A tender shall be considered not to be suitable where it is irrelevant to the contract, being manifestly incapable, without substantial changes, of meeting the contracting authority’s needs and requirements as specified in the procurement documents. A request for participation shall be considered not to be suitable where the economic operator concerned is to be or may be excluded pursuant to Article 57 or does not meet the selection criteria set out by the contracting authority pursuant to Article 58; (b) where the works, supplies or services can be supplied only by a particular economic operator for any of the following reasons: (i) the aim of the procurement is the creation or acquisition of a unique work of art or artistic performance; (ii) competition is absent for technical reasons; (iii) the protection of exclusive rights, including intellectual property rights; The exceptions set out in points (ii) and (iii) shall only apply when no reasonable alternative or substitute exists and the absence of competition is not the result of an artificial narrowing down of the parameters of the procurement; (c) in so far as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with. The circumstances invoked to justify extreme urgency shall not in any event be attributable to the contracting authority. 3. The negotiated procedure without prior publication may be used for public supply contracts: (a) where the products involved are manufactured purely for the purpose of research, experimentation, study or development; however, contracts awarded pursuant to this point shall not include quantity production to es-

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DIRECTIVE 2014/24/EU tablish commercial viability or to recover research and development costs; (b) for additional deliveries by the original supplier which are intended either as a partial replacement of supplies or installations or as the extension of existing supplies or installations where a change of supplier would oblige the contracting authority to acquire supplies having different technical characteristics which would result in incompatibility or disproportionate technical difficulties in operation and maintenance; the duration of such contracts as well as that of recurrent contracts shall not, as a general rule, exceed three years; (c) for supplies quoted and purchased on a commodity market; (d) for the purchase of supplies or services on particularly advantageous terms, from either a supplier which is definitively winding up its business activities, or the liquidator in an insolvency procedure, an arrangement with creditors, or a similar procedure under national laws or regulations. 4. The negotiated procedure without prior publication may be used for public service contracts, where the contract concerned follows a design contest organised in accordance with this Directive and is to be awarded, under the rules provided for in the design contest, to the winner or one of the winners of the design contest; in the latter case, all winners must be invited to participate in the negotiations. 5. The negotiated procedure without prior publication may be used for new works or services consisting in the repetition of similar works or services entrusted to the economic operator to which the same contracting authorities awarded an original contract, provided that such works or services are in conformity with a basic project for which the original contract was awarded pursuant to a procedure in accordance with Article 26(1). The basic project shall indicate the extent of possible additional works or services and the conditions under which they will be awarded. As soon as the first project is put up for tender, the possible use of this procedure shall be disclosed and the total estimated cost of subsequent works or services shall be taken into

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PART I The Public Sector Directive 2014/24/EU consideration by the contracting authorities when they apply Article 4. This procedure may be used only during the three years following the conclusion of the original contract.

Chapter II Techniques and instruments for electronic and aggregated procurement Article 33 Framework agreements 1. Contracting authorities may conclude framework agreements, provided that they apply the procedures provided for in this Directive. A framework agreement means an agreement between one or more contracting authorities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged. The term of a framework agreement shall not exceed four years, save in exceptional cases duly justified, in particular by the subject of the framework agreement. 2. Contracts based on a framework agreement shall be awarded in accordance with the procedures laid down in this paragraph and in paragraphs 3 and 4. Those procedures may be applied only between those contracting authorities clearly identified for this purpose in the call for competition or the invitation to confirm interest and those economic operators party to the framework agreement as concluded. Contracts based on a framework agreement may under no circumstances entail substantial modifications to the terms laid down in that framework agreement, in particular in the case referred to in paragraph 3. 3. Where a framework agreement is concluded with a single economic operator, contracts based on that agreement shall be awarded within the limits of the terms laid down in the framework agreement. For the award of those contracts, contracting authorities may consult the economic operator party to the framework agreement in writing, requesting it to supplement its tender as necessary. 4. Where a framework agreement is concluded with more than one economic operator,

PART I The Public Sector Directive 2014/24/EU that framework agreement shall be performed in one of the following ways: (a) following the terms and conditions of the framework agreement, without reopening competition, where it sets out all the terms governing the provision of the works, services and supplies concerned and the objective conditions for determining which of the economic operators, party to the framework agreement, shall perform them; the latter conditions shall be indicated in the procurement documents for the framework agreement; (b) where the framework agreement sets out all the terms governing the provision of the works, services and supplies concerned, partly without reopening of competition in accordance with point (a) and partly with reopening of competition amongst the economic operators parties to the framework agreement in accordance with point (c), where this possibility has been stipulated by the contracting authorities in the procurement documents for the framework agreement. The choice of whether specific works, supplies or services shall be acquired following a reopening of competition or directly on the terms set out in the framework agreement shall be made pursuant to objective criteria, which shall be set out in the procurement documents for the framework agreement. These procurement documents shall also specify which terms may be subject to reopening of competition. The possibilities provided for under the first paragraph of this point shall also apply to any lot of a framework agreement for which all the terms governing the provision of the works, services and supplies concerned are set out in the framework agreement, regardless of whether all the terms governing the provision of the works, services and supplies concerned under other lots have been set out. (c) where not all the terms governing the provision of the works, services and supplies are laid down in the framework agreement, through reopening competition amongst the economic operators parties to the framework agreement.

DIRECTIVE 2014/24/EU 5. The competitions referred to in points (b) and (c) of paragraph 4 shall be based on the same terms as applied for the award of the framework agreement and, where necessary, more precisely formulated terms, and, where appropriate, other terms referred to in the procurement documents for the framework agreement, in accordance with the following procedure: (a) for every contract to be awarded, contracting authorities shall consult in writing the economic operators capable of performing the contract; (b) contracting authorities shall fix a time limit which is sufficiently long to allow tenders for each specific contract to be submitted, taking into account factors such as the complexity of the subject-matter of the contract and the time needed to send in tenders; (c) tenders shall be submitted in writing, and their content shall not be opened until the stipulated time limit for reply has expired; (d) contracting authorities shall award each contract to the tenderer that has submitted the best tender on the basis of the award criteria set out in the procurement documents for the framework agreement.

Article 34 Dynamic purchasing systems 1. For commonly used purchases the characteristics of which, as generally available on the market, meet the requirements of the contracting authorities, contracting authorities may use a dynamic purchasing system. The dynamic purchasing system shall be operated as a completely electronic process, and shall be open throughout the period of validity of the purchasing system to any economic operator that satisfies the selection criteria. It may be divided into categories of products, works or services that are objectively defined on the basis of characteristics of the procurement to be undertaken under the category concerned. Such characteristics may include reference to the maximum allowable size of the subsequent specific contracts or to a specific geographic area in which subsequent specific contracts will be performed. 2. In order to procure under a dynamic purchasing system, contracting authorities

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DIRECTIVE 2014/24/EU shall follow the rules of the restricted procedure. All the candidates satisfying the selection criteria shall be admitted to the system, and the number of candidates to be admitted to the system shall not be limited in accordance with Article 65. Where contracting authorities have divided the system into categories of products, works or services in accordance with paragraph 1 of this Article, they shall specify the applicable selection criteria for each category. Notwithstanding Article 28, the following time limits shall apply: (a) the minimum time limit for receipt of requests to participate shall be 30 days from the date on which the contract notice or, where a prior information notice is used as a means of calling for competition, the invitation to confirm interest is sent. No further time limits for receipt of requests to participate shall apply once the invitation to tender for the first specific procurement under the dynamic purchasing system has been sent; (b) the minimum time limit for receipt of tenders shall be at least 10 days from the date on which the invitation to tender is sent. Where appropriate, Article 28(4) shall apply. Article 28(3) and (5) shall not apply. 3. All communications in the context of a dynamic purchasing system shall only be made by electronic means in accordance with Article 22(1), (3), (5) and (6). 4. For the purposes of awarding contracts under a dynamic purchasing system, contracting authorities shall: (a) publish a call for competition making it clear that a dynamic purchasing system is involved; (b) indicate in the procurement documents at least the nature and estimated quantity of the purchases envisaged, as well as all the necessary information concerning the dynamic purchasing system, including how the dynamic purchasing system operates, the electronic equipment used and the technical connection arrangements and specifications; (c) indicate any division into categories of products, works or services and the characteristics defining them;

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PART I The Public Sector Directive 2014/24/EU (d) offer unrestricted and full direct access, as long as the system is valid, to the procurement documents in conformity with Article 53. 5. Contracting authorities shall give any economic operator, throughout the entire period of validity of the dynamic purchasing system, the possibility of requesting to participate in the system under the conditions referred to in paragraph 2. Contracting authorities shall finalise their assessment of such requests in accordance with the selection criteria within 10 working days following their receipt. That deadline may be prolonged to 15 working days in individual cases where justified, in particular because of the need to examine additional documentation or to otherwise verify whether the selection criteria are met. Notwithstanding the first subparagraph, as long as the invitation to tender for the first specific procurement under the dynamic purchasing system has not been sent, contracting authorities may extend the evaluation period provided that no invitation to tender is issued during the extended evaluation period. Contracting authorities shall indicate in the procurement documents the length of the extended period that they intend to apply. Contracting authorities shall inform the economic operator concerned at the earliest possible opportunity of whether or not it has been admitted to the dynamic purchasing system. 6. Contracting authorities shall invite all admitted participants to submit a tender for each specific procurement under the dynamic purchasing system, in accordance with Article 54. Where the dynamic purchasing system has been divided into categories of works, products or services, contracting authorities shall invite all participants having been admitted to the category corresponding to the specific procurement concerned to submit a tender. They shall award the contract to the tenderer that submitted the best tender on the basis of the award criteria set out in the contract notice for the dynamic purchasing system or, where a prior information notice is used as a means of calling for competition, in the invitation to confirm interest. Those criteria may, where appropriate, be formulated more precisely in the invitation to tender.

PART I The Public Sector Directive 2014/24/EU 7. Contracting authorities may, at any time during the period of validity of the dynamic purchasing system, require admitted participants to submit a renewed and updated self-declaration as provided for in Article 59(1), within five working days from the date on which that request is transmitted. Article 59(4) to (6) shall apply throughout the entire period of validity of the dynamic purchasing system. 8. Contracting authorities shall indicate the period of validity of the dynamic purchasing system in the call for competition. They shall notify the Commission of any change in the period of validity, using the following standard forms: (a) where the period of validity is changed without terminating the system, the form used initially for the call for competition for the dynamic purchasing system; (b) where the system is terminated, a contract award notice referred to in Article 50. 9. No charges may be billed prior to or during the period of validity of the dynamic purchasing system to the economic operators interested in or party to the dynamic purchasing system.

Article 35 Electronic auctions 1. Contracting authorities may use electronic auctions, in which new prices, revised downwards, and/or new values concerning certain elements of tenders are presented. For this purpose, contracting authorities shall structure the electronic auction as a repetitive electronic process, which occurs after an initial full evaluation of the tenders, enabling them to be ranked using automatic evaluation methods. Certain public service contracts and certain public works contracts having as their subject-matter intellectual performances, such as the design of works, which cannot be ranked using automatic evaluation methods, shall not be the object of electronic auctions. 2. In open or restricted procedures or competitive procedures with negotiation, the contracting authorities may decide that the award of a public contract shall be preceded by an electronic auction when the content of the procurement documents, in

DIRECTIVE 2014/24/EU particular the technical specifications, can be established with precision. In the same circumstances, an electronic auction may be held on the reopening of competition among the parties to a framework agreement as provided for in points (b) or (c) of Article 33(4) and on the opening for competition of contracts to be awarded under the dynamic purchasing system referred to in Article 34. 3. The electronic auction shall be based on one of the following elements of the tenders: (a) solely on prices where the contract is awarded on the basis of price only; (b) on prices and/or on the new values of the features of the tenders indicated in the procurement documents where the contract is awarded on the basis of the best price-quality ratio or to the tender with the lowest cost using a cost-effectiveness approach. 4. Contracting authorities which decide to hold an electronic auction shall state that fact in the contract notice or in the invitation to confirm interest. The procurement documents shall include at least the information set out in Annex VI. 5. Before proceeding with an electronic auction, contracting authorities shall make a full initial evaluation of the tenders in accordance with the award criterion or criteria and with the weighting fixed for them. A tender shall be considered admissible where it has been submitted by a tenderer, who has not been excluded pursuant to Article 57 and who meets the selection criteria, and whose tender is in conformity with the technical specifications without being irregular or unacceptable or unsuitable. In particular, tenders which do not comply with the procurement documents, which were received late, where there is evidence of collusion or corruption, or which have been found by the contracting authority to be abnormally low, shall be considered as being irregular. In particular tenders submitted by tenderers that do not have the required qualifications, and tenders whose price exceeds the contracting authority’s budget as determined and documented prior to the launching of the procurement procedure shall be considered as unacceptable.

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DIRECTIVE 2014/24/EU A tender shall be considered not to be suitable where it is irrelevant to the contract, being manifestly incapable, without substantial changes, of meeting the contracting authority’s needs and requirements as specified in the procurement documents. A request for participation shall be considered not to be suitable where the economic operator concerned is to be or may be excluded pursuant to Article 57 or does not meet the selection criteria set out by the contracting authority pursuant to Article 58 All tenderers that have submitted admissible tenders shall be invited simultaneously to participate in the electronic auction using, as of the specified date and time, the connections in accordance with the instructions set out in the invitation. The electronic auction may take place in a number of successive phases. The electronic auction shall not start sooner than two working days after the date on which invitations are sent out. 6. The invitation shall be accompanied by the outcome of a full evaluation of the relevant tender, carried out in accordance with the weighting provided for in the first subparagraph of Article 67(5). The invitation shall also state the mathematical formula to be used in the electronic auction to determine the automatic rerankings on the basis of the new prices and/or new values submitted. Except where the most economically advantageous offer is identified on the basis of price alone, that formula shall incorporate the weighting of all the criteria established to determine the most economically advantageous tender, as indicated in the notice used as a means of calling for competition or in other procurement documents. For that purpose, any ranges shall, however, be reduced beforehand to a specified value. Where variants are authorised, a separate formula shall be provided for each variant. 7. Throughout each phase of an electronic auction the contracting authorities shall instantaneously communicate to all tenderers at least sufficient information to enable them to ascertain their relative rankings at any moment. They may, where this has been previously indicated, communicate other information concerning

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PART I The Public Sector Directive 2014/24/EU other prices or values submitted. They may also at any time announce the number of participants in that phase of the auction. In no case, however, may they disclose the identities of the tenderers during any phase of an electronic auction. 8. Contracting authorities shall close an electronic auction in one or more of the following manners: (a) at the previously indicated date and time; (b) when they receive no more new prices or new values which meet the requirements concerning minimum differences, provided that they have previously stated the time which they will allow to elapse after receiving the last submission before they close the electronic auction; or (c) when the previously indicated number of phases in the auction has been completed. Where the contracting authorities intend to close an electronic auction in accordance with point (c) of the first subparagraph, possibly in combination with the arrangements laid down in point (b) thereof, the invitation to take part in the auction shall indicate the timetable for each phase of the auction. 9. After closing an electronic auction contracting authorities shall award the contract in accordance with Article 67 on the basis of the results of the electronic auction.

Article 36 Electronic catalogues 1. Where the use of electronic means of communication is required, contracting authorities may require tenders to be presented in the format of an electronic catalogue or to include an electronic catalogue. Member States may render the use of electronic catalogues mandatory in connection with certain types of procurement. Tenders presented in the form of an electronic catalogue may be accompanied by other documents, completing the tender. 2. Electronic catalogues shall be established by the candidates or tenderers with a view to participating in a given procurement procedure in accordance with the technical specifications and format established by the contracting authority.

PART I The Public Sector Directive 2014/24/EU Furthermore, electronic catalogues shall comply with the requirements for electronic communication tools as well as with any additional requirements set by the contracting authority in accordance with Article 22. 3. Where the presentation of tenders in the form of electronic catalogues is accepted or required, contracting authorities shall: (a) state so in the contract notice or in the invitation to confirm interest where a prior information notice is used as a means of calling for competition; (b) indicate in the procurement documents all the necessary information pursuant to Article 22(6) concerning the format, the electronic equipment used and the technical connection arrangements and specifications for the catalogue. 4. Where a framework agreement has been concluded with more than one economic operator following the submission of tenders in the form of electronic catalogues, contracting authorities may provide that the reopening of competition for specific contracts takes place on the basis of updated catalogues. In such a case, contracting authorities shall use one of the following methods: (a) invite tenderers to resubmit their electronic catalogues, adapted to the requirements of the contract in question; or (b) notify tenderers that they intend to collect from the electronic catalogues which have already been submitted the information needed to constitute tenders adapted to the requirements of the contract in question; provided that the use of that method has been announced in the procurement documents for the framework agreement. 5. Where contracting authorities reopen competition for specific contracts in accordance with point (b) of paragraph 4, they shall notify tenderers of the date and time at which they intend to collect the information needed to constitute tenders adapted to the requirements of the specific contract in question and shall give tenderers the possibility to refuse such collection of information.

DIRECTIVE 2014/24/EU Contracting authorities shall allow for an adequate period between the notification and the actual collection of information. Before awarding the contract, contracting authorities shall present the collected information to the tenderer concerned so as to give it the opportunity to contest or confirm that the tender thus constituted does not contain any material errors. 6. Contracting authorities may award contracts based on a dynamic purchasing system by requiring that offers for a specific contract are to be presented in the format of an electronic catalogue. Contracting authorities may also award contracts based on a dynamic purchasing system in accordance with point (b) of paragraph 4 and paragraph 5 provided that the request for participation in the dynamic purchasing system is accompanied by an electronic catalogue in accordance with the technical specifications and format established by the contracting authority. That catalogue shall be completed subsequently by the candidates, when they are informed of the contracting authority’s intention to constitute tenders by means of the procedure set out in point (b) of paragraph 4.

Article 37 Centralised purchasing activities and central purchasing bodies 1. Member States may provide that contracting authorities may acquire supplies and/or services from a central purchasing body offering the centralised purchasing activity referred to in point (a) of point (14) of Article 2(1). Member States may also provide that contracting authorities may acquire works, supplies and services by using contracts awarded by a central purchasing body, by using dynamic purchasing systems operated by a central purchasing body or, to the extent set out in the second subparagraph of Article 33(2), by using a framework agreement concluded by a central purchasing body offering the centralised purchasing activity referred to in point (b) of point (14) of Article 2(1). Where a dynamic purchasing system which is operated by a central purchasing body may be used by other contracting authorities, this shall be mentioned in the call for competition setting up that dynamic purchasing system.

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DIRECTIVE 2014/24/EU In relation to the first and second subparagraphs, Member States may provide that certain procurements are to be made by having recourse to central purchasing bodies or to one or more specific central purchasing bodies. 2. A contracting authority fulfils its obligations pursuant to this Directive when it acquires supplies or services from a central purchasing body offering the centralised purchasing activity referred to in point (a) of point (14) of Article 2(1). Furthermore, a contracting authority also fulfils its obligations pursuant to this Directive where it acquires works, supplies or services by using contracts awarded by the central purchasing body, by using dynamic purchasing systems operated by the central purchasing body or, to the extent set out in the second subparagraph of Article 33(2), by using a framework agreement concluded by the central purchasing body offering the centralised purchasing activity referred to in point (b) of point (14) of Article 2(1). However, the contracting authority concerned shall be responsible for fulfilling the obligations pursuant to this Directive in respect of the parts it conducts itself, such as: (a) awarding a contract under a dynamic purchasing system, which is operated by a central purchasing body; (b) conducting a reopening of competition under a framework agreement that has been concluded by a central purchasing body; (c) pursuant to points (a) or (b) of Article 33(4), determining which of the economic operators, party to the framework agreement, shall perform a given task under a framework agreement that has been concluded by a central purchasing body. 3. All procurement procedures conducted by a central purchasing body shall be performed using electronic means of communication, in accordance with the requirements set out in Article 22. 4. Contracting authorities may, without applying the procedures provided for in this Directive, award a public service contract for the provision of centralised purchasing activities to a central purchasing body.

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PART I The Public Sector Directive 2014/24/EU Such public service contracts may also include the provision of ancillary purchasing activities.

Article 38 Occasional joint procurement 1. Two or more contracting authorities may agree to perform certain specific procurements jointly. 2. Where the conduct of a procurement procedure in its entirety is carried out jointly in the name and on behalf of all the contracting authorities concerned, they shall be jointly responsible for fulfilling their obligations pursuant to this Directive. This applies also in cases where one contracting authority manages the procedure, acting on its own behalf and on the behalf of the other contracting authorities concerned. Where the conduct of a procurement procedure is not in its entirety carried out in the name and on behalf of the contracting authorities concerned, they shall be jointly responsible only for those parts carried out jointly. Each contracting authority shall have sole responsibility for fulfilling its obligations pursuant to this Directive in respect of the parts it conducts in its own name and on its own behalf.

Article 39 Procurement involving contracting authorities from different Member States 1. Without prejudice to Article 12, contracting authorities from different Member States may act jointly in the award of public contracts by using one of the means provided for in this Article. Contracting authorities shall not use the means provided in this Article for the purpose of avoiding the application of mandatory public law provisions in conformity with Union law to which they are subject in their Member State. 2. A Member State shall not prohibit its contracting authorities from using centralised purchasing activities offered by central purchasing bodies located in another Member State. In respect of centralised purchasing activities offered by a central purchasing body located in another Member State than the contracting authority, Member States may, however, choose to specify that their con-

PART I The Public Sector Directive 2014/24/EU tracting authorities may only use the centralised purchasing activities as defined in either point (a) or in point (b) of point (14) of Article 2(1). 3. The provision of centralised purchasing activities by a central purchasing body located in another Member State shall be conducted in accordance with the national provisions of the Member State where the central purchasing body is located. The national provisions of the Member State where the central purchasing body is located shall also apply to the following: (a) the award of a contract under a dynamic purchasing system; (b) the conduct of a reopening of competition under a framework agreement; (c) the determination pursuant to points (a) or (b) of Article 33(4) of which of the economic operators, party to the framework agreement, shall perform a given task. 4. Several contracting authorities from different Member States may jointly award a public contract, conclude a framework agreement or operate a dynamic purchasing system. They may also, to the extent set out in the second subparagraph of Article 33(2), award contracts based on the framework agreement or on the dynamic purchasing system. Unless the necessary elements have been regulated by an international agreement concluded between the Member States concerned, the participating contracting authorities shall conclude an agreement that determines: (a) the responsibilities of the parties and the relevant applicable national provisions; (b) the internal organisation of the procurement procedure, including the management of the procedure, the distribution of the works, supplies or services to be procured, and the conclusion of contracts. A participating contracting authority fulfils its obligations pursuant to this Directive when it purchases works, supplies or services from a contracting authority which is responsible for the procurement procedure. When determining responsibilities and the applicable national law as referred to in point (a), the participating

DIRECTIVE 2014/24/EU contracting authorities may allocate specific responsibilities among them and determine the applicable provisions of the national laws of any of their respective Member States. The allocation of responsibilities and the applicable national law shall be referred to in the procurement documents for jointly awarded public contracts. 5. Where several contracting authorities from different Member States have set up a joint entity, including European Groupings of territorial cooperation under Regulation (EC) No 1082/2006 of the European Parliament and of the Council1 or other entities established under Union law, the participating contracting authorities shall, by a decision of the competent body of the joint entity, agree on the applicable national procurement rules of one of the following Member States: (a) the national provisions of the Member State where the joint entity has its registered office; (b) the national provisions of the Member State where the joint entity is carrying out its activities. The agreement referred to in the first subparagraph may either apply for an undetermined period, when fixed in the constitutive act of the joint entity, or may be limited to a certain period of time, certain types of contracts or to one or more individual contract awards.

Chapter III Conduct of the procedure Section 1 Preparation Article 40 Preliminary market consultations Before launching a procurement procedure, contracting authorities may conduct market consultations with a view to preparing the procurement and informing economic operators of their procurement plans and requirements. For this purpose, contracting authorities may for example seek or accept advice from independent experts or authorities or from market participants. That advice may be used in the planning and conduct of the procurement procedure, provided that such advice does

1 Regulation (EC) No 1082/2006 of the European Parliament and of the Council of 5 July 2006 on a European grouping of territorial cooperation (EGTC) (OJ L 210, 31.7.2006, p. 19).

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DIRECTIVE 2014/24/EU not have the effect of distorting competition and does not result in a violation of the principles of non-discrimination and transparency.

Article 41 Prior involvement of candidates or tenderers Where a candidate or tenderer or an undertaking related to a candidate or tenderer has advised the contracting authority, whether in the context of Article 40 or not, or has otherwise been involved in the preparation of the procurement procedure, the contracting authority shall take appropriate measures to ensure that competition is not distorted by the participation of that candidate or tenderer. Such measures shall include the communication to the other candidates and tenderers of relevant information exchanged in the context of or resulting from the involvement of the candidate or tenderer in the preparation of the procurement procedure and the fixing of adequate time limits for the receipt of tenders. The candidate or tenderer concerned shall only be excluded from the procedure where there are no other means to ensure compliance with the duty to observe the principle of equal treatment. Prior to any such exclusion, candidates or tenderers shall be given the opportunity to prove that their involvement in preparing the procurement procedure is not capable of distorting competition. The measures taken shall be documented in the individual report required by Article 84.

Article 42 Technical specifications 1. The technical specifications as defined in point 1 of Annex VII shall be set out in the procurement documents. The technical specification shall lay down the characteristics required of a works, service or supply. Those characteristics may also refer to the specific process or method of production or provision of the requested works, supplies or services or to a specific process for another stage of its life cycle even where such factors do not form part of their material substance provided that they are linked to the subject-matter of the contract and proportionate to its value and its objectives.

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PART I The Public Sector Directive 2014/24/EU The technical specifications may also specify whether the transfer of intellectual property rights will be required. For all procurement which is intended for use by natural persons, whether general public or staff of the contracting authority, the technical specifications shall, except in duly justified cases, be drawn up so as to take into account accessibility criteria for persons with disabilities or design for all users. Where mandatory accessibility requirements are adopted by a legal act of the Union, technical specifications shall, as far as accessibility criteria for persons with disabilities or design for all users are concerned, be defined by reference thereto. 2. Technical specifications shall afford equal access of economic operators to the procurement procedure and shall not have the effect of creating unjustified obstacles to the opening up of public procurement to competition. 3. Without prejudice to mandatory national technical rules, to the extent that they are compatible with Union law, the technical specifications shall be formulated in one of the following ways: (a) in terms of performance or functional requirements, including environmental characteristics, provided that the parameters are sufficiently precise to allow tenderers to determine the subject-matter of the contract and to allow contracting authorities to award the contract; (b) by reference to technical specifications and, in order of preference, to national standards transposing European standards, European Technical Assessments, common technical specifications, international standards, other technical reference systems established by the European standardisation bodies or – when any of those do not exist – national standards, national technical approvals or national technical specifications relating to the design, calculation and execution of the works and use of the supplies; each reference shall be accompanied by the words ‘or equivalent’; (c) in terms of performance or functional requirements as referred to in point (a), with reference to the technical

PART I The Public Sector Directive 2014/24/EU specifications referred to in point (b) as a means of presuming conformity with such performance or functional requirements; (d) by reference to the technical specifications referred to in point (b) for certain characteristics, and by reference to the performance or functional requirements referred to in point (a) for other characteristics. 4. Unless justified by the subject-matter of the contract, technical specifications shall not refer to a specific make or source, or a particular process which characterises the products or services provided by a specific economic operator, or to trade marks, patents, types or a specific origin or production with the effect of favouring or eliminating certain undertakings or certain products. Such reference shall be permitted on an exceptional basis, where a sufficiently precise and intelligible description of the subject-matter of the contract pursuant to paragraph 3 is not possible. Such reference shall be accompanied by the words ‘or equivalent’. 5. Where a contracting authority uses the option of referring to the technical specifications referred to in point (b) of paragraph 3, it shall not reject a tender on the grounds that the works, supplies or services tendered for do not comply with the technical specifications to which it has referred, once the tenderer proves in its tender by any appropriate means, including the means of proof referred to in Article 44, that the solutions proposed satisfy in an equivalent manner the requirements defined by the technical specifications. 6. Where a contracting authority uses the option laid down in point (a) of paragraph 3 to formulate technical specifications in terms of performance or functional requirements, it shall not reject a tender for works, supplies or services which comply with a national standard transposing a European standard, a European technical approval, a common technical specification, an international standard or a technical reference system established by a European standardisation body, where those specifications address the performance or functional requirements which it has laid down. In its tender, the tenderer shall prove by any appropriate means, including those referred

DIRECTIVE 2014/24/EU to in Article 44, that the work, supply or service in compliance with the standard meets the performance or functional requirements of the contracting authority.

Article 43 Labels 1. Where contracting authorities intend to purchase works, supplies or services with specific environmental, social or other characteristics they may, in the technical specifications, the award criteria or the contract performance conditions, require a specific label as means of proof that the works, services or supplies correspond to the required characteristics, provided that all of the following conditions are fulfilled: (a) the label requirements only concern criteria which are linked to the subject-matter of the contract and are appropriate to define characteristics of the works, supplies or services that are the subject-matter of the contract; (b) the label requirements are based on objectively verifiable and non-discriminatory criteria; (c) the labels are established in an open and transparent procedure in which all relevant stakeholders, including government bodies, consumers, social partners, manufacturers, distributors and non-governmental organisations, may participate; (d) the labels are accessible to all interested parties; (e) the label requirements are set by a third party over which the economic operator applying for the label cannot exercise a decisive influence. Where contracting authorities do not require the works, supplies or services to meet all of the label requirements, they shall indicate which label requirements are referred to. Contracting authorities requiring a specific label shall accept all labels that confirm that the works, supplies or services meet equivalent label requirements. Where an economic operator had demonstrably no possibility of obtaining the specific label indicated by the contracting authority or an equivalent label within the relevant time limits for reasons that are not attributable to that economic operator, the contracting authority shall accept

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DIRECTIVE 2014/24/EU other appropriate means of proof, which may include a technical dossier from the manufacturer, provided that the economic operator concerned proves that the works, supplies or services to be provided by it fulfil the requirements of the specific label or the specific requirements indicated by the contracting authority. 2. Where a label fulfils the conditions provided in points (b), (c), (d) and (e) of paragraph 1 but also sets out requirements not linked to the subject-matter of the contract, contracting authorities shall not require the label as such but may define the technical specification by reference to those of the detailed specifications of that label, or, where necessary, parts thereof, that are linked to the subject-matter of the contract and are appropriate to define characteristics of this subject-matter.

Article 44 Test reports, certification and other means of proof 1. Contracting authorities may require that economic operators provide a test report from a conformity assessment body or a certificate issued by such a body as means of proof of conformity with requirements or criteria set out in the technical specifications, the award criteria or the contract performance conditions. Where contracting authorities require the submission of certificates drawn up by a specific conformity assessment body, certificates from equivalent other conformity assessment bodies shall also be accepted by the contracting authorities. For the purpose of this paragraph, a conformity assessment body shall be a body that performs conformity assessment activities including calibration, testing, certification and inspection accredited in accordance with Regulation (EC) No 765/2008 of the European Parliament and of the Council1. 2. Contracting authorities shall accept other appropriate means of proof than those referred to in paragraph 1, such as a technical dossier of the manufacturer where the economic operator concerned had no access to the certificates or test reports re-

PART I The Public Sector Directive 2014/24/EU ferred to in paragraph 1, or no possibility of obtaining them within the relevant time limits, provided that the lack of access is not attributable to the economic operator concerned and provided that the economic operator concerned thereby proves that the works, supplies or services provided by it meet the requirements or criteria set out in the technical specifications, the award criteria or the contract performance conditions. 3. Member States shall make available to other Member States, upon request, any information related to the evidence and documents submitted in accordance with Article 42(6), Article 43 and paragraphs 1 and 2 of this Article. The competent authorities of the Member State of establishment of the economic operator shall provide this information in accordance with Article 86.

Article 45 Variants 1. Contracting authorities may authorise or require tenderers to submit variants. They shall indicate in the contract notice or, where a prior information notice is used as a means of calling for competition, in the invitation to confirm interest whether or not they authorise or require variants. Variants shall not be authorised without such indication. Variants shall be linked to the subject-matter of the contract. 2. Contracting authorities authorising or requiring variants shall state in the procurement documents the minimum requirements to be met by the variants and any specific requirements for their presentation, in particular whether variants may be submitted only where a tender, which is not a variant, has also been submitted. They shall also ensure that the chosen award criteria can be applied to variants meeting those minimum requirements as well as to conforming tenders which are not variants. 3. Only variants meeting the minimum requirements laid down by the contracting authorities shall be taken into consideration.

1 Regulation (EC) No 765/2008 of the European Parliament and of the Council of 9 July 2008 setting out the requirements for accreditation and market surveillance relating to the marketing of products and repealing Regulation (EEC) No 339/93 (OJ L 218, 13.8.2008, p. 30).

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PART I The Public Sector Directive 2014/24/EU In procedures for awarding public supply or service contracts, contracting authorities that have authorised or required variants shall not reject a variant on the sole ground that it would, where successful, lead to either a service contract rather than a public supply contract or a supply contract rather than a public service contract.

Article 46 Division of contracts into lots 1. Contracting authorities may decide to award a contract in the form of separate lots and may determine the size and subject-matter of such lots. Contracting authorities shall, except in respect of contracts whose division has been made mandatory pursuant to paragraph 4 of this Article, provide an indication of the main reasons for their decision not to subdivide into lots, which shall be included in the procurement documents or the individual report referred to in Article 84. 2. Contracting authorities shall indicate, in the contract notice or in the invitation to confirm interest, whether tenders may be submitted for one, for several or for all of the lots. Contracting authorities may, even where tenders may be submitted for several or all lots, limit the number of lots that may be awarded to one tenderer, provided that the maximum number of lots per tenderer is stated in the contract notice or in the invitation to confirm interest. Contracting authorities shall indicate in the procurement documents the objective and nondiscriminatory criteria or rules they intend to apply for determining which lots will be awarded where the application of the award criteria would result in one tenderer being awarded more lots than the maximum number. 3. Member States may provide that, where more than one lot may be awarded to the same tenderer, contracting authorities may award contracts combining several or all lots where they have specified in the contract notice or in the invitation to confirm interest that they reserve the possibility of doing so and indicate the lots or groups of lots that may be combined. 4. Member States may implement the second subparagraph of paragraph 1 by rendering it obligatory to award contracts in the form of separate lots under conditions to

DIRECTIVE 2014/24/EU be specified in accordance with their national law and having regard for Union law. In such circumstances the first subparagraph of paragraph 2 and, where appropriate, paragraph 3 shall apply.

Article 47 Setting time limits 1. When fixing the time limits for the receipt of tenders and requests to participate, contracting authorities shall take account of the complexity of the contract and the time required for drawing up tenders, without prejudice to the minimum time limits set out in Articles 27 to 31. 2. Where tenders can be made only after a visit to the site or after on-the-spot inspection of the documents supporting the procurement documents, the time limits for the receipt of tenders, which shall be longer than the minimum time limits set out in Articles 27 to 31, shall be fixed so that all economic operators concerned may be aware of all the information needed to produce tenders. 3. Contracting authorities shall extend the time limits for the receipt of tenders so that all economic operators concerned may be aware of all the information needed to produce tenders in the following cases: (a) where, for whatever reason, additional information, although requested by the economic operator in good time, is not supplied at the latest six days before the time limit fixed for the receipt of tenders. In the event of an accelerated procedure as referred to in Article 27(3) and Article 28(6), that period shall be four days; (b) where significant changes are made to the procurement documents. The length of the extension shall be proportionate to the importance of the information or change. Where the additional information has either not been requested in good time or its importance with a view to preparing responsive tenders is insignificant, contracting authorities shall not be required to extend the time limits.

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Section 2 Publication and transparency Article 48 Prior information notices 1. Contracting authorities may make known their intentions of planned procurements through the publication of a prior information notice. Those notices shall contain the information set out in Annex V part B section I. They shall be published either by the Publications Office of the European Union or by the contracting authorities on their buyer profiles in accordance with point 2(b) of Annex VIII. Where the prior information notice is published by the contracting authorities on their buyer profile, they shall send a notice of the publication on their buyer profile to the Publications Office of the European Union in accordance with Annex VIII. Those notices shall contain the information set out in Annex V part A. 2. For restricted procedures and competitive procedures with negotiation, sub-central contracting authorities may use a prior information notice as a call for competition pursuant to Article 26(5), provided that the notice fulfils all of the following conditions: (a) it refers specifically to the supplies, works or services that will be the subject of the contract to be awarded; (b) it indicates that the contract will be awarded by restricted procedure or competitive procedure with negotiation without further publication of a call for competition and invites interested economic operators to express their interest; (c) it contains, in addition to the information set out in Annex V part B section I, the information set out in Annex V part B section II; (d) it has been sent for publication between 35 days and 12 months prior to the date on which the invitation referred to in Article 54(1) is sent. Such notices shall not be published on a buyer profile. However, the additional publication at national level pursuant to Article 52, if any, may be made on a buyer profile. The period covered by the prior information notice shall be a maximum of 12 months from the date the notice is transmitted for publication. However, in the case of public contracts for social and other specific ser-

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PART I The Public Sector Directive 2014/24/EU vices, the prior information notice referred to in point (b) of Article 75(1) may cover a period which is longer than 12 months.

Article 49 Contract notices Contract notices shall be used as a means of calling for competition in respect of all procedures, without prejudice to the second subparagraph of Article 26(5) and Article 32. Contract notices shall contain the information set out in Annex V part C and shall be published in accordance with Article 51.

Article 50 Contract award notices 1. Not later than 30 days after the conclusion of a contract or of a framework agreement, following the decision to award or conclude it, contracting authorities shall send a contract award notice on the results of the procurement procedure. Such notices shall contain the information set out in Annex V part D and shall be published in accordance with Article 51. 2. Where the call for competition for the contract concerned has been made in the form of a prior information notice and the contracting authority has decided that it will not award further contracts during the period covered by the prior information notice, the contract award notice shall contain a specific indication to that effect. In the case of framework agreements concluded in accordance with Article 33, contracting authorities shall not be bound to send a notice of the results of the procurement procedure for each contract based on that agreement. Member States may provide that contracting authorities shall group notices of the results of the procurement procedure for contracts based on the framework agreement on a quarterly basis. In that case, contracting authorities shall send the grouped notices within 30 days of the end of each quarter. 3. Contracting authorities shall send a contract award notice within 30 days after the award of each contract based on a dynamic purchasing system. They may, however, group such notices on a quarterly basis. In that case, they shall send the grouped notices within 30 days of the end of each quarter.

PART I The Public Sector Directive 2014/24/EU 4. Certain information on the contract award or the conclusion of the framework agreement may be withheld from publication where its release would impede law enforcement or otherwise be contrary to the public interest, would harm the legitimate commercial interests of a particular economic operator, public or private, or might prejudice fair competition between economic operators.

Article 51 Form and manner of publication of notices 1. Notices referred to in Articles 48, 49 and 50 shall include the information set out in Annex V in the format of standard forms, including standard forms for corrigenda. The Commission shall establish those standard forms by means of implementing acts. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 89(2). 2. Notices referred to in Articles 48, 49 and 50 shall be drawn up, transmitted by electronic means to the Publications Office of the European Union and published in accordance with Annex VIII. Notices shall be published not later than five days after they are sent. The costs of publication of the notices by the Publications Office of the European Union shall be borne by the Union. 3. Notices referred to in Articles 48, 49 and 50 shall be published in full in the official language(s) of the institutions of the Union chosen by the contracting authority. That language version or those language versions shall constitute the sole authentic text(s). A summary of the important elements of each notice shall be published in the other official languages of the institutions of the Union. 4. The Publications Office of the European Union shall ensure that the full text and the summary of prior information notices referred to in Article 48(2) and calls for competition setting up a dynamic purchasing system, as referred to in point (a) of Article 34(4) continue to be published: (a) in the case of prior information notices, for 12 months or until receipt of a contract award notice as provided for in Article 50 indicating that no further contracts will be awarded during the 12-month period covered by

DIRECTIVE 2014/24/EU the call for competition. However, in the case of public contracts for social and other specific services, the prior information notice referred to in point (b) of Article 75(1) shall continue to be published until the end of its originally indicated period of validity or until receipt of a contract award notice as provided for in Article 50 indicating that no further contracts will be awarded during the period covered by the call for competition; (b) in the case of calls for competition setting up a dynamic purchasing system, for the period of validity of the dynamic purchasing system. 5. Contracting authorities shall be able to supply proof of the dates on which notices are dispatched. The Publications Office of the European Union shall give the contracting authority confirmation of the receipt of the notice and of the publication of the information sent, indicating the date of that publication. Such confirmation shall constitute proof of publication. 6. Contracting authorities may publish notices for public contracts that are not subject to the publication requirement laid down in this Directive provided that those notices are sent to the Publications Office of the European Union by electronic means in accordance with the format and procedures for transmission indicated in Annex VIII.

Article 52 Publication at national level 1. Notices referred to in Articles 48, 49 and 50 and the information contained therein shall not be published at national level before the publication pursuant to Article 51. However, publication may in any event take place at the national level where contracting authorities have not been notified of the publication within 48 hours after confirmation of the receipt of the notice in accordance with Article 51. 2. Notices published at national level shall not contain information other than that contained in the notices dispatched to the Publications Office of the European Union or published on a buyer profile, but shall indicate the date of dispatch of the notice to the Publications Office of the

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DIRECTIVE 2014/24/EU European Union or its publication on the buyer profile. 3. Prior information notices shall not be published on a buyer profile before the dispatch to the Publications Office of the European Union of the notice of their publication in that form. They shall indicate the date of that dispatch.

Article 53 Electronic availability of procurement documents 1. Contracting authorities shall by electronic means offer unrestricted and full direct access free of charge to the procurement documents from the date of publication of a notice in accordance with Article 51 or the date on which an invitation to confirm interest was sent. The text of the notice or the invitation to confirm interest shall specify the internet address at which the procurement documents are accessible. Where unrestricted and full direct access free of charge by electronic means to certain procurement documents cannot be offered for one of the reasons set out in the second subparagraph of Article 22(1), contracting authorities may indicate in the notice or the invitation to confirm interest that the procurement documents concerned will be transmitted by other means than electronic means in accordance with paragraph 2 of this Article. In such a case, the time limit for the submission of tenders shall be prolonged by five days, except in the cases of duly substantiated urgency referred to in Article 27(3), Article 28(6) and in the fourth subparagraph of Article 29(1). Where unrestricted and full direct access free of charge by electronic means to certain procurement documents cannot be offered because contracting authorities intend to apply Article 21(2) of this Directive, they shall indicate in the notice or the invitation to confirm interest which measures aimed at protecting the confidential nature of the information they require and how access can be obtained to the documents concerned. In such case, the time limit for the submission of tenders shall be prolonged by five days, except in the cases of duly substantiated urgency referred to in Article 27(3), Article 28(6) and in the fourth subparagraph of Article 29(1).

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PART I The Public Sector Directive 2014/24/EU 2. Provided that it has been requested in good time, the contracting authorities shall supply to all tenderers taking part in the procurement procedure additional information relating to the specifications and any supporting documents not later than six days before the time limit fixed for the receipt of tenders. In the event of an accelerated procedure as referred to in Article 27(3) and Article 28(6), that period shall be four days.

Article 54 Invitations to candidates 1. In restricted procedures, competitive dialogue procedures, innovation partnerships and competitive procedures with negotiation, contracting authorities shall simultaneously and in writing invite the selected candidates to submit their tenders or, in the case of a competitive dialogue, to take part in the dialogue. Where a prior information notice is used as a call for competition pursuant to Article 48(2), contracting authorities shall simultaneously and in writing invite the economic operators which have expressed their interest to confirm their continuing interest. 2. The invitations referred to in paragraph 1 of this Article shall include a reference to the electronic address on which the procurement documents have been made directly available by electronic means. The invitations shall be accompanied by the procurement documents, where those documents have not been the subject of unrestricted and full direct access, free of charge, for the reasons set out in the second or third subparagraph of Article 53(1) and have not already been made otherwise available. In addition, the invitations referred to in paragraph 1 of this Article shall include the information set out in Annex IX.

Article 55 Informing candidates and tenderers 1. Contracting authorities shall as soon as possible inform each candidate and tenderer of decisions reached concerning the conclusion of a framework agreement, the award of the contract or admittance to a dynamic purchasing system, including the grounds for any decision not to conclude a

PART I The Public Sector Directive 2014/24/EU framework agreement, not to award a contract for which there has been a call for competition, to recommence the procedure or not to implement a dynamic purchasing system. 2. On request from the candidate or tenderer concerned, the contracting authority shall as quickly as possible, and in any event within 15 days from receipt of a written request, inform: (a) any unsuccessful candidate of the reasons for the rejection of its request to participate, (b) any unsuccessful tenderer of the reasons for the rejection of its tender, including, for the cases referred to in Article 42(5) and (6), the reasons for its decision of non-equivalence or its decision that the works, supplies or services do not meet the performance or functional requirements, (c) any tenderer that has made an admissible tender of the characteristics and relative advantages of the tender selected as well as the name of the successful tenderer or the parties to the framework agreement, (d) any tenderer that has made an admissible tender of the conduct and progress of negotiations and dialogue with tenderers. 3. Contracting authorities may decide to withhold certain information referred to in paragraphs 1 and 2, regarding the contract award, the conclusion of framework agreements or admittance to a dynamic purchasing system, where the release of such information would impede law enforcement or would otherwise be contrary to the public interest, would prejudice the legitimate commercial interests of a particular economic operator, whether public or private, or might prejudice fair competition between economic operators.

Section 3 Choice of participants and award of contracts Article 56 General principles 1. Contracts shall be awarded on the basis of criteria laid down in accordance with Articles 67 to 69, provided that the contracting authority has verified in accordance with Articles 59 to 61 that all of the following conditions are fulfilled:

DIRECTIVE 2014/24/EU (a) the tender complies with the requirements, conditions and criteria set out in the contract notice or the invitation to confirm interest and in the procurement documents, taking into account, where applicable, Article 45; (b) the tender comes from a tenderer that is not excluded in accordance with Article 57 and that meets the selection criteria set out by the contracting authority in accordance with Article 58 and, where applicable, the non-discriminatory rules and criteria referred to in Article 65. Contracting authorities may decide not to award a contract to the tenderer submitting the most economically advantageous tender where they have established that the tender does not comply with the applicable obligations referred to in Article 18(2). 2. In open procedures, contracting authorities may decide to examine tenders before verifying the absence of grounds for exclusion and the fulfilment of the selection criteria in accordance with Articles 57 to 64. Where they make use of that possibility, they shall ensure that the verification of absence of grounds for exclusion and of fulfilment of the selection criteria is carried out in an impartial and transparent manner so that no contract is awarded to a tenderer that should have been excluded pursuant to Article 57 or that does not meet the selection criteria set out by the contracting authority. Member States may exclude the use of the procedure in the first subparagraph for, or restrict it to, certain types of procurement or specific circumstances. 3. Where information or documentation to be submitted by economic operators is or appears to be incomplete or erroneous or where specific documents are missing, contracting authorities may, unless otherwise provided by the national law implementing this Directive, request the economic operators concerned to submit, supplement, clarify or complete the relevant information or documentation within an appropriate time limit, provided that such requests are made in full compliance with the principles of equal treatment and transparency. 4. The Commission shall be empowered to adopt delegated acts in accordance with

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DIRECTIVE 2014/24/EU Article 87 to amend the list in Annex X, where necessary, to add new international agreements that have been ratified by all Member States or where the existing international agreements referred to are no longer ratified by all Member States or they are otherwise changed, for instance in respect of their scope, content or denomination.

Subsection 1 Criteria for qualitative selection Article 57 Exclusion grounds 1. Contracting authorities shall exclude an economic operator from participation in a procurement procedure where they have established, by verifying in accordance with Articles 59, 60 and 61, or are otherwise aware that that economic operator has been the subject of a conviction by final judgment for one of the following reasons: (a) participation in a criminal organisation, as defined in Article 2 of Council Framework Decision 2008/841/JHA1; (b) corruption, as defined in Article 3 of the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union2 and Article 2(1) of Council Framework Decision 2003/568/JHA3 as well as corruption as defined in the national law of the contracting authority or the economic operator; (c) fraud within the meaning of Article 1 of the Convention on the protection of the European Communities’ financial interests4;

PART I The Public Sector Directive 2014/24/EU (d) terrorist offences or offences linked to terrorist activities, as defined in Articles 1 and 3 of Council Framework Decision 2002/475/JHA5 respectively, or inciting or aiding or abetting or attempting to commit an offence, as referred to in Article 4 of that Framework Decision; (e) money laundering or terrorist financing, as defined in Article 1 of Directive 2005/60/EC of the European Parliament and of the Council6; (f) child labour and other forms of trafficking in human beings as defined in Article 2 of Directive 2011/36/EU of the European Parliament and of the Council7. The obligation to exclude an economic operator shall also apply where the person convicted by final judgment is a member of the administrative, management or supervisory body of that economic operator or has powers of representation, decision or control therein. 2. An economic operator shall be excluded from participation in a procurement procedure where the contracting authority is aware that the economic operator is in breach of its obligations relating to the payment of taxes or social security contributions and where this has been established by a judicial or administrative decision having final and binding effect in accordance with the legal provisions of the country in which it is established or with those of the Member State of the contracting authority. Furthermore, contracting authorities may exclude or may be required by Member States to exclude from participation in a procurement procedure an economic operator where the contracting authority can demonstrate by any appropriate means

1 Council Framework Decision 2008/841/JHA of 24 October 2008 on the fight against organised crime (OJ L 300, 11.11.2008, p. 42). 2 OJ C 195, 25.6.1997, p. 1. 3 Council Framework Decision 2003/568/JHA of 22 July 2003 on combating corruption in the private sector (OJ L 192, 31.7.2003, p. 54). 4 OJ C 316, 27.11.1995, p. 48. 5 Council Framework Decision of 13 June 2002 on combating terrorism (OJ L 164, 22.6.2002, p. 3). 6 Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (OJ L 309, 25.11.2005, p. 15). 7 Directive 2011/36/EU of the European Parliament and of the Council of 5 April 2011 on preventing and combating trafficking in human beings and protecting its victims, and replacing Council Framework Decision 2002/629/JHA (OJ L 101, 15.4.2011, p. 1).

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PART I The Public Sector Directive 2014/24/EU that the economic operator is in breach of its obligations relating to the payment of taxes or social security contributions. This paragraph shall no longer apply when the economic operator has fulfilled its obligations by paying or entering into a binding arrangement with a view to paying the taxes or social security contributions due, including, where applicable, any interest accrued or fines. 3. Member States may provide for a derogation from the mandatory exclusion provided for in paragraphs 1 and 2, on an exceptional basis, for overriding reasons relating to the public interest such as public health or protection of the environment. Member States may also provide for a derogation from the mandatory exclusion provided in paragraph 2, where an exclusion would be clearly disproportionate, in particular where only minor amounts of taxes or social security contributions are unpaid or where the economic operator was informed of the exact amount due following its breach of its obligations relating to the payment of taxes or social security contributions at such time that it did not have the possibility of taking measures as provided for in the third subparagraph of paragraph 2 before expiration of the deadline for requesting participation or, in open procedures, the deadline for submitting its tender. 4. Contracting authorities may exclude or may be required by Member States to exclude from participation in a procurement procedure any economic operator in any of the following situations: (a) where the contracting authority can demonstrate by any appropriate means a violation of applicable obligations referred to in Article 18(2); (b) where the economic operator is bankrupt or is the subject of insolvency or winding-up proceedings, where its assets are being administered by a liquidator or by the court, where it is in an arrangement with creditors, where its business activities are suspended or it is in any analogous situation arising from a similar procedure under national laws and regulations; (c) where the contracting authority can demonstrate by appropriate means that the economic operator is guilty of grave professional misconduct,

DIRECTIVE 2014/24/EU which renders its integrity questionable; (d) where the contracting authority has sufficiently plausible indications to conclude that the economic operator has entered into agreements with other economic operators aimed at distorting competition; (e) where a conflict of interest within the meaning of Article 24 cannot be effectively remedied by other less intrusive measures; (f) where a distortion of competition from the prior involvement of the economic operators in the preparation of the procurement procedure, as referred to in Article 41, cannot be remedied by other, less intrusive measures; (g) where the economic operator has shown significant or persistent deficiencies in the performance of a substantive requirement under a prior public contract, a prior contract with a contracting entity or a prior concession contract which led to early termination of that prior contract, damages or other comparable sanctions; (h) where the economic operator has been guilty of serious misrepresentation in supplying the information required for the verification of the absence of grounds for exclusion or the fulfilment of the selection criteria, has withheld such information or is not able to submit the supporting documents required pursuant to Article 59; or (i) where the economic operator has undertaken to unduly influence the decision-making process of the contracting authority, to obtain confidential information that may confer upon it undue advantages in the procurement procedure or to negligently provide misleading information that may have a material influence on decisions concerning exclusion, selection or award. Notwithstanding point (b) of the first subparagraph, Member States may require or may provide for the possibility that the contracting authority does not exclude an economic operator which is in one of the situations referred to in that point, where the contracting authority has established

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DIRECTIVE 2014/24/EU that the economic operator in question will be able to perform the contract, taking into account the applicable national rules and measures on the continuation of business in the case of the situations referred to in point (b). 5. Contracting authorities shall at any time during the procedure exclude an economic operator where it turns out that the economic operator is, in view of acts committed or omitted either before or during the procedure, in one of the situations referred to in paragraphs 1 and 2. At any time during the procedure, contracting authorities may exclude or may be required by Member States to exclude an economic operator where it turns out that the economic operator is, in view of acts committed or omitted either before or during the procedure, in one of the situations referred to in paragraph 4. 6. Any economic operator that is in one of the situations referred to in paragraphs 1 and 4 may provide evidence to the effect that measures taken by the economic operator are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion. If such evidence is considered as sufficient, the economic operator concerned shall not be excluded from the procurement procedure. For this purpose, the economic operator shall prove that it has paid or undertaken to pay compensation in respect of any damage caused by the criminal offence or misconduct, clarified the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities and taken concrete technical, organisational and personnel measures that are appropriate to prevent further criminal offences or misconduct. The measures taken by the economic operators shall be evaluated taking into account the gravity and particular circumstances of the criminal offence or misconduct. Where the measures are considered to be insufficient, the economic operator shall receive a statement of the reasons for that decision. An economic operator which has been excluded by final judgment from participating in procurement or concession award procedures shall not be entitled to make use of the possibility provided for under this paragraph during the period of exclu-

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PART I The Public Sector Directive 2014/24/EU sion resulting from that judgment in the Member States where the judgment is effective. 7. By law, regulation or administrative provision and having regard to Union law, Member States shall specify the implementing conditions for this Article. They shall, in particular, determine the maximum period of exclusion if no measures as specified in paragraph 6 are taken by the economic operator to demonstrate its reliability. Where the period of exclusion has not been set by final judgment, that period shall not exceed five years from the date of the conviction by final judgment in the cases referred to in paragraph 1 and three years from the date of the relevant event in the cases referred to in paragraph 4.

Article 58 Selection criteria 1. Selection criteria may relate to: (a) suitability to pursue the professional activity; (b) economic and financial standing; (c) technical and professional ability. Contracting authorities may only impose criteria referred to in paragraphs 2, 3 and 4 on economic operators as requirements for participation. They shall limit any requirements to those that are appropriate to ensure that a candidate or tenderer has the legal and financial capacities and the technical and professional abilities to perform the contract to be awarded. All requirements shall be related and proportionate to the subject-matter of the contract. 2. With regard to suitability to pursue the professional activity, contracting authorities may require economic operators to be enrolled in one of the professional or trade registers kept in their Member State of establishment, as described in Annex XI, or to comply with any other request set out in that Annex. In procurement procedures for services, in so far as economic operators have to possess a particular authorisation or to be members of a particular organisation in order to be able to perform in their country of origin the service concerned, the contracting authority may require them to prove that they hold such authorisation or membership.

PART I The Public Sector Directive 2014/24/EU 3. With regard to economic and financial standing, contracting authorities may impose requirements ensuring that economic operators possess the necessary economic and financial capacity to perform the contract. For that purpose, contracting authorities may require, in particular, that economic operators have a certain minimum yearly turnover, including a certain minimum turnover in the area covered by the contract. In addition, contracting authorities may require that economic operators provide information on their annual accounts showing the ratios, for instance, between assets and liabilities. They may also require an appropriate level of professional risk indemnity insurance. The minimum yearly turnover that economic operators are required to have shall not exceed two times the estimated contract value, except in duly justified cases such as relating to the special risks attached to the nature of the works, services or supplies. The contracting authority shall indicate the main reasons for such a requirement in the procurement documents or the individual report referred to in Article 84. The ratio, for instance, between assets and liabilities may be taken into consideration where the contracting authority specifies the methods and criteria for such consideration in the procurement documents. Such methods and criteria shall be transparent, objective and non-discriminatory. Where a contract is divided into lots this Article shall apply in relation to each individual lot. However, the contracting authority may set the minimum yearly turnover that economic operators are required to have by reference to groups of lots in the event that the successful tenderer is awarded several lots to be executed at the same time. Where contracts based on a framework agreement are to be awarded following a reopening of competition, the maximum yearly turnover requirement referred to in the second subparagraph of this paragraph shall be calculated on the basis of the expected maximum size of specific contracts that will be performed at the same time, or, where it is not known, on the basis of the estimated value of the framework agreement. In the case of dy-

DIRECTIVE 2014/24/EU namic purchasing systems, the maximum yearly turnover requirement referred to in the second subparagraph shall be calculated on the basis of the expected maximum size of specific contracts to be awarded under that system. 4. With regard to technical and professional ability, contracting authorities may impose requirements ensuring that economic operators possess the necessary human and technical resources and experience to perform the contract to an appropriate quality standard. Contracting authorities may require, in particular, that economic operators have a sufficient level of experience demonstrated by suitable references from contracts performed in the past. A contracting authority may assume that an economic operator does not possess the required professional abilities where the contracting authority has established that the economic operator has conflicting interests which may negatively affect the performance of the contract. In procurement procedures for supplies requiring siting or installation work, services or works, the professional ability of economic operators to provide the service or to execute the installation or the work may be evaluated with regard to their skills, efficiency, experience and reliability. 5. Contracting authorities shall indicate the required conditions of participation which may be expressed as minimum levels of ability, together with the appropriate means of proof, in the contract notice or in the invitation to confirm interest.

Article 59 European Single Procurement Document 1. At the time of submission of requests to participate or of tenders, contracting authorities shall accept the European Single Procurement Document (ESPD), consisting of an updated self-declaration as preliminary evidence in replacement of certificates issued by public authorities or third parties confirming that the relevant economic operator fulfils the following conditions: (a) it is not in one of the situations referred to in Article 57 in which econo-

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DIRECTIVE 2014/24/EU mic operators shall or may be excluded; (b) it meets the relevant selection criteria that have been set out pursuant to Article 58; (c) where applicable, it fulfils the objective rules and criteria that have been set out pursuant to Article 65. Where the economic operator relies on the capacities of other entities pursuant to Article 63, the ESPD shall also contain the information referred to in the first subparagraph of this paragraph in respect of such entities. The ESPD shall consist of a formal statement by the economic operator that the relevant ground for exclusion does not apply and/or that the relevant selection criterion is fulfilled and shall provide the relevant information as required by the contracting authority. The ESPD shall further identify the public authority or third party responsible for establishing the supporting documents and contain a formal statement to the effect that the economic operator will be able, upon request and without delay, to provide those supporting documents. Where the contracting authority can obtain the supporting documents directly by accessing a database pursuant to paragraph 5, the EPSD shall also contain the information required for this purpose, such as the internet address of the database, any identification data and, where applicable, the necessary declaration of consent. Economic operators may reuse an ESPD which has already been used in a previous procurement procedure, provided that they confirm that the information contained therein continues to be correct. 2. The ESPD shall be drawn up on the basis of a standard form. The Commission shall establish that standard form, by means of implementing acts. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 89(3). The ESPD shall be provided exclusively in electronic form. 3. Notwithstanding Article 92, the Commission shall review the practical application of the ESPD taking into account the technical development of databases in the Member States and report thereon to the

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PART I The Public Sector Directive 2014/24/EU European Parliament and the Council by 18 April 2017. Where appropriate, the Commission shall make proposals for solutions optimising the cross-border access to such databases and the use of certificates and attestations in the internal market. 4. A contracting authority may ask tenderers and candidates at any moment during the procedure to submit all or part of the supporting documents where this is necessary to ensure the proper conduct of the procedure. Before awarding the contract, the contracting authority shall, except in respect of contracts based on framework agreements where such contracts are concluded in accordance with Article 33(3) or point (a) of Article 33(4), require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60 and, where appropriate, Article 62. The contracting authority may invite economic operators to supplement or clarify the certificates received pursuant to Articles 60 and 62. 5. Notwithstanding paragraph 4, economic operators shall not be required to submit supporting documents or other documentary evidence where and in so far as the contracting authority has the possibility of obtaining the certificates or the relevant information directly by accessing a national database in any Member State that is available free of charge, such as a national procurement register, a virtual company dossier, an electronic document storage system or a prequalification system. Notwithstanding paragraph 4, economic operators shall not be required to submit supporting documents where the contracting authority having awarded the contract or concluded the framework agreement already possesses these documents. For the purpose of the first subparagraph, Member States shall ensure that databases which contain relevant information on economic operators and which may be consulted by their contracting authorities may also be consulted, under the same conditions, by contracting authorities of other Member States.

PART I The Public Sector Directive 2014/24/EU 6. Member States shall make available and up-to-date in e-Certis a complete list of databases containing relevant information on economic operators which can be consulted by contracting authorities from other Member States. Upon request, Member States shall communicate to other Member States any information related to the databases referred to in this Article.

Article 60 Means of proof 1. Contracting authorities may require the certificates, statements and other means of proof referred to in paragraphs 2, 3 and 4 of this Article and Annex XII as evidence for the absence of grounds for exclusion as referred to in Article 57 and for the fulfilment of the selection criteria in accordance with Article 58. Contracting authorities shall not require means of proof other than those referred to in this Article and in Article 62. In respect of Article 63, economic operators may rely on any appropriate means to prove to the contracting authority that they will have the necessary resources at their disposal. 2. Contracting authorities shall accept the following as sufficient evidence that none of the cases specified in Article 57 apply to the economic operator: (a) as regards paragraph 1 of that Article, the production of an extract from the relevant register, such as judicial records or, failing that, of an equivalent document issued by a competent judicial or administrative authority in the Member State or country of origin or the country where the economic operator is established showing that those requirements have been met; (b) as regards paragraph 2 and point (b) of paragraph 4 of that Article, a certificate issued by the competent authority in the Member State or country concerned. Where the Member State or country in question does not issue such documents or certificates, or where these do not cover all the cases specified in paragraphs 1 and 2 and point (b) of paragraph 4 of Article 57, they may be replaced by a declaration on oath or, in Member States or countries where there is no provision for declarations on oath, by a solemn declaration

DIRECTIVE 2014/24/EU made by the person concerned before a competent judicial or administrative authority, a notary or a competent professional or trade body, in the Member State or country of origin or in the Member State or country where the economic operator is established. A Member State shall, where relevant, provide an official declaration stating that the documents or certificates referred to in this paragraph are not issued or that they do not cover all the cases specified in paragraphs 1 and 2 and point (b) of paragraph 4 of Article 57. Such official declarations shall be made available through the online repository of certificates (eCertis) referred to in Article 61. 3. Proof of the economic operator’s economic and financial standing may, as a general rule, be provided by one or more of the references listed in Annex XII Part I. Where, for any valid reason, the economic operator is unable to provide the references requested by the contracting authority, it may prove its economic and financial standing by any other document which the contracting authority considers appropriate. 4. Evidence of the economic operators’ technical abilities may be provided by one or more of the means listed in Annex XII Part II, in accordance with the nature, quantity or importance, and use of the works, supplies or services. 5. Upon request, Member States shall make available to other Member States any information relating to the grounds for exclusion listed in Article 57, the suitability to pursue the professional activity, and the financial and technical capacities of tenderers referred to in Article 58, and any information relating to the means of proof referred to in this Article.

Article 61 Online repository of certificates (e-Certis) 1. With a view to facilitating cross-border tendering, Member States shall ensure that the information concerning certificates and other forms of documentary evidence introduced in e-Certis established by the Commission is constantly kept upto-date. 2. Contracting authorities shall have recourse to e-Certis and shall require pri-

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DIRECTIVE 2014/24/EU marily such types of certificates or forms of documentary evidence that are covered by e-Certis. 3. The Commission shall make available all language versions of the ESPD in e-Certis.

Article 62 Quality assurance standards and environmental management standards 1. Contracting authorities shall, where they require the production of certificates drawn up by independent bodies attesting that the economic operator complies with certain quality assurance standards, including on accessibility for disabled persons, refer to quality assurance systems based on the relevant European standards series certified by accredited bodies. They shall recognise equivalent certificates from bodies established in other Member States. They shall also accept other evidence of equivalent quality assurance measures where the economic operator concerned had no possibility of obtaining such certificates within the relevant time limits for reasons that are not attributable to that economic operator provided that the economic operator proves that the proposed quality assurance measures comply with the required quality assurance standards. 2. Where contracting authorities require the production of certificates drawn up by independent bodies attesting that the economic operator complies with certain environmental management systems or standards, they shall refer to the Eco-Management and Audit Scheme (EMAS) of the Union or to other environmental management systems as recognised in accordance with Article 45 of Regulation (EC) No 1221/2009 or other environmental management standards based on the relevant European or international standards by accredited bodies. They shall recognise equivalent certificates from bodies established in other Member States. Where an economic operator had demonstrably no access to such certificates, or no possibility of obtaining them within the relevant time limits for reasons that are not attributable to that economic operator, the contracting authority shall also accept other evidence of environmental management measures, provided that the economic operator proves that these mea-

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PART I The Public Sector Directive 2014/24/EU sures are equivalent to those required under the applicable environmental management system or standard. 3. Upon request, Member States shall make available to other Member States, in accordance with Article 86, any information relating to the documents produced as evidence of compliance with quality and environmental standards referred to in paragraphs 1 and 2.

Article 63 Reliance on the capacities of other entities 1. With regard to criteria relating to economic and financial standing as set out pursuant to Article 58(3), and to criteria relating to technical and professional ability as set out pursuant to Article 58(4), an economic operator may, where appropriate and for a particular contract, rely on the capacities of other entities, regardless of the legal nature of the links which it has with them. With regard to criteria relating to the educational and professional qualifications as set out in point (f) of Annex XII Part II, or to the relevant professional experience, economic operators may however only rely on the capacities of other entities where the latter will perform the works or services for which these capacities are required. Where an economic operator wants to rely on the capacities of other entities, it shall prove to the contracting authority that it will have at its disposal the resources necessary, for example, by producing a commitment by those entities to that effect. The contracting authority shall, in accordance with Articles 59, 60 and 61, verify whether the entities on whose capacity the economic operator intends to rely fulfil the relevant selection criteria and whether there are grounds for exclusion pursuant to Article 57. The contracting authority shall require that the economic operator replaces an entity which does not meet a relevant selection criterion, or in respect of which there are compulsory grounds for exclusion. The contracting authority may require or may be required by the Member State to require that the economic operator substitutes an entity in respect of which there are non-compulsory grounds for exclusion.

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PART I The Public Sector Directive 2014/24/EU Where an economic operator relies on the capacities of other entities with regard to criteria relating to economic and financial standing, the contracting authority may require that the economic operator and those entities be jointly liable for the execution of the contract. Under the same conditions, a group of economic operators as referred to in Article 19(2) may rely on the capacities of participants in the group or of other entities. 2. In the case of works contracts, service contracts and siting or installation operations in the context of a supply contract, contracting authorities may require that certain critical tasks be performed directly by the tenderer itself or, where the tender is submitted by a group of economic operators as referred to in Article 19(2), by a participant in that group.

Article 64 Official lists of approved economic operators and certification by bodies established under public or private law 1. Member States may establish or maintain either official lists of approved contractors, suppliers or service providers or provide for a certification by certification bodies complying with European certification standards within the meaning of Annex VII. They shall inform the Commission and the other Member States of the address of the certification body or the body responsible for the official lists, to which applications shall be sent. 2. Member States shall adapt the conditions for registration on the official lists referred to in paragraph 1 and for the issue of certificates by certification bodies to the provisions of this subsection. Member States shall also adapt those conditions to Article 63 as regards applications for registration submitted by economic operators belonging to a group and claiming resources made available to them by the other companies in the group. In such cases, those operators shall prove to the authority establishing the official list that they will have those resources at their disposal throughout the period of validity of the certificate attesting to their registration on the official list and that throughout the same period those companies con-

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tinue to fulfil the qualitative selection requirements encompassed by the official list or certificate on which operators rely for their registration. Economic operators registered on the official lists or having a certificate may, for each contract, submit to the contracting authority a certificate of registration issued by the competent authority or the certificate issued by the competent certification body. Those certificates shall state the references which enabled those economic operators to be registered on the official list or to obtain certification and the classification given in that list. Certified registration on official lists by the competent bodies or a certificate issued by the certification body shall constitute a presumption of suitability with regard to requirements for qualitative selection encompassed by the official list or certificate. Information that can be deduced from registration on official lists or certification shall not be questioned without justification. With regard to the payment of social security contributions and taxes, an additional certificate may be required of any registered economic operator whenever a contract is to be awarded. The contracting authorities of other Member States shall apply paragraph 3 and the first subparagraph of this paragraph only in favour of economic operators established in the Member State holding the official list. The requirements of proof for the criteria for qualitative selection encompassed by the official list or certificate shall comply with Article 60 and, where appropriate, Article 62. For any registration of economic operators of other Member States on an official list or for their certification, no further proof or statements shall be required other than those requested of national economic operators. Economic operators may request at any time their registration on an official list or the issuance of a certificate. They shall be informed within a reasonably short period of time of the decision of the authority drawing up the official list or of the competent certification body. Economic operators from other Member States shall not be obliged to undergo such

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DIRECTIVE 2014/24/EU registration or certification in order to participate in a public contract. The contracting authorities shall recognise equivalent certificates from bodies established in other Member States. They shall also accept other equivalent means of proof. 8. Upon request, Member States shall make available to other Member States any information relating to the documents produced as evidence that the economic operators fulfil the requirements to be registered on the official list of approved economic operators or as evidence that economic operators from another Member State possess an equivalent certification.

Subsection 2 Reduction of numbers of candidates, tenders and solutions Article 65 Reduction of the number of otherwise qualified candidates to be invited to participate 1. In restricted procedures, competitive procedures with negotiation, competitive dialogue procedures and innovation partnerships, contracting authorities may limit the number of candidates meeting the selection criteria that they will invite to tender or to conduct a dialogue, provided the minimum number, in accordance with paragraph 2, of qualified candidates is available. 2. The contracting authorities shall indicate, in the contract notice or in the invitation to confirm interest, the objective and nondiscriminatory criteria or rules they intend to apply, the minimum number of candidates they intend to invite and, where appropriate, the maximum number. In the restricted procedure the minimum number of candidates shall be five. In the competitive procedure with negotiation, in the competitive dialogue procedure and in the innovation partnership the minimum number of candidates shall be three. In any event the number of candidates invited shall be sufficient to ensure genuine competition. The contracting authorities shall invite a number of candidates at least equal to the minimum number. However, where the number of candidates meeting the selection criteria and the minimum levels of ability as referred to in Article 58(5) is below the minimum number, the contracting authority may continue the procedure by inviting the candi-

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PART I The Public Sector Directive 2014/24/EU dates with the required capabilities. In the context of the same procedure, the contracting authority shall not include economic operators that did not request to participate, or candidates that do not have the required capabilities.

Article 66 Reduction of the number of tenders and solutions Where contracting authorities exercise the option of reducing the number of tenders to be negotiated as provided for in Article 29(6) or of solutions to be discussed as provided for in Article 30(4), they shall do so by applying the award criteria stated in the procurement documents. In the final stage, the number arrived at shall make for genuine competition in so far as there are enough tenders, solutions or qualified candidates.

Subsection 3 Award of the contract Article 67 Contract award criteria 1. Without prejudice to national laws, regulations or administrative provisions concerning the price of certain supplies or the remuneration of certain services, contracting authorities shall base the award of public contracts on the most economically advantageous tender. 2. The most economically advantageous tender from the point of view of the contracting authority shall be identified on the basis of the price or cost, using a cost-effectiveness approach, such as life-cycle costing in accordance with Article 68, and may include the best price-quality ratio, which shall be assessed on the basis of criteria, including qualitative, environmental and/or social aspects, linked to the subject-matter of the public contract in question. Such criteria may comprise, for instance: (a) quality, including technical merit, aesthetic and functional characteristics, accessibility, design for all users, social, environmental and innovative characteristics and trading and its conditions; (b) organisation, qualification and experience of staff assigned to performing the contract, where the quality of the staff assigned can have a significant impact on the level of performance of the contract; or

PART I The Public Sector Directive 2014/24/EU (c) after-sales service and technical assistance, delivery conditions such as delivery date, delivery process and delivery period or period of completion. The cost element may also take the form of a fixed price or cost on the basis of which economic operators will compete on quality criteria only. Member States may provide that contracting authorities may not use price only or cost only as the sole award criterion or restrict their use to certain categories of contracting authorities or certain types of contracts. 3. Award criteria shall be considered to be linked to the subject-matter of the public contract where they relate to the works, supplies or services to be provided under that contract in any respect and at any stage of their life cycle, including factors involved in: (a) the specific process of production, provision or trading of those works, supplies or services; or (b) a specific process for another stage of their life cycle, even where such factors do not form part of their material substance. 4. Award criteria shall not have the effect of conferring an unrestricted freedom of choice on the contracting authority. They shall ensure the possibility of effective competition and shall be accompanied by specifications that allow the information provided by the tenderers to be effectively verified in order to assess how well the tenders meet the award criteria. In case of doubt, contracting authorities shall verify effectively the accuracy of the information and proof provided by the tenderers. 5. The contracting authority shall specify, in the procurement documents, the relative weighting which it gives to each of the criteria chosen to determine the most economically advantageous tender, except where this is identified on the basis of price alone. Those weightings may be expressed by providing for a range with an appropriate maximum spread. Where weighting is not possible for objective reasons, the contracting authority shall indicate the criteria in decreasing order of importance.

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Article 68 Life-cycle costing 1. Life-cycle costing shall to the extent relevant cover parts or all of the following costs over the life cycle of a product, service or works: (a) costs, borne by the contracting authority or other users, such as: (i) costs relating to acquisition, (ii) costs of use, such as consumption of energy and other resources, (iii) maintenance costs, (iv) end of life costs, such as collection and recycling costs. (b) costs imputed to environmental externalities linked to the product, service or works during its life cycle, provided their monetary value can be determined and verified; such costs may include the cost of emissions of greenhouse gases and of other pollutant emissions and other climate change mitigation costs. 2. Where contracting authorities assess the costs using a life-cycle costing approach, they shall indicate in the procurement documents the data to be provided by the tenderers and the method which the contracting authority will use to determine the life-cycle costs on the basis of those data. The method used for the assessment of costs imputed to environmental externalities shall fulfil all of the following conditions: (a) it is based on objectively verifiable and non-discriminatory criteria. In particular, where it has not been established for repeated or continuous application, it shall not unduly favour or disadvantage certain economic operators; (b) it is accessible to all interested parties; (c) the data required can be provided with reasonable effort by normally diligent economic operators, including economic operators from third countries party to the GPA or other international agreements by which the Union is bound. 3. Whenever a common method for the calculation of life-cycle costs has been made mandatory by a legislative act of the Union, that common method shall be applied for the assessment of life-cycle costs.

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DIRECTIVE 2014/24/EU A list of such legislative acts, and where necessary the delegated acts supplementing them, is set out in Annex XIII. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 concerning the update of that list, when an update of the list is necessary due to the adoption of new legislation making a common method mandatory or the repeal or modification of existing legal acts.

Article 69 Abnormally low tenders 1. Contracting authorities shall require economic operators to explain the price or costs proposed in the tender where tenders appear to be abnormally low in relation to the works, supplies or services. 2. The explanations referred to in paragraph 1 may in particular relate to: (a) the economics of the manufacturing process, of the services provided or of the construction method; (b) the technical solutions chosen or any exceptionally favourable conditions available to the tenderer for the supply of the products or services or for the execution of the work; (c) the originality of the work, supplies or services proposed by the tenderer; (d) compliance with obligations referred to in Article 18(2); (e) compliance with obligations referred to in Article 71; (f) the possibility of the tenderer obtaining State aid. 3. The contracting authority shall assess the information provided by consulting the tenderer. It may only reject the tender where the evidence supplied does not satisfactorily account for the low level of price or costs proposed, taking into account the elements referred to in paragraph 2. Contracting authorities shall reject the tender, where they have established that the tender is abnormally low because it does not comply with applicable obligations referred to in Article 18(2). 4. Where a contracting authority establishes that a tender is abnormally low because the tenderer has obtained State aid, the tender may be rejected on that ground alone only after consultation with the tenderer where the latter is unable to prove, within a sufficient time limit fixed by the

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PART I The Public Sector Directive 2014/24/EU contracting authority, that the aid in question was compatible with the internal market within the meaning of Article 107 TFEU. Where the contracting authority rejects a tender in those circumstances, it shall inform the Commission thereof. 5. Upon request, Member States shall make available to other Member States by means of administrative cooperation any information at its disposal, such as laws, regulations, universally applicable collective agreements or national technical standards, relating to the evidence and documents produced in relation to details listed in paragraph 2.

Chapter IV Contract performance Article 70 Conditions for performance of contracts Contracting authorities may lay down special conditions relating to the performance of a contract, provided that they are linked to the subject-matter of the contract within the meaning of Article 67(3) and indicated in the call for competition or in the procurement documents. Those conditions may include economic, innovation-related, environmental, social or employment-related considerations.

Article 71 Subcontracting 1. Observance of the obligations referred to in Article 18(2) by subcontractors is ensured through appropriate action by the competent national authorities acting within the scope of their responsibility and remit. 2. In the procurement documents, the contracting authority may ask or may be required by a Member State to ask the tenderer to indicate in its tender any share of the contract it may intend to subcontract to third parties and any proposed subcontractors. 3. Member States may provide that at the request of the subcontractor and where the nature of the contract so allows, the contracting authority shall transfer due payments directly to the subcontractor for services, supplies or works provided to the economic operator to whom the public contract has been awarded (the main contractor). Such measures may include appropriate mechanisms permitting the

PART I The Public Sector Directive 2014/24/EU main contractor to object to undue payments. The arrangements concerning that mode of payment shall be set out in the procurement documents. 4. Paragraphs 1 to 3 shall be without prejudice to the question of the main contractor’s liability. 5. In the case of works contracts and in respect of services to be provided at a facility under the direct oversight of the contracting authority, after the award of the contract and at the latest when the performance of the contract commences, the contracting authority shall require the main contractor to indicate to the contracting authority the name, contact details and legal representatives of its subcontractors, involved in such works or services, in so far as known at this point in time. The contracting authority shall require the main contractor to notify the contracting authority of any changes to this information during the course of the contract as well as of the required information for any new subcontractors which it subsequently involves in such works or services. Notwithstanding the first subparagraph, Member States may impose the obligation to deliver the required information directly on the main contractor. Where necessary for the purposes of point (b) of paragraph 6 of this Article, the required information shall be accompanied by the subcontractors’ self-declarations as provided for in Article 59. The implementing measures pursuant to paragraph 8 of this Article may provide that subcontractors which are presented after the award of the contract shall provide the certificates and other supporting documents instead of the self-declaration. The first subparagraph shall not apply to suppliers. Contracting authorities may extend or may be required by Member States to extend the obligations provided for in the first subparagraph to for instance: (a) supply contracts, to services contracts other than those concerning services to be provided at the facilities under the direct oversight of the contracting authority or to suppliers involved in works or services contracts;

DIRECTIVE 2014/24/EU (b) subcontractors of the main contractor’s subcontractors or further down the subcontracting chain. 6. With the aim of avoiding breaches of the obligations referred to in Article 18(2), appropriate measures may be taken, such as: (a) Where the national law of a Member State provides for a mechanism of joint liability between subcontractors and the main contractor, the Member State concerned shall ensure that the relevant rules are applied in compliance with the conditions set out in Article 18(2). (b) Contracting authorities may, in accordance with Articles 59, 60 and 61, verify or may be required by Member States to verify whether there are grounds for exclusion of subcontractors pursuant to Article 57. In such cases, the contracting authority shall require that the economic operator replaces a subcontractor in respect of which the verification has shown that there are compulsory grounds for exclusion. The contracting authority may require or may be required by a Member State to require that the economic operator replaces a subcontractor in respect of which the verification has shown that there are noncompulsory grounds for exclusion. 7. Member States may provide for more stringent liability rules under national law or to go further under national law on direct payments to subcontractors, for instance by providing for direct payments to subcontractors without it being necessary for them to request such direct payment. 8. Member States having chosen to provide for measures pursuant to paragraphs 3, 5 or 6 shall, by law, regulation or administrative provisions and having regard for Union law, specify the implementing conditions for those measures. In so doing, Member States may limit their applicability, for instance in respect of certain types of contracts, certain categories of contacting authorities or economic operators or as of certain amounts.

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Article 72 Modification of contracts during their term 1. Contracts and framework agreements may be modified without a new procurement procedure in accordance with this Directive in any of the following cases: (a) where the modifications, irrespective of their monetary value, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses, which may include price revision clauses, or options. Such clauses shall state the scope and nature of possible modifications or options as well as the conditions under which they may be used. They shall not provide for modifications or options that would alter the overall nature of the contract or the framework agreement; (b) for additional works, services or supplies by the original contractor that have become necessary and that were not included in the initial procurement where a change of contractor: (i) cannot be made for economic or technical reasons such as requirements of interchangeability or interoperability with existing equipment, services or installations procured under the initial procurement; and (ii) would cause significant inconvenience or substantial duplication of costs for the contracting authority. However, any increase in price shall not exceed 50 % of the value of the original contract. Where several successive modifications are made, that limitation shall apply to the value of each modification. Such consecutive modifications shall not be aimed at circumventing this Directive; (c) where all of the following conditions are fulfilled: (i) the need for modification has been brought about by circumstances which a diligent contracting authority could not foresee; (ii) the modification does not alter the overall nature of the contract;

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PART I The Public Sector Directive 2014/24/EU (iii) any increase in price is not higher than 50 % of the value of the original contract or framework agreement. Where several successive modifications are made, that limitation shall apply to the value of each modification. Such consecutive modifications shall not be aimed at circumventing this Directive; (d) where a new contractor replaces the one to which the contracting authority had initially awarded the contract as a consequence of either: (i) an unequivocal review clause or option in conformity with point (a); (ii) universal or partial succession into the position of the initial contractor, following corporate restructuring, including takeover, merger, acquisition or insolvency, of another economic operator that fulfils the criteria for qualitative selection initially established provided that this does not entail other substantial modifications to the contract and is not aimed at circumventing the application of this Directive; or (iii) in the event that the contracting authority itself assumes the main contractor’s obligations towards its subcontractors where this possibility is provided for under national legislation pursuant to Article 71; (e) where the modifications, irrespective of their value, are not substantial within the meaning of paragraph 4. Contracting authorities having modified a contract in the cases set out under points (b) and (c) of this paragraph shall publish a notice to that effect in the Official Journal of the European Union. Such notice shall contain the information set out in Annex V part G and shall be published in accordance with Article 51. 2. Furthermore, and without any need to verify whether the conditions set out under points (a) to (d) of paragraph 4 are met, contracts may equally be modified without a new procurement procedure in accordance with this Directive being nec-

PART I The Public Sector Directive 2014/24/EU essary where the value of the modification is below both of the following values: (i) the thresholds set out in Article 4; and (ii) 10 % of the initial contract value for service and supply contracts and below 15 % of the initial contract value for works contracts. However, the modification may not alter the overall nature of the contract or framework agreement. Where several successive modifications are made, the value shall be assessed on the basis of the net cumulative value of the successive modifications. 3. For the purpose of the calculation of the price mentioned in paragraph 2 and points (b) and (c) of paragraph 1, the updated price shall be the reference value when the contract includes an indexation clause. 4. A modification of a contract or a framework agreement during its term shall be considered to be substantial within the meaning of point (e) of paragraph 1, where it renders the contract or the framework agreement materially different in character from the one initially concluded. In any event, without prejudice to paragraphs 1 and 2, a modification shall be considered to be substantial where one or more of the following conditions is met: (a) the modification introduces conditions which, had they been part of the initial procurement procedure, would have allowed for the admission of other candidates than those initially selected or for the acceptance of a tender other than that originally accepted or would have attracted additional participants in the procurement procedure; (b) the modification changes the economic balance of the contract or the framework agreement in favour of the contractor in a manner which was not provided for in the initial contract or framework agreement; (c) the modification extends the scope of the contract or framework agreement considerably; (d) where a new contractor replaces the one to which the contracting authority had initially awarded the contract

DIRECTIVE 2014/24/EU in other cases than those provided for under point (d) of paragraph 1. 5. A new procurement procedure in accordance with this Directive shall be required for other modifications of the provisions of a public contract or a framework agreement during its term than those provided for under paragraphs 1 and 2.

Article 73 Termination of contracts Member States shall ensure that contracting authorities have the possibility, at least under the following circumstances and under the conditions determined by the applicable national law, to terminate a public contract during its term, where: (a) the contract has been subject to a substantial modification, which would have required a new procurement procedure pursuant to Article 72; (b) the contractor has, at the time of contract award, been in one of the situations referred to in Article 57(1) and should therefore have been excluded from the procurement procedure; (c) the contract should not have been awarded to the contractor in view of a serious infringement of the obligations under the Treaties and this Directive that has been declared by the Court of Justice of the European Union in a procedure pursuant to Article 258 TFEU.

TITLE III PARTICULAR PROCUREMENT REGIMES Chapter I Social and other specific services Article 74 Award of contracts for social and other specific services Public contracts for social and other specific services listed in Annex XIV shall be awarded in accordance with this Chapter, where the value of the contracts is equal to or greater than the threshold indicated in point (d) of Article 4.

Article 75 Publication of notices 1. Contracting authorities intending to award a public contract for the services referred to in Article 74 shall make known their intention by any of the following means:

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DIRECTIVE 2014/24/EU (a) by means of a contract notice, which shall contain the information referred to in Annex V Part H, in accordance with the standard forms referred to in Article 51; or (b) by means of a prior information notice, which shall be published continuously and contain the information set out in Annex V Part I. The prior information notice shall refer specifically to the types of services that will be the subject of the contracts to be awarded. It shall indicate that the contracts will be awarded without further publication and invite interested economic operators to express their interest in writing. The first subparagraph shall, however, not apply where a negotiated procedure without prior publication could have been used in conformity with Article 32 for the award of a public service contract. 2. Contracting authorities that have awarded a public contract for the services referred to in Article 74 shall make known the results of the procurement procedure by means of a contract award notice, which shall contain the information referred to in Annex V Part J, in accordance with the standard forms referred to in Article 51. They may, however, group such notices on a quarterly basis. In that case, they shall send the grouped notices within 30 days of the end of each quarter. 3. The Commission shall establish the standard forms referred to in paragraphs 1 and 2 of this Article by means of implementing acts. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 89(2). 4. The notices referred to in this Article shall be published in accordance with Article 51.

Article 76 Principles of awarding contracts 1. Member States shall put in place national rules for the award of contracts subject to this Chapter in order to ensure contracting authorities comply with the principles of transparency and equal treatment of economic operators. Member States are free to determine the procedural rules applicable as long as such rules allow con-

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PART I The Public Sector Directive 2014/24/EU tracting authorities to take into account the specificities of the services in question. 2. Member States shall ensure that contracting authorities may take into account the need to ensure quality, continuity, accessibility, affordability, availability and comprehensiveness of the services, the specific needs of different categories of users, including disadvantaged and vulnerable groups, the involvement and empowerment of users and innovation. Member States may also provide that the choice of the service provider shall be made on the basis of the tender presenting the best price-quality ratio, taking into account quality and sustainability criteria for social services.

Article 77 Reserved contracts for certain services 1. Member States may provide that contracting authorities may reserve the right for organisations to participate in procedures for the award of public contracts exclusively for those health, social and cultural services referred to in Article 74, which are covered by CPV codes 75121000-0, 75122000-7, 75123000-4, 79622000-0, 79624000-4, 79625000-1, 80110000-8, 80300000-7, 80420000-4, 80430000-7, 80511000-9, 80520000-5, 80590000-6, from 85000000-9 to 85323000-9, 92500000-6, 92600000-7, 98133000-4, 98133110-8. 2. An organisation referred to in paragraph 1 shall fulfil all of the following conditions: (a) its objective is the pursuit of a public service mission linked to the delivery of the services referred to in paragraph 1; (b) profits are reinvested with a view to achieving the organisation’s objective. Where profits are distributed or redistributed, this should be based on participatory considerations; (c) the structures of management or ownership of the organisation performing the contract are based on employee ownership or participatory principles, or require the active participation of employees, users or stakeholders; and (d) the organisation has not been awarded a contract for the services con-

PART I The Public Sector Directive 2014/24/EU cerned by the contracting authority concerned pursuant to this Article within the past three years. 3. The maximum duration of the contract shall not be longer than three years. 4. The call for competition shall make reference to this Article. 5. Notwithstanding Article 92, the Commission shall assess the effects of this Article and report to the European Parliament and the Council by 18 April 2019.

Chapter II Rules governing design contests Article 78 Scope This Chapter shall apply to: (a) design contests organised as part of a procedure leading to the award of a public service contract; (b) design contests with prizes or payments to participants. In the cases referred to in point (a) of the first paragraph of this Article, the threshold referred to in Article 4 is calculated on the basis of the estimated value net of VAT of the public service contract, including any possible prizes or payments to participants. In the cases referred to in point (b) of the first paragraph of this Article, the threshold refers to the total amount of the prizes and payments, including the estimated value net of VAT of the public services contract which might subsequently be concluded under Article 32(4) if the contracting authority has announced its intention to award such contract in the contest notice.

Article 79 Notices 1. Contracting authorities that intend to carry out a design contest shall make known their intention by means of a contest notice. Where they intend to award a subsequent service contract pursuant to Article 32(4), this shall be indicated in the contest notice. 2. Contracting authorities that have held a design contest shall send a notice of the results of the contest in accordance with Article 51 and shall be able to prove the date of dispatch. Where the release of information on the outcome of the contest would impede law enforcement, would be contrary to the public interest or would prejudice the le-

DIRECTIVE 2014/24/EU gitimate commercial interests of a particular enterprise, whether public or private, or might prejudice fair competition between service providers, such information may be withheld from publication. 3. The notices referred to in paragraphs 1 and 2 of this Article shall be published in accordance with Article 51(2) to (6) and Article 52. They shall include the information set out respectively in Annex V parts E and F in the format of the standard forms. The Commission shall establish the standard forms by means of implementing acts. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 89(2).

Article 80 Rules on the organisation of design contests and the selection of participants 1. When organising design contests, contracting authorities shall apply procedures which are adapted to the provisions of Title I and this Chapter. 2. The admission of participants to design contests shall not be limited: (a) by reference to the territory or part of the territory of a Member State; (b) on the grounds that, under the law of the Member State in which the contest is organised, they would be required to be either natural or legal persons. 3. Where design contests are restricted to a limited number of participants, the contracting authorities shall lay down clear and non-discriminatory selection criteria. In any event, the number of candidates invited to participate shall be sufficient to ensure genuine competition.

Article 81 Composition of the jury The jury shall be composed exclusively of natural persons who are independent of participants in the contest. Where a particular professional qualification is required from participants in a contest, at least a third of the members of the jury shall have that qualification or an equivalent qualification.

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Article 82 Decisions of the jury 1. The jury shall be autonomous in its decisions or opinions. 2. The jury shall examine the plans and projects submitted by the candidates anonymously and solely on the basis of the criteria indicated in the contest notice. 3. The jury shall record its ranking of projects in a report, signed by its members, made according to the merits of each project, together with its remarks and any points that may need clarification. 4. Anonymity shall be observed until the jury has reached its opinion or decision. 5. Candidates may be invited, if need be, to answer questions that the jury has recorded in the minutes to clarify any aspect of the projects. 6. Complete minutes shall be drawn up of the dialogue between jury members and candidates.

TITLE IV GOVERNANCE Article 83 Enforcement 1. In order to effectively ensure correct and efficient implementation, Member States shall ensure that at least the tasks set out in this Article are performed by one or more authorities, bodies or structures. They shall indicate to the Commission all authorities, bodies or structures competent for those tasks. 2. Member States shall ensure that the application of public procurement rules is monitored. Where monitoring authorities or structures identify by their own initiative or upon the receipt of information specific violations or systemic problems, they shall be empowered to indicate those problems to national auditing authorities, courts or tribunals or other appropriate authorities or structures, such as the ombudsman, national parliaments or committees thereof. 3. The results of the monitoring activities pursuant to paragraph 2 shall be made available to the public through appropriate means of information. These results shall also be made available to the Commission. For instance, they may be integrated in the monitoring reports referred

PART I The Public Sector Directive 2014/24/EU to in the second subparagraph of this paragraph. By 18 April 2017 and every three years thereafter Member States shall submit to the Commission a monitoring report covering, where applicable, information on the most frequent sources of wrong application or of legal uncertainty, including possible structural or recurring problems in the application of the rules, on the level of SME participation in public procurement and about prevention, detection and adequate reporting of cases of procurement fraud, corruption, conflict of interest and other serious irregularities. The Commission may, not more than every three years, request Member States to provide information on the practical implementation of national strategic procurement policies. For the purposes of this paragraph and paragraph 4 of this Article, ‘SME’ shall be understood as defined in Commission Recommendation 2003/361/EC1. On the basis of the data received under this paragraph, the Commission shall regularly issue a report on the implementation and best practices of national procurement policies in the internal market. 4. Member States shall ensure that: (a) information and guidance on the interpretation and application of the Union public procurement law is available free of charge to assist contracting authorities and economic operators, in particular SMEs, in correctly applying the Union public procurement rules; and (b) support is available to contracting authorities with regard to planning and carrying out procurement procedures. 5. Member States shall, without prejudice to the general procedures and working methods established by the Commission for its communications and contacts with Member States, designate a point of reference for cooperation with the Commission as regards the application of public procurement legislation. 6. Contracting authorities shall, at least for the duration of the contract, keep copies

1 Commission Recommendation of 6 May 2003 concerning the definition of micro, small and mediumsized enterprises, (OJ L 124, 20.5.2003, p. 36).

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PART I The Public Sector Directive 2014/24/EU of all concluded contracts with a value equal to or greater than: (a) 1 000 000 EUR in the case of public supply contracts or public service contracts; (b) 10 000 000 EUR in the case of public works contracts. Contracting authorities shall grant access to those contracts; however, access to specific documents or items of information may be denied to the extent and on the conditions provided for in the applicable Union or national rules on access to documents and data protection.

Article 84 Individual reports on procedures for the award of contracts 1. For every contract or framework agreement covered by this Directive, and every time a dynamic purchasing system is established, contracting authorities shall draw up a written report which shall include at least the following: (a) the name and address of the contracting authority, the subject-matter and value of the contract, framework agreement or dynamic purchasing system; (b) where applicable, the results of the qualitative selection and/or reduction of numbers pursuant to Articles 65 and 66, namely: (i) the names of the selected candidates or tenderers and the reasons for their selection; (ii) the names of the candidates or tenderers rejected and the reasons for their rejection; (c) the reasons for the rejection of tenders found to be abnormally low; (d) the name of the successful tenderer and the reasons why its tender was selected and, where known, the share of the contract or framework agreement which the successful tenderer intends to subcontract to third parties; and, where known at this point in time, the names of the main contractor’s subcontractors, if any; (e) for competitive procedures with negotiations and competitive dialogues, the circumstances as laid down in Article 26 which justify the use of those procedures;

DIRECTIVE 2014/24/EU (f) for negotiated procedures without prior publication, the circumstances referred to in Article 32 which justify the use of this procedure; (g) where applicable, the reasons why the contracting authority has decided not to award a contract or framework agreement or to establish a dynamic purchasing system; (h) where applicable, the reasons why other means of communication than electronic means have been used for the submission of tenders; (i) where applicable, conflicts of interests detected and subsequent measures taken. This report shall not be required in respect of contracts based on framework agreements where these are concluded in accordance with Article 33(3) or point (a) of Article 33(4). To the extent that the contract award notice drawn up pursuant to Article 50 or Article 75(2) contains the information required in this paragraph, contracting authorities may refer to that notice. 2. Contracting authorities shall document the progress of all procurement procedures, whether or not those are conducted by electronic means. To that end, they shall ensure that they keep sufficient documentation to justify decisions taken in all stages of the procurement procedure, such as documentation on communications with economic operators and internal deliberations, preparation of the procurement documents, dialogue or negotiation if any, selection and award of the contract. The documentation shall be kept for a period of at least three years from the date of award of the contract. 3. The report, or its main elements, shall be communicated to the Commission or the competent authorities, bodies or structures referred to in Article 83 where they so request.

Article 85 National reporting and statistical information 1. The Commission shall review the quality and completeness of data that can be extracted from the notices, referred to in Articles 48, 49, 50, 75 and 79, which are published in accordance with Annex VIII.

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DIRECTIVE 2014/24/EU Where the quality and completeness of the data referred to in the first subparagraph of this paragraph is not compliant with the obligations stipulated in Article 48(1), Article 49, Article 50(1), Article 75(2) and Article 79(3), the Commission shall request complementary information from the Member State concerned. Within a reasonable time, the Member State concerned shall supply the missing statistical information requested by the Commission. 2. By 18 April 2017 and every three years thereafter, Member States shall forward to the Commission a statistical report for procurement which would have been covered by this Directive if its value had exceeded the relevant threshold laid down in Article 4, indicating an estimation of the aggregated total value of such procurement during the period concerned. That estimation may in particular be based on data available under national publication requirements or on sample-based estimates. That report may be included in the report referred to in Article 83(3). 3. Member States shall make available to the Commission information on their institutional organisation related to the implementation, monitoring and enforcement of this Directive, as well as on national initiatives taken to provide guidance on or assist in implementation of Union rules on public procurement, or to respond to challenges confronting the implementation of those rules. That information may be included in the report referred to in Article 83(3).

Article 86 Administrative cooperation 1. Member States shall provide mutual assistance to each other, and shall put in place measures for effective cooperation with one another, in order to ensure exchange of information on issues referred to in Articles 42, 43, 44, 57, 59, 60, 62, 64 and 69.

PART I The Public Sector Directive 2014/24/EU They shall ensure the confidentiality of the information which they exchange. 2. The competent authorities of all Member States concerned shall exchange information in compliance with personal data protection rules provided for in Directive 95/46/EC of the European Parliament and of the Council1 and Directive 2002/58/EC of the European Parliament and of the Council2. 3. To test the suitability of using the Internal Market Information System (IMI) established by Regulation (EU) No 1024/2012 for the purpose of exchanging information covered by this Directive, a pilot project shall be launched by 18 April 2015.

TITLE V DELEGATED POWERS, IMPLEMENTING POWERS AND FINAL PROVISIONS Article 87 Exercise of the delegation 1. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article. 2. The power to adopt delegated acts referred to in Articles 6, 22, 23, 56 and 68 shall be conferred on the Commission for an indeterminate period of time from 17 April 2014. 3. The delegation of power referred to in Articles 6, 22, 23, 56 and 68 may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force. 4. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council. 5. A delegated act adopted pursuant to Articles 6, 22, 23, 56 and 68 shall enter into force only where no objection has been expressed either by the European Parliament

1 Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (OJ L 281, 23.11.1995, p. 31). 2 Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications) (OJ L 201, 31.7.2002, p. 37).

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PART I The Public Sector Directive 2014/24/EU or by the Council within a period of two months of notification of the act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or of the Council.

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Article 88 Urgency procedure 1. Delegated acts adopted under this Article shall enter into force without delay and shall apply as long as no objection is expressed in accordance with paragraph 2. The notification of a delegated act to the European Parliament and to the Council shall state the reasons for the use of the urgency procedure. 2. Either the European Parliament or the Council may object to a delegated act in accordance with the procedure referred to in Article 87(5). In such a case, the Commission shall repeal the act without delay following the notification of the decision to object by the European Parliament or by the Council.

Article 89 Committee procedure 1. The Commission shall be assisted by the Advisory Committee on Public Procurement established by Council Decision 71/306/EEC1. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011. 2. Where reference is made to this paragraph, Article 4 of Regulation (EU) No 182/2011 shall apply. 3. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

Article 90 Transposition and transitional provisions 1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 18 April 2016. They shall forth-

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with communicate to the Commission the text of those measures. Notwithstanding paragraph 1 of this Article, Member States may postpone the application of Article 22(1) until 18 October 2018, except where use of electronic means is mandatory pursuant to Articles 34, 35 or 36, Article 37(3), Article 51(2) or Article 53. Notwithstanding paragraph 1 of this Article, Member States may postpone the application of Article 22(1) for central purchasing bodies until 18 April 2017. Where a Member State chooses to postpone the application of Article 22(1), that Member State shall provide that contracting authorities may choose between the following means of communication for all communication and information exchange: (a) electronic means in accordance with Article 22; (b) post or other suitable carrier; (c) fax; (d) a combination of those means. Notwithstanding paragraph 1 of this Article, Member States may postpone the application of the second subparagraph of Article 59(2) until 18 April 2018. Notwithstanding paragraph 1 of this Article, Member States may postpone the application of the second subparagraph of Article 59(5) until 18 October 2018. Notwithstanding paragraph 1 of this Article, Member States may postpone the application of Article 61(2) until 18 October 2018. When Member States adopt the measures referred to in paragraphs 1 to 5, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 91 Repeals Directive 2004/18/EC is repealed with effect from 18 April 2016.

1 Council Decision 71/306/EEC of 26 July 1971 setting up an Advisory Committee for Public Works Contracts (OJ L 185, 16.8.1971, p. 15).

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DIRECTIVE 2014/24/EU References to the repealed Directive shall be construed as references to this Directive and shall be read in accordance with the correlation table in Annex XV.

Article 92 Review The Commission shall review the economic effects on the internal market, in particular in terms of factors such as the cross-border award of contracts and transaction costs, resulting from the application of the thresholds set in Article 4 and report thereon to the European Parliament and the Council by 18 April 2019. The Commission shall, where possible and appropriate, consider suggesting an increase of the threshold amounts applicable under

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PART I The Public Sector Directive 2014/24/EU the GPA during the next round of negotiations. In the event of any change to the threshold amounts applicable under the GPA, the report shall, where appropriate, be followed by a proposal for a legal act amending the thresholds set out in this Directive.

Article 93 Entry into force This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 94 Addressees This Directive is addressed to the Member States.

TITLE I SCOPE, DEFINITIONS AND GENERAL PRINCIPLES Chapter I Scope and definitions Section 1 Subject-matter and definitions Article 1 Subject-matter and scope 1. This Directive establishes rules on the procedures for procurement by contracting authorities with respect to public contracts as well as design contests, whose value is estimated to be not less than the thresholds laid down in Article 4. 2. Procurement within the meaning of this Directive is the acquisition by means of a public contract of works, supplies or services by one or more contracting authorities from economic operators chosen by those contracting authorities, whether or not the works, supplies or services are intended for a public purpose. 3. The application of this Directive is subject to Article 346 TFEU. 4. This Directive does not affect the freedom of Member States to define, in conformity with Union law, what they consider to be services of general economic interest, how those services should be organised and financed, in compliance with the State aid rules, and what specific obligations they should be subject to. Equally, this Directive does not affect the decision of public authorities whether, how and to what extent they wish to perform public functions themselves pursuant to Article 14 TFEU and Protocol No 26. 5. This Directive does not affect the way in which the Member States organise their social security systems. 6. Agreements, decisions or other legal instruments that organise the transfer of powers and responsibilities for the performance of public tasks between contracting authorities or groupings of contracting authorities and do not provide for remuneration to be given for contractual performance, are considered to be a matter of internal organisation of the Member State concerned and, as such, are not affected in any way by this Directive. The provisions in Article 1 are basically new compared to previous directives. Some 1 of the elements contained in Article 1 are new, at least in the sense that they have not been explicitly mentioned in earlier directives, some of the provisions are consolidating case law and well-known legal positions. Most of the provisions in Article 1 are in the nature of being political statements showing the intentions of the Directive without setting up many rights or obligations for the parties in the procurement procedures. This applies for Article 1, para. 1, 2 and 6. In Article 1, para. 3, 4 and 5 the provisions determine how to deal with specific other concepts and issues, namely defense issues, services of a general economic interest and the social security systems. All the provisions are of a general (political) nature and it could be argued that the practical importance of the provisions to the everyday application of the procurement rules is very limited.

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1.1. Rules of procedure This first paragraph of Article 1 merely states that the Directive contains the procedural rules to be applied in situations when a contracting authority is to enter into a public (purchasing) contract with an estimated contract value equivalent to or higher than the thresholds laid down in Article 4 of the Public Sector Directive. The provision does not entail any obligation for the contracting authority or lay down any rights for the economic operators. It only mentions the economic thresholds for limiting the scope of the directive whereas, in practice, this is not the only conditions for applying the procedures of the directive. Traditionally, the contracting authority will also assess whether the purchase will be made from an entity affiliated to the contracting authority (the so-called in house providing, see Article 12), just as the contracting authority will consider whether any of the exemptions in the Public Sector Directive will apply (e.g. there are a number of services the purchase of which are not subject to the procurement procedures, e.g. Article 10). 3 There is a specific reference to the economic thresholds in Article 4. For more, see the commentary to that provision. In regards to applying the Public Sector Directive the thresholds represent the (economic) level at which there is expected to be European interest in the contracts covered by the directive. As case law has repeatedly established, however, the thresholds do not reflect the only yardstick for the determination of European interest in public contracts. In a number of occasions the CJEU has stated that if a contract is of a “certain cross-border interest” the TFEU and the general EU principles will apply even though the public procurement directives do not apply. As described in the introductory chapter this leads to the application of more lenient procedures in such cases even though there are still some basic obligations to fulfill, e.g. an obligation to ensure transparency (often through publication of an announcement) and equal treatment. 4 It is stated in Article 1, para. 1 that the Directive establishes rules for the procurement by means of public contracts as well as by means of design contests. The latter might be a truth subject to some modification: a design contest (in the sense that is described in the directive – see Article 2, para. 1(21)) is basically a type of competition and only in some cases a procedure that leads to a procurement. This inaccuracy does not change the fact that if the thresholds are met and a design contest is planned such a procedure will have to be carried out based on the procedural requirements in Articles 78-82 of the Public Sector Directive. 2

1.2. Acquisition by contracting authorities Article 1, para. 2 contains a description of the concept of procurement. This provision does not contain a definition of the concept as such with legal implications or for the specific use of the definition in any of the rules in the Public Sector Directive. The description is merely an overall presentation of a procurement and does not hold any surprises or new elements. The only element not representing the mere basics of a description of a public procurement through the directive is the last statement that the purchase does not need to be intended for public purpose. 6 Since it does not matter whether the purchase is intended for a public purpose it is of limited importance to define what is meant by public purpose. Public purpose can be distinguished from private purpose in this context and the former concept could cover all services, works or goods that are intended to be used in the activities traditionally characterizing the public sector covering different services or authority measures directed toward the citizens and the organizations and enterprises within the geographical scope of any specific public authority. However, since the wording in Article 1, para. 2, 5

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explicitly mentions that it does not have to be for public purpose this definition does not seem to have any real merit. This part of Article 1, para. 2 underlines that the purpose of the goods, services or works purchased is not of importance to the application of the Public Sector Directive. The application of the public procurement directives is exclusively based on technical-formal criteria, and not on the purpose the specific purchase or the contracting entity is meant to serve. These criteria are the level of the estimated contract value if the entity is a contracting authority and if the subject-matter of the contract requires a full procurement procedure. It is stated in Article 1, para. 2 that the parties to the public procurement contract are 7 contracting authorities and the economic operators “chosen” by the former. Even though this part seems obvious for anyone with knowledge of the way a tendering procedure works it still marks an important characteristic of public tendering. In recital 4 of the preamble to the Public Sector Directive this element of Article 1, para. 2 is described in further detail: “The increasingly diverse forms of public action have made it necessary to define more clearly the notion of procurement itself; that clarification should not however broaden the scope of this Directive compared to that of Directive 2004/18/EC. The Union rules on public procurement are not intended to cover all forms of disbursement of public funds, but only those aimed at the acquisition of works, supplies or services for consideration by means of a public contract. It should be clarified that such acquisitions of works, supplies or services should be subject to this Directive whether they are implemented through purchase, leasing or other contractual forms. The notion of acquisition should be understood broadly in the sense of obtaining the benefits of the works, supplies or services in question, not necessarily requiring a transfer of ownership to the contracting authorities. Furthermore, the mere financing, in particular through grants, of an activity, which is frequently linked to the obligation to reimburse the amounts received where they are not used for the purposes intended, does not usually fall within the scope of the public procurement rules. Similarly, situations where all operators fulfilling certain conditions are entitled to perform a given task, without any selectivity, such as customer choice and service voucher systems, should not be understood as being procurement but simple authorization schemes (for instance licenses for medicines or medical services).”

The fact the use of the Public Sector Directive requires that there will be a selection of one or several of the economic operators for there to be a procurement is also emphasized in the CJEU’s case law in C-410/14, Falk Pharma. For more on this, see the definition on public contracts in Article 2, para. 1(5).

1.3. TFEU Article 346 on defense and security1 According to Article 1, para. 3 the application of the Public Sector Directive is subject 8 to Article 346 of the TFEU. The reference to Article 346 marks a special area of European procurement law since defence and security contracts are particularly sensitive and require certain specific measures in order to ensure national security interests. Article 346 TFEU has the following wording: “1. The provisions of the Treaties shall not preclude the application of the following rules: (a) no Member State shall be obliged to supply information the disclosure of which it considers contrary to the essential interests of its security; (b) any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the pro1

3.

For more on Article 346 TFEU, see e.g. Martin Trybus, Buying Defence and Security in Europe, chap.

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duction of or trade in arms, munitions and war material; such measures shall not adversely affect the conditions of competition in the internal market regarding products which are not intended for specifically military purposes. 2. The Council may, acting unanimously on a proposal from the Commission, make changes to the list, which it drew up on 15 April 1958, of the products to which the provisions of paragraph 1(b) apply.” For more on the application of TFEU Article 346, see Part IV of this book, where the provision and relevant case law is presented. 9 Article 1, para. 3 contains an obvious statement since all rules in the directive due to the principle of legitimacy are subject to the rules of the TFEU. Article 346 covers rules on defense and security issues within the Member States and basically excludes any activities related to such goods (including procurement) from application of the other rules of the TFEU. Accordingly, the treaty provisions on free movement are not applicable to cases where it is necessary in order to ensure certain defense or security interests. 10 Even though the provision contains a specific reference to Article 346 this does not exclude the application of other TFEU provisions in combination with the Public Sector Directive (or the other public procurement directives). Although other exceptions such as the one found in Article 347,2 Article 106(2) and the ones related to the free movement rules (e.g. Article 36 (free movement of goods), Article 45, para. 4 (free movement of workers), Article 51 and 52 (the freedom of establishment and the free movement of services) and more). These exceptions will still apply with regard to public procurement even though they are not mentioned in the Public Sector Directive.

1.4. Services of a general economic interest3 11

Article 1, para. 4 states that “This Directive does not affect the freedom of Member States to define, in conformity with Union law, what they consider to be services of general economic interest, how those services should be organised and financed, in compliance with the State aid rules, and what specific obligations they should be subject to. Equally, this Directive does not affect the decision of public authorities whether, how and to what extent they wish to perform public functions themselves pursuant to Article 14 TFEU and Protocol No 26.” In the previous directives there has not been any such explicit reference when it comes to services of general economic interest. The need to make a reference to services of general economic interest (hereinafter: SGEI) is a natural development based on case law from the CJEU and the increased political focus on such services within the last decade after the adoption of the previous directives. The purpose of Article 1, para. 4 is basically to emphasize that the Public Sector Directive (as well as the other procurement directives)4 are neutral with regard to the ap2 Occasionally, Article 347 TFEU has been seen in the same context as Article 346 TFEU. Article 347 has the following wording: “Member States shall consult each other with a view to taking together the steps needed to prevent the functioning of the internal market being affected by measures which a Member State may be called upon to take in the event of serious internal disturbances affecting the maintenance of law and order, in the event of war, serious international tension constituting a threat of war, or in order to carry out obligations it has accepted for the purpose of maintaining peace and international security.” 3 See Erika Szyszcak and Johan Willem van de Gronden (eds.), Financing Services of general Economic Interest. Reform and Modernization; Caroline Wehlander, Who is afraid of SGEI?; Neergaard, Szyszczak, van de Gronden and Krajewski (eds.), Social Services of General Interest in the EU; Krajewski, Neergaard and Van de Gronden (eds.), The Changing Legal Framework for Services of general Interest in Europe; Neergaard, Nielsen and Roseberry (eds.), Integrating Welfare Functions into EU Law.

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plication of the specific rules on SGEIs, including Article 106(2). The implication of this is that the Member States are free to organize the SGEIs as they may see fit as long as this is not inconsistent with the conditions for application of the Public Sector Directive. If, on the other hand, the conditions for applying the procedures established in the Public Sector Directive are met the projected contract containing a SGEI must be entered into only on the basis of a tendering procedure in accordance with the directive. The background to the provision is presented in the preamble to the Public Sector 12 Directive, recitals 6 and 7, containing the following: “It is also appropriate to recall that this Directive should not affect the social security legislation of the Member States. Nor should it deal with the liberalisation of services of general economic interest, reserved to public or private entities, or with the privatisation of public entities providing services. It should equally be recalled that Member States are free to organize the provision of compulsory social services or of other services such as postal services either as services of general economic interest or as non-economic services of general interest or as a mixture thereof. It is appropriate to clarify that non-economic services of general interest should not fall within the scope of this Directive. It should finally be recalled that this Directive is without prejudice to the freedom of national, regional and local authorities to define, in conformity with Union law, services of general economic interest, their scope and the characteristics of the service to be provided, including any conditions regarding the quality of the service, in order to pursue their public policy objectives. This Directive should also be without prejudice to the power of national, regional and local authorities to provide, commission and finance services of general economic interest in accordance with Article 14 TFEU and Protocol No 26 on Services of General Interest annexed to the TFEU and to the Treaty on European Union (TEU). In addition, this Directive does not deal with the funding of services of general economic interest or with systems of aid granted by Member States, in particular in the social field, in accordance with Union rules on competition.” (Our italics)

It is submitted in the provision that the directive does not affect the application of the 13 organization and financing of services of general economic interest on the condition. Basically, the Public Sector Directive is neutral in relation to the organization of the SGEI, but if and when such organization will require the award of a purchasing contract as specified in this provision the Public Sector Directive will apply.5 Despite the legal and (especially) political importance of services of general economic 14 interest the concept has not been defined in any detailed manner. However, case law of the EUCJ and the significant political packages from the Commission do contain contributions as how to interpret the concept.6 There is a reference to Article 14 TFEU as well as Protocol No 26. Article 14 states that: “Without prejudice to Article 4 of the Treaty on European Union or to Articles 93, 106 and 107 of this Treaty, and given the place occupied by services of general economic interest in the shared values of the Union as well as their role in promoting social and territorial cohesion, the Union and the Member States, each within their respective powers and within the scope of application of the Treaties, shall take care that such services operate on the basis of principles and conditions, particularly economic and financial conditions, which enable them to fulfill their missions. The European

See also Article 4 in the Concessions Directive. See also Roberto Caranta, ‘General report’, in: Neergaard, Jacqueson & Ølykke (eds.), Public Procurement Law: Limitations, Opportunities and Paradoxes, p. 143; Fiedziuk, Putting Services of General Economic Interest up for Tender, CMLR, 2013, p. 88. 6 See the so-called Almunia-package from 2012 consisting of the following documents: Commission Regulation 360/2012 on the application of Articles 107 and 108 TFEU to de minimis aid granted to undertakings granted SGEI, Commission Decision 2012/21 on the application of Article 106(2) TFEU to State Aid in the form of public service compensation, Commission’s Communication on the application of the EU State aid rules to compensation granted for the provision of SGEI and Commission’s Communication on EU Framework for State aid in the form of public services compensation (OJ 2012/C 8/03). 4

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Parliament and the Council, acting by means of regulations in accordance with the ordinary legislative procedure, shall establish these principles and set these conditions without prejudice to the competence of Member States, in compliance with the Treaties, to provide, to commission and to fund such services.”

Protocol 26 contains rules on how to understand services of general economic interest. Furthermore, in Article 2 of the protocol there is a reference to non-economic services of general interest. According to the protocol such services fall outside the scope of the TFEU which also means that it will be outside the scope of the procurement directive. The legal effect of such statements in the protocols could be contested. It is pointed out that the state aid provisions of Article 107 will have to be respected in regard to the financing of SGEI. This issue is not dealt with in the procurement rules, even though there is a clear connection between the State aid provisions on the one hand and the procurement rules on the other hand. Therefore, even though the rules on State aid in regards to SGEI does not at first glance involve the procurement rules the intersection between State aid rules and the public procurement directives is complex and of great practical importance. Therefore, the financing element of SGEI may have a large impact on the application of procurement rules even though the latter rules in principle are neutral to the aid-element. For more on the State aid issue, see the Commission’s Communication on the concept of state aid (OJ 2016/C 262/01).7

1.5. Social security systems 15

The provision in Article 1, para. 5 states that the Directive does not affect the way in which the Member States organise their social security systems. The specifics of the provision is supplemented in the preamble to the Public Sector Directive recital 6: “It is also appropriate to recall that this Directive should not affect the social security legislation of the Member States. Nor should it deal with the liberalisation of services of general economic interest, reserved to public or private entities, or with the privatisation of public entities providing services. It should equally be recalled that Member States are free to organise the provision of compulsory social services or of other services such as postal services either as services of general economic interest or as non-economic services of general interest or as a mixture thereof. It is appropriate to clarify that non-economic services of general interest should not fall within the scope of this Directive.”

16

When Article 1, para. 5 states that Public Sector Directive does not affect the way social security systems are organized it is not quite clear what this entails. It could be read so as to imply that the directive does not explicitly regulate such social security systems, meaning that whenever such systems by the normal application of the procurement are covered by the procurement rules this means that the public authorities should apply the procedures available in the directive. Another way of interpreting the wording of para. 5 is to read it as though such national social security systems will simply not be within the scope of the procurement rules regardless of whether the directive seems to be (otherwise) applicable or not. The latter interpretation, it is submitted, is going too far and therefore it must be concluded that the application of the procurement rules is neutral to the organization of social security systems. This also corresponds well to the relation between the issue of social security systems and the issue of services of general economic interest (see recital 6 of the preamble to the Public Sector Directive). As was the case in relation to SGEIs it is also the case in relation to social security systems: the organization is not something that the Public Sector Di7 See also the case C-280/00, Altmark, which establishes a specific approach to the interplay between state aid rules and public procurement rules.

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rective (or the other public procurement directives for that matter) is concerned about or regulating. If, however, the relevant public authorities are about to award contracts within the scope of the Public Sector Directive then the rules of the directive will apply.

1.6. Internal organization Article 1, para. 6 states that the Public Sector Directive does not affect agreements, 17 decisions or other legal instruments that organise the transfer of powers and responsibilities for the performance of public tasks between contracting authorities or groupings of contracting authorities and do not provide for remuneration to be given for contractual performance. Such organization is considered to be a matter of internal organization of the Member State concerned and is, as such, not covered by the directive. It has been argued that this provision merely reflects the issue that has already been encountered in other contexts: the public entity has a large autonomy in regard to organizing the internal structure of the public sector. It must be underlined that the condition for this autonomy is that there is not a contract at stake – a true purchase with all the requisite characteristics. It is stated in Article 1, para. 6 that the provision covers “agreements, decisions or other legal instruments”. In this context the term agreement shall not be seen synonymous to a contract in the meaning used in Article 2, para. 1(5) on public contracts. Instead, the term agreement shall be seen in a broader connection in the same line as decisions or similar legal instruments. In other words there is not any kind of private contract but rather a public agreement with the characteristics of (other) public instruments. There is a provision bordering to Article 1, para. 6 in Article 12, para. 4 concerning 18 horizontal agreements (in-house). The difference is that agreements covered by Article 12, para. 4, are basically agreements according to the concept found in Article 2, para. 1(5) but subject to specific conditions and therefore exempted from the general procedural obligations, whereas agreements (and similar instruments) covered by Article 1, para. 6 are not purchasing agreements in the traditional sense. It is stated in Article 1, para. 6 that the arrangement is merely an instrument for transferring powers and responsibilities for the performance of a public task between contracting authorities. The accept of public-public cooperation of which Article 1, para. 6 is an expression is also shown in the rules on centralized procurement, e.g. through centralized purchasing bodies. When considering whether there is remuneration the distinguishing element may be 19 whether there is payment in a traditional sense (covering costs and potentially profit) or whether remuneration should rather serve to cover reimbursement. It has been submitted that both situations could be covered since the promotion of public-public cooperation found in Article 1, para. 6 would point towards including also reimbursement even though it could be argued that this would not be considered remuneration, but merely compensation. A narrow interpretation of the economic compensation would limit the scope of this provision excessively. 8

8 Roberto Caranta, General report, in Neergaard, Jacqueson and Ølykke (eds.), Public Procurement law: Limitations, Opportunities and Paradoxes, p. 111-112.

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Article 2 Definitions 1. For the purposes of this Directive, the following definitions apply: (1) ‘contracting authorities’ means the State, regional or local authorities, bodies governed by public law or associations formed by one or more such authorities or one or more such bodies governed by public law; (2) ‘central government authorities’ means the contracting authorities listed in Annex I and, in so far as corrections or amendments have been made at national level, their successor entities; (3) ‘sub-central contracting authorities’ means all contracting authorities which are not central government authorities; (4) ‘bodies governed by public law’ means bodies that have all of the following characteristics: (a) they are established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; (b) they have legal personality; and (c) they are financed, for the most part, by the State, regional or local authorities, or by other bodies governed by public law; or are subject to management supervision by those authorities or bodies; or have an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law; (5) ‘public contracts’ means contracts for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities and having as their object the execution of works, the supply of products or the provision of services; (6) ‘public works contracts’ means public contracts having as their object one of the following: (a) the execution, or both the design and execution, of works related to one of the activities within the meaning of Annex II; (b) the execution, or both the design and execution, of a work; (c) the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority exercising a decisive influence on the type or design of the work; (7) ‘a work’ means the outcome of building or civil engineering works taken as a whole which is sufficient in itself to fulfil an economic or technical function; (8) ‘public supply contracts’ means public contracts having as their object the purchase, lease, rental or hire-purchase, with or without an option to buy, of products. A public supply contract may include, as an incidental matter, siting and installation operations; (9) ‘public service contracts’ means public contracts having as their object the provision of services other than those referred to in point 6; (10) ‘economic operator’ means any natural or legal person or public entity or group of such persons and/or entities, including any temporary association of undertakings, which offers the execution of works and/or a work, the supply of products or the provision of services on the market; (11) ‘tenderer’ means an economic operator that has submitted a tender; (12) ‘candidate’ means an economic operator that has sought an invitation or has been invited to take part in a restricted procedure, in a competitive proce134

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(13)

(14)

(15)

(16) (17) (18) (19)

(20)

(21)

(22)

Art. 2

dure with negotiation, in a negotiated procedure without prior publication, in a competitive dialogue or in an innovation partnership; ‘procurement document’ means any document produced or referred to by the contracting authority to describe or determine elements of the procurement or the procedure, including the contract notice, the prior information notice where it is used as a means of calling for competition, the technical specifications, the descriptive document, proposed conditions of contract, formats for the presentation of documents by candidates and tenderers, information on generally applicable obligations and any additional documents; ‘centralised purchasing activities’ means activities conducted on a permanent basis, in one of the following forms: (a) the acquisition of supplies and/or services intended for contracting authorities, (b) the award of public contracts or the conclusion of framework agreements for works, supplies or services intended for contracting authorities; ‘ancillary purchasing activities’ means activities consisting in the provision of support to purchasing activities, in particular in the following forms: (a) technical infrastructure enabling contracting authorities to award public contracts or to conclude framework agreements for works, supplies or services; (b) advice on the conduct or design of public procurement procedures; (c) preparation and management of procurement procedures on behalf and for the account of the contracting authority concerned; ‘central purchasing body’ means a contracting authority providing centralised purchasing activities and, possibly, ancillary purchasing activities; ‘procurement service provider’ means a public or private body which offers ancillary purchasing activities on the market; ‘written’ or ‘in writing’ means any expression consisting of words or figures which can be read, reproduced and subsequently communicated, including information transmitted and stored by electronic means; ‘electronic means’ means electronic equipment for the processing (including digital compression) and storage of data which is transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means; ‘life cycle’ means all consecutive and/or interlinked stages, including research and development to be carried out, production, trading and its conditions, transport, use and maintenance, throughout the existence of the product or the works or the provision of the service, from raw material acquisition or generation of resources to disposal, clearance and end of service or utilisation; ‘design contests’ means those procedures which enable the contracting authority to acquire, mainly in the fields of town and country planning, architecture and engineering or data processing, a plan or design selected by a jury after being put out to competition with or without the award of prizes; ‘innovation’ means the implementation of a new or significantly improved product, service or process, including but not limited to production, building or construction processes, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations inter alia with the purpose of helping to solve societal challenges or to

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support the Europe 2020 strategy for smart, sustainable and inclusive growth; (23) ‘label’ means any document, certificate or attestation confirming that the works, products, services, processes or procedures in question meet certain requirements; (24) ‘label requirements’ means the requirements to be met by the works, products, services, processes or procedures in question in order to obtain the label concerned. 2. For the purpose of this Article ‘regional authorities’ includes authorities listed non-exhaustively in NUTS 1 and 2, as referred to in Regulation (EC) No 1059/2003 of the European Parliament and of the Council, while ‘local authorities’ includes all authorities of the administrative units falling under NUTS 3 and smaller administrative units, as referred to in Regulation (EC) No 1059/2003. 2.1. The definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.1. Contracting authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.2. Central government authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.3. Non-central government authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.4. Definition of bodies governed by public law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.4.1. Meeting needs in the general interest, not having an industrial or commercial character. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.4.1.1. General interest …. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.4.1.2. … not having an industrial or commercial character . . . . . . . . . . 2.1.4.2. Status as a legal person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.4.3. A close connection with the public sector . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.4.3.1. Financing criterion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.4.3.2. Appointment criterion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.4.3.3. Control criterion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.4.4. Associations of contracting authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.5. Public contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.5.1. The parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.5.2. In writing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.5.3. Pecuniary interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.5.3.1. Bilateral performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.5.3.2. On the basis of agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.5.3.3. Benchmark offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.5.4. Contracts for executing works, supplying goods or performing services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.5.5. No limitation of the number of potential suppliers. . . . . . . . . . . . . . . . . . 2.1.6. Public works contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.6.1. Based on Annex II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.6.2. Based on the definition of a work. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.6.3. Works defined by the contracting authority. . . . . . . . . . . . . . . . . . . . . . . . . 2.1.7. Works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.8. Public supply contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.9. Service contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.9.1. Public service contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.10. The concept of ‘economic operator’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.11. Tenderer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.12. Candidate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.13. Procurement document. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.14. Centralised purchasing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.15. Ancillary purchasing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.16. Central purchasing body. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.17. Procurement service provider. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.18. Written or in writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.19. Electronic means . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.20. Life cycle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.21. Design contests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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TITLE I SCOPE, DEFINITIONS AND GENERAL PRINCIPLES 2.1.22. Innovation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.23. Labels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.24. Label requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2. Regional and local authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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2.1. The definitions Article 2, para. 1 of Directive 2014/24/EU contains the definitions in the following 1 subparagraphs 1 to 24, which concern basic terms that apply for the purposes of the Directive. The definitions cover the various kinds of contracts (paragraphs 5-9), the operators involved, including contracting authorities and central purchasing bodies (paragraphs 1-4, 10-12 and 16-17, elements of communication and means of communication (paragraphs 18-19) and provisions on different new elements, such as innovation and life cycle (paragraphs 20 and 22-24). In relation to the previous provisions and definitions, an adjustment has been made 2 to the terms included in the definitions provision. For example, legislators no longer find that there is a need to define the individual procurement procedures, which is probably due to the fact that the provisions regulating the procurement procedures address these at a relatively high level of detail, rendering further definition unnecessary. Conversely, several new terms have been introduced in light of new trends within procurement law such as “innovation” and “life cycle”.1 The other directives contain similar provisions on definitions. The key recurring 3 terms in the various directives are also repeated in the definition provisions. These terms include “contracting authority” and “public contract”. The definition provisions are contained in Article 5 of the Concessions Directive 2014/23, Article 2 of the Utilities Directive 2014/25, and Article 1 of the Defence and Security Directive 2009/81. Article 2, para 1(1)-(4) 1. For the purposes of this Directive, the following definitions apply: (1) ‘contracting authorities’ means the State, regional or local authorities, bodies governed by public law or associations formed by one or more such authorities or one or more such bodies governed by public law; (2) ‘central government authorities’ means the contracting authorities listed in Annex I and, in so far as corrections or amendments have been made at national level, their successor entities; (3) ‘sub-central contracting authorities’ means all contracting authorities which are not central government authorities; (4) ‘bodies governed by public law’ means bodies that have all of the following characteristics: (a) they are established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; (b) they have legal personality; and (c) they are financed, for the most part, by the State, regional or local authorities, or by other bodies governed by public law; or are subject to management supervision by those authorities or bodies; or have an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law;

2.1.1. Contracting authority2 The definition ‘contracting authority’ establishes which legal persons are bound by 4 the procurement directives, and thus essentially determines the scope of the directives. 1 The term “life cycle” is new in relation to previous versions of the Utilities Directive and the Public Sector Directive, but it was already contained in the Defence and Security Directive, Article 1, no. 26. 2 See Sue Arrowsmith, The Law of Public and Utilities Procurement, Chap. 5, p. 339 et seq.; Sune Troels Poulsen et al., EU Public Procurement Law, p. 81 et seq.; Christopher Bovis, The Law of EU Public Procurement, Chap. 7, p. 309 et seq.; and Martin Trybus, Roberto Caranta and Gunilla Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, p. 16 et seq.

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The scope of those to whom the procurement directives apply has been the subject of a long list of judgments from the CJEU.3 Regardless of minor differences in their wording, the definition of ‘contracting authority’ should be understood in the same way as in the previous procurement directives.4 What is most important about the definition of a contracting authority is that it should be binding on entities which, because of their nature, their financing and their management cannot generally be assumed to act purely on the basis of financial interests when making their purchases. State, regional and local authorities clearly fall within this category since, by their nature, they can have regard for other than financial interests, and they have the possibility of financing such other interests through taxation. The risk that, in the absence of the competitive pressure to which private undertakings are subject, public authorities will make purchases on grounds other than financial considerations also applies to legal persons other than the classic public authorities when such legal persons have a close connection with a public authority. Since the public sector carries on activities in many organisational forms which differ from the traditional state, regional and local authorities, the definition of contracting authorities must cover all entities where there is the risk referred to, and thus a risk to the effective operation of the internal market. ‘Contracting authorities’ not only covers state and local authorities, but also bodies governed by public law; see section 2.1.4. of the Commentary. In several judgments the CJEU has established that the terms ‘contracting authority’ and ‘bodies governed by public law’ must be interpreted in accordance with the purposes of the procurement directives to remove the risk that domestic tenderers might have an advantageous position when entering into public contracts and the possibility that a public authority or some other entity linked to a public authority might be guided by other than financial considerations.5 This removes obstacles to the free movement of goods and services and protects the interests of undertakings established in one Member State that wish to offer goods and service to the public sector in another Member State. The CJEU has further stated that given the double objective of introducing competition and transparency, the concept of a body governed by public law must be interpreted broadly.6 For the purposes of the procurement directives it does not matter whether a contracting authority delegates to others the conduct of an EU procurement procedure, the award of a contract or other responsibilities for a purchase made to fulfil the needs of the authority; the procurement directives must be complied with in any case.7 In the opposite situation, where a contracting authority enters into a purchasing contract on behalf of an entity that is not bound by the procurement directives, the directives to not apply if the purchase is wholly covered by the purposes of the entity that is not bound.8

3 With the older cases one should be aware that the current form of the definition was first used from the date of the earlier Directive 89/440/EEC amending Directive 71/305/EEC on coordination of procedures for the award of public works contracts, Directive 93/36/EEC coordinating procedures for the award of public supply contracts, and Directive 92/50/EEC on the coordination of procedures for the award of public service contracts. 4 Similarly, the minor differences in wording between the earlier procurement directives cannot be assumed to indicate any substantive differences with regard to the definition of contracting authorities; see Case C-470/99 Universale-Bau, para. 60. 5 See Case C-237/99 OPAC/HLM, paras 41-43; and Case C-470/99 Universale-Bau, paras 51-53. 6 Case C-373/00 Truley, para. 43; Case C-214/00 Commission v Spain, para. 53; and Case C-283/00 SIEPSA, para. 73.

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2.1.2. Central government authorities Article 2, paragraph 1, point 2 of the Public Sector Directive defines “central govern- 5 ment authorities” as “the contracting authorities listed in Annex I and, in so far as corrections or amendments have been made at national level, their successor entities”. The importance of this list is not entirely clear. Firstly, the list refers to both named and unnamed entities, and secondly, there are regular changes but the list is not necessarily updated. Additionally, new or additional bodies may be established at a national level that cannot necessarily be placed in relation to the earlier entities listed. It is evident from the provision that the annex and thus the definition seem to depend on the list being updated, which may seem problematic when it already appears that this list is neither exhaustive nor complete. It must therefore be assumed that if an entity is not listed yet undoubtedly falls under state organisation, it must be presumed that the entity should still be considered as a central government authority. The legislative body of the State is covered by the term the ‘State’ regardless of any 6 provisions of national law on its autonomy, as confirmed in Case C-323/96 Commission v Belgium (Vlaamse Raad). The CJEU stated that the term ‘the State’ encompasses all the bodies which exercise legislative, executive and judicial powers.9 The terms State, regional and local authorities must interpreted according to the purposes of the procurement directives to ensure the effective operation of the internal market in relation to public purchases. Even if an entity is not formally part of the ordinary structure of public authorities, it can very well be regarded as so closely linked to the public sphere and functions that it must be seen as part of a State, regional or local authority. It must be assumed that the terms State, regional and local authorities must be interpreted on the basis of their functions also covering entities that are not formally part of an authority but which act as instruments independent of an authority through which an authority acts.10 However, if an entity is an independent legal person, it is only a contracting authority if it fulfils the criteria for being a body governed by public law; see section 2.1.4. of this Commentary, below. In Case 31/87 Beentjes, on the basis of a functional interpretation the CJEU found that a local Dutch committee, which was not an independent legal person, must be regarded as being a part of the State within the meaning of Directive 71/305/EEC on the coordination of procedures for the award of public works contracts, then in force. The CJEU referred to the fact that the committee’s composition and functions were determined by law and that the committee was dependant on the authorities for the appointment of its members, guarantees for the obligations arising out of its measures and the financing of the public works contracts which it was its task to award.11 7 However, Article 37 of the Public Sector Directive allows contracting authorities to purchase via central purchasing bodies, where the central purchasing body’s conduct of an EU procurement procedure will fulfil the procurement obligations that would otherwise have had to be fulfilled by the contracting authority; see further in this Commentary on Article 37. In other situations there must also be an evaluation of whether those who act as agents for a contracting authority can only enter into contracts in accordance with the EU procurement procedures; see Case C-264/03 Commission v France. 8 Case C-44/96 Mannesmann, paras 42-46, where the CJEU ruled that a contracting authority’s transfer of its rights and obligations under a public works contract to an entity that was not a contracting authority does not mean that the contract lost its character as a public works contract. 9 Case C-323/96 Commission v Belgium (Vlaamse Raad), para. 27. 10 See the Commission’s guidelines on the earlier directive on procurement of services, section II.1.3.1. On the basis of the CJEU’s comments in Case C-31/87 Beentjes and the Commission’s comments in its guidelines, it is also natural to consider the criteria for the definition of a body governed by public law when assessing whether a body that is not formally part of the ordinary public administrative structure may be regarded as part of a State, regional or local authority. 11 Case 31/87 Beentjes, paras 11-12.

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Both central government and non-central government contracting authorities are generally fully liable for conducting procurement procedures when the conditions are met. The significance of whether this relates to a central government or non-central government contracting authority is primarily relevant with regard to which threshold values to apply. In accordance with Article 4 of the directive, the threshold value for central government contracting authorities for the procurement of goods and services is EUR 134,000, compared with EUR 207,000 for non-central government authorities. 2.1.3. Non-central government authorities

Article 2, paragraph 1(3) of the Public Sector Directive defines the term sub-central authority. The definition of sub-central government authorities is invalid in relation to central government authorities which, in this context, means that the determining factor is whether an entity is listed in Annex I. The delimitation must conceptually cover all types of contracting authority, including bodies governed by public law. Bodies governed by public law that are subject to control by a central government authority should thus be seen as a sub-central contracting authority provided they are not listed themselves. 9 For comments regarding the significance of being a sub-central contracting authority, see the commentary to Article 2, paragraph 1, point 2 (section 2.1.2. above). 10 For a further breakdown between regional and local authorities, see Article 2, paragraph 2. 8

2.1.4. Definition of bodies governed by public law 11

Article 2, para 1(4) of the Public Sector Directive defines a ‘body governed by public law’ by three criteria, as follows: A ‘body governed by public law’ means any body: (a) established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; (b) having legal personality; and (c) financed, for the most part, by State, regional or local authorities, or other bodies governed by public law; or subject to management supervision by those bodies; or having an administrative, managerial or supervisory board, more than half of whose members are appointed by State, regional or local authorities, or by other bodies governed by public law.

All three criteria must be fulfilled. Thus, for example, is not enough that a body is established by or receives financing from a public authority if its purposes do not also meet needs in the general interest that are not of an industrial or commercial character. 12 The fact that one of the undertakings of a corporate group is a body governed by public law is not sufficient for all of the undertakings to be regarded as bodies governed by public law.13 If a body fulfils these three criteria it will be a contracting authority and all its purchases will be governed by the procurement directives, even if the body has activities of an industrial or commercial character. There is no basis for distinguishing between the body’s purchases according to whether or not they relate to industrial or commercial activities.14 There are no conditions other than the three criteria stated above for whether an entity is a body governed by public law, and thus a contracting authority.15

Case C-44/96 Mannesmann, para. 39. Case C-360/96 BFI Holding, para. 57. 14 Case C-44/96 Mannesmann, paras 32-34; and Case C-18/01 Korhonen, para. 58. 12

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Previously an annex was appended to the definition of “bodies governed by public law” in which the member states’ entities that were deemed to meet the criteria were listed. It was apparent that this list was not exhaustive, and in this context the Court stated that the list was not determinative of whether specific entities should be regarded as bodies governed by public law. The list has not been continued, and so it is clear that the only assessment of significance is now whether the three criteria in Article 2, paragraph 1, point 4 are met. The term has been carried forward largely unaltered from previous directives. Con- 12 sideration 10 of the preamble states: “The term ‘contracting bodies’ and in particular the term ‘bodies governed by public law’ have been addressed repeatedly by the European Court of Justice. In order to clarify that the private-sector applications of this directive should remain unchanged, it is appropriate to retain the definition used by the Court and to incorporate a number of clarifications based on this case law to facilitate the understanding of the definitions without the intention of changing the understanding of the terms established in case law. To this end, it should be clarified that a body operating under normal market conditions that has the purpose of making a profit and bearing losses associated with carrying out its activities should not be considered a “body governed by public law” as the public needs that the body has been established to satisfy or tasked to satisfy may be considered to be of an industrial or commercial nature. Similarly, the condition relating to the relevant body’s funding is also addressed in case law, which amongst other things clarifies that being funded for “the most part” means more than half, and that such funding may include payments made by users that are imposed, calculated, and collected in accordance with the rules of public law.” As for definitions of timing, it must be assumed that each year, presumably at the 13 start of the budgetary year, it must be decided whether an entity is a body governed by public law. If so, then the body will be bound by the procurement directives for the rest of the budgetary year and will continue to be bound in respect of procurements initiated in the course of the budgetary year until the procurement procedure comes to an end. 16 In principle the same should apply if it is decided that the entity is not a body governed by public law. However, it cannot be said to have been finally settled whether the status of not being a body governed by public law can be retained if in the course of a budgetary year changes occur so that an entity fulfils the criteria for being a body governed by public law. 2.1.4.1. Meeting needs in the general interest, not having an industrial or commercial character An important element of the definition of a body governed by public law is that the 14 body should have the for the purpose of meeting needs in the general interest, not having an industrial or commercial character; see Article 2, para. 1(4) of the Public Sector 15 In particular, the definition of ‘body governed by public law’ does not mean that bodies that are organised in private law forms, such as limited companies, may not be covered; see Case C-214/00 Commission v Spain, paras 55-57; and Case C-283/00 SIEPSA, para. 74. Only the three criteria discussed in sections 2.1.4. of this Commentary are relevant to whether an entity is a body governed by public law. 16 See Case C-380/98 University of Cambridge, paras 37-44. In this case the question referred for a preliminary ruling specifically concerned the period that had to be taken into account for determining whether an entity’s operations were more than half financed from public funds. However, the CJEU’s statement seems to have been more general; see in particular paras 40-41 and 46, where the CJEU stated that the decision as to whether a body such as the University was a contracting authority had to be made annually, and that legal certainty and transparency required that both the University and third parties should be in a position to know from the beginning of the budgetary year whether procurement contracts awarded during that year fall within the scope of the procurement directives.

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Directive. This criterion is aimed at identifying bodies that undertake activities that only public authorities usually undertake. At the same time the criterion applies to bodies whose activities have purposes other than those of an industrial or commercial character and where there is an increased risk that purchases will not be made purely on financial grounds. The criterion for activities meeting needs of a general interest means that, on the one hand, there must be the fulfilment of needs of a general interest and, on the other hand, these needs must be needs of a general interest that are not of an industrial or commercial character. The two sub-criteria ought generally to be assessed separately. In its initial cases the CJEU did not always consider the two sub-criteria separately, but appears to have made an overall assessment of whether the activities of an entity were aimed at meeting needs in the general interest and were not of an industrial or commercial character. Hitherto the CJEU has found that the sub-criteria have been fulfilled by an undertaking printing official documents (passports, driving licences, legal acts etc.),17 removing and processing household waste,18 protecting national forests19 and establishing prisons.20 Operating a university,21 a low-rent housing entity22 and sewage treatment23 have also not been contested by the CJEU. So far, in only one case has the CJEU found that the activity in question (the organisations of fairs and exhibitions)24 concerned needs in the general interest which were of an industrial or commercial character, and thus fell outside the definition of a body governed by public law. 15 The CJEU’s assessments of whether the needs in the general interest fall within or without the scope of having an industrial or commercial character have more taken the form of an assessment of the actual circumstances of an entity’s conduct of its business. In three judgments in 2003 the CJEU seemed to adhere to an interpretation of the subcriterion which less concerned the nature of the activity undertaken, and focussed more on whether the entity operated on a commercial basis; see section 2.1.4.1.2. of this Commentary on the sub-criterion of activities of industrial or commercial character. In Case C-283/00 SIEPSA, which concerned an alleged breach of the TFEU, referring to the actual circumstances of the State-owned company’s activity of establishing prisons, the CJEU found that the purpose of the activity was to meet needs in the general interest and that the activity did not have an industrial or commercial character. On the other hand, in Case C-373/00 Truley and Case C-18/01 Korhonen, which concerned references for preliminary rulings, the CJEU restricted itself to finding that the activities of the municipally-owned undertakings for funeral services and the construction and renting out of offices with a view to attracting undertakings to the area, were concerned with meeting needs in the general interest. The CJEU then left it to the referring courts to decide whether the activities of the companies, including the conditions for them, were of an industrial or commercial character.25 Case C-44/96 Mannesmann. Case C-360/96 BFI Holding. 19 Joined Cases C-353/96 and C-306/97 Irish Forestry Board I and II. While these cases concerned the meaning of ‘other public authorities whose public supply contracts are subject to control by the State’ (see Directive 77/62/EEC coordinating procedures for the award of public supply contracts), there is little doubt that ‘meeting needs in the general interest, not having an industrial or commercial character’ would have led to the same result. 20 Case C-283/00 SIEPSA. 21 Case C-380/98 University of Cambridge. 22 Case C-237/99 OPAC/HLM. 23 Case C-470/99 Universale-Bau, para. 46. 24 Case C-223/99 Agorà. 17

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Since giving these judgments, the CJEU has extended its policy of making functional interpretations by stating that the purpose of the Public Sector Directive means that the term ‘body governed by public law’ should be interpreted broadly.26 2.1.4.1.1. General interest … Neither the Public Sector Directive nor the case law has given a general definition of 16 the term ‘general interest’ in the context of the Directive. 27 It must be assumed that activities in the general interest should be understood as aiming to serve the interests of society as opposed to activities serving the particular interests of individuals or groups of individuals.28 Certain activities are clearly aimed at meeting the needs of the majority of the population, for example waste removal. The fact that not all are interested in or have free access to the services provided by an undertaking does not mean that the undertaking’s activities are not based on the general interest.29 Often there will be a dual meeting of needs, where an activity is for the advantage both of social interests and the interests of individuals or undertakings or groups of individuals or undertakings. Sometimes an activity can correspond precisely with activities of private sector undertakings, while still having the purpose of meeting needs in the general interest. Where this is the case the overall purpose that lies behind the activity will determine whether the entity in question aims to meet needs in the general interest. Even if an activity only benefits one person or undertaking, the activity may be classified as meeting needs in the general interest if there is a social purpose in benefitting the individual or undertaking. In Case C-360/96 BFI Holding, the CJEU found that there was no question that the removal and processing of household waste could be regarded as meeting needs in the general interest;30 and in Case C-44/96 Mannesmann there was little comment on the fact that the printing of passports, driving licences, legal acts etc. was found to be associated with public order and the activities of State institutions and thus met needs in the general interest.31 In Case C-223/99 Agorà, the CJEU found that, by organising fairs and exhibitions, Ente Fiera was not acting solely in the individual interest of manufacturers and traders who thereby had an opportunity to promote their goods; it also provided information to 25 Case C-373/00 Truley, paras 57 and 65-66; and Case C-18/01 Korhonen, paras 45 and 55-59. In the Korhonen case the CJEU said it found it probable that the property company’s activities were not industrial or commercial. 26 Case C-373/00 Truley, para. 43; Case C-214/00 Commission v Spain, para. 53; and Case C-283/00 SIEPSA, para. 73. 27 See the Opinion of Advocate General Albers in Case C-373/00 Truley, paras 63-64. In its decision on the case the CJEU stated that the term ‘general interest’ is an independent concept in Union law and that it should be interpreted in the context in which it occurs and in the light of the purposes of the procurement directives; see para. 40. 28 Guidance on the general interest can be found in the case law on Article 106(2) TFEU on situations in which it can be incompatible with the Treaty for undertakings to be entrusted with the operation of services of general economic interest; see also the Opinion of Advocate General Léger in Case C-44/96 Mannesmann, point 65. However, the CJEU has not accepted that the ‘general interest’ in the procurement directives’ definition of a body governed by public law corresponds to the ‘operation of services of general economic interest’ as used in Article 106(2) TFEU. Care must be taken in treating these terms as equivalent, in particular with regard to the fact that their purposes are fundamentally different. 29 Access to certain educational institutions may be restricted, for example, but the aims of such institutions are unquestionably to meet the interests of society in educating the people. 30 Case C-360/96 BFI Holding, para. 52. 31 Case C-44/96 Mannesmann, para. 24. In Case C-283/00 SIEPSA it was not disputed that SIEPSA’s activities, which consisted of building prisons in accordance with a plan approved by the State, met the needs of the general interest; see the Opinion of Advocate General Albers, point 30.

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consumers who attended the events enabling them to make choices in optimum conditions. The resulting stimulus to trade could be considered to be in the general interest. The reasoning of the CJEU must be understood as meaning that it saw the stimulation of trade as being in the general interest merely by virtue of consumer’s possibility of making choices on a better basis by visiting exhibitions, and not on this being combined with the special interests of manufacturers and traders marketing their products at exhibitions.32 In Case C-373/00 Truley, the CJEU found that the activities of undertakers must be regarded as activities meeting needs in the general interest, and the fact that regional and local authorities had a legal duty to arrange or at least pay for burials where they had not been carried out within a given period was an indication of such a general need.33 Case C-18/01 Korhonen concerned a municipally-owned company’s activities to invest in property and buildings with a view to leasing them to private firms in the technology sector in order to fulfil the municipality’s policy of setting up a technological development centre. The CJEU found that such activities were to meet needs in the general interest in so far as they were suitable for stimulating sales and the economic and social development in the local area, as the setting up of businesses generally has positive effect on a municipality by creating jobs, increasing tax revenues and increasing the supply and demand for goods and services. The CJEU noted that, in principle, it did not matter whether the property was leased to a single undertaking, as serving of the general interest would not be measured by the number of direct users of an undertaking or services. 34 2.1.4.1.2. … not having an industrial or commercial character 17

As for determining whether the general interest that is served has an industrial or commercial character, here too the CJEU has not given a clear criterion. However, more recently the CJEU made an approach towards providing a general criterion giving more specific guidance than that which characterised the CJEU’s earlier case law. The CJEU has emphasised that the assessment of whether the general interest is met by means that are not of an industrial or commercial character must take into account all the legal and factual circumstances. Regardless of the CJEU’s specification of the assessment, it is still possible to take other circumstances into account. In other words no single criterion has yet been established. Moreover, the CJEU has specifically emphasised that the assessment should take account both of the circumstances applying when the entity was set up, and the conditions to which the entity’s activities are subject. To this end, the Court has specified a number of conditions of particular importance. These include: – – – –

Whether there is competition in the market for the entity’s activities. Whether the entity conducts its activities under normal market conditions. Whether the entity intends to turn a profit. Whether the entity itself bears the risks and potential losses associated with conducting its activities. – Whether the entity is publicly funded.

32 Case C-223/99 Agorà, para. 34. The Commission’s view of the case was apparently also that the promotion of the interests of manufacturers and traders could not constitute meeting a need in the general interest; see the Opinion of Advocate General Albers, point 37. 33 Case C-373/00 Truley, paras 50-57. 34 Case C-18/01 Korhonen, paras 41-45 and 60-64.

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These conditions, as discussed below, relate to all of the conditions applicable to each entity’s performance of its activities, including the conditions set out specifically in relation to that entity, e.g. any public funding. Consequently it is difficult to argue with the justification that the assessment actually relates to whether the public needs catered for by the entity are industrial or commercial in nature. Furthermore, it is a foregone conclusion that “public needs not of an industrial or commercial character” cannot form the basis of general delimitations according to which a specific type of activity in all cases – i.e. regardless of the specific conditions applicable to the individual entity – relates to such needs. On the other hand, there can be no doubt that conditions like those set out above should be determinative in delimiting considerations other than the strictly economic considerations of its purchases when the entity has decided the forms of activity to engage in. Furthermore, the concept “public needs not of an industrial or commercial nature” must and shall be subject to an independent and uniform interpretation throughout the EU, even though the concept cannot be translated into a general categorisation of specific types of activity covered by the concept.35 The list above includes examples of conditions which may be relevant in terms of as- 18 sessing whether the entity’s catering for activities falls outside the industrial and commercial sphere. Although in most cases those conditions will reveal the actual and legal circumstances which may affect the assessment, other conditions may be relevant. Even if all the conditions mentioned in the specific case indicate that an entity is operating within the industrial or commercial sphere, it is not an impossibility that other circumstances may result in the entity still being considered to operate outside of this sphere. 36 Current case law does not provide a basis for appointing one or more of the stated conditions as determinative in itself, and in previous judgements the Court has referred to several of the conditions by way of justification. At the same time, it is in no way impossible that in some cases it will be sufficient if a single condition with adequate strength indicates that the catering for the activities falls outside of the industrial and commercial sphere, e.g. in the case of significant public funding. Conversely it is obvious that not all of the above conditions shall necessarily indicate that the management of the activities falls outside the industrial or commercial sphere, just as there is no basis for claiming that a particular condition shall necessarily indicate such catering for the activities. There are grounds for emphasising that beyond the current relationships, either legal or contractual, that determine the terms of how the entity conducts its business, the circumstances in relation to the entity’s establishment shall be examined, including with regard to an assessment in relation to the conditions mentioned above. In C-373/00 Truley, the Court referred the referring court to examine the national and local statutory provisions regulating activities of the municipally owned funeral company, as well as the circumstances of the municipality of Vienna’s conversion of the former internal funeral entity into an external company, and the exclusivity agreement that operationally associated the company with the municipality.37

See C-283/00, SIEPSA, para. 79. It is worth noting that the Court’s wording of both C-283/00 SIEPSA and C-18/01 Korhonen is that it is unlikely (but in no way impossible) that an entity operating in a competitive market under normal market conditions and whose primary purpose is to turn a profit, and which itself bears any losses associated with its activities, caters for public needs outside of the industrial and commercial sphere; see paras. 81-82, 51, and 59. 37 C-373/00 Truley, para. 65. 35

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One of the conditions pointed to by the EU Court is whether there is competition in the market of the entity’s activities. Public needs outside of the industrial or commercial sphere are usually catered for other than through the provision of goods or services on the market. The fact that there is heavy competition with regard to the satisfaction of these needs, and in particular the fact that the entity is operating competitively on the market, is thus an indication that there is no question of public needs outside of the industrial or commercial sphere.38 However, it cannot be directly concluded from the fact that the public needs are being served through the supply of goods and services in a competitive market that such needs are being catered for within the industrial or commercial sphere. These needs could also be catered for even if private enterprises serve or could serve the same needs. A lack of competition is therefore not determinative of whether the public needs fall outside of the industrial or commercial sphere. In C-360/96 BFI Holding, the Court noted that competition with regard to the relevant activities does not preclude an entity that is publicly controlled or financed being guided by considerations other than economic factors, and that there are hardly any activities that cannot be performed by private enterprises under any circumstances. Deeming it determinative whether private enterprises will be able to serve the same needs would therefore – according to the view of the Court – empty the term “body governed by public law” of its content.39 In C-283/00 SIEPSA, the Court’s assessment was that there was no market for the planning and establishment of prisons as the imposition of punishment is a government prerogative, and that the state-owned company which was in charge of the construction and running of prison facilities was consequently not offering services on the open market in competition with other economic actors.40 20 Another relevant condition put forward by the EU Court is whether the entity is operating under normal market conditions. Even if an entity’s activities involve the supply of goods or services in a highly competitive market, the entity may be given special rights or otherwise have a special position that means it does not operate under normal market conditions. Depending on how the entity is positioned in terms of competition with other enterprises, the special market conditions may mean that the competitive situation necessitates that the entity allow only economic factors to determine its procurement policy. In C-373/00 Truley, the Court made do with highlighting a number of circumstances that the referring court should include in its assessment of whether public needs outside the industrial or commercial sphere could be deemed to have been catered for by the municipally owned company providing funeral and undertaker services. These circumstances included e.g. that such operations in Austria were not confined to specific legal persons and in principle could be conducted without geographical limitation. However, operations were subject to prior approval, the issuance of which depended on a current or future need as well as on the provisions imposed by each municipality with regard to burials. Furthermore, the Court emphasised that the federal state authority has the power to set maximum prices for funeral services.41 In C-18/01 Korhonen, the Court referred in general to the significance of the municipally owned property company operating under normal market conditions but did not 19

See C-360/96 BFI Holding, para. 49, and C-223/99 Agorà, para. 38. C-360/96, BFI Holding, paras. 40-47. 40 This assumption is, however, surprising given the private sector’s involvement in the establishment and operation of prisons in e.g. the UK by way of public-private partnerships (PPP). 41 C-373/00 Truley, para. 62-63. 38

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appear itself to make a more detailed assessment of the actual market conditions in its evaluation of whether the company’s activities in all probability fell outside the industrial or commercial sphere.42 Whether the entity intends to turn a profit can also play a role in assessing whether 21 public needs are being catered for on commercial terms. The purpose of the activities performed by an entity is a key element in determining whether these activities fall outside the industrial or commercial sphere. While private enterprises typically operate businesses with the primary aim of turning a profit, public bodies seldom have profit as their primary purpose. If the entity is run without the objective of turning a profit, the key incentive of making purchases based on economic considerations is lacking. This is normally a strong indication that the entity’s activities are not of an industrial or commercial character. So far the Court has failed to directly emphasise the profit objective as a determinative factor, yet has invoked the objective as the basis for assumptions concerning other relevant circumstances such as the public sector bearing losses. For more details, see below. The fact that an entity’s operations turn a profit does not mean that doing so is the objective of the business. Similarly, a profit objective is not in itself sufficient if the entity also has another objective which is prioritised over profit. Consequently, turning a profit shall be the primary purpose of the entity’s activities so as to indicate that these activities are of an industrial or commercial character. In C-283/00 SIEPSA, the Court first ruled that the state-owned company SIEPSA was established especially to implement the state’s plan to set up prisons and thereby promote the policy conducted by the Spanish state in the field of criminal administration. Consequently, the general tasks which SIEPS was designed to perform were a necessary condition of the Spanish state being able to exercise its powers with regard to the imposition of criminal penalties and were therefore inextricably linked to public order. The Court then rejected Spain’s view that SIEPSA’s purpose was to turn a profit and that it actually turned a profit from its activities, and that it was irrelevant that this profit was ultimately used for other public-utility purposes. In this regard, the Court stated that SIEPSA’s business activities relating to the acquisition of property, the tendering and implementation of construction and fitting-out projects, and the disposal of facilities no longer in use were, in their own right, the means by which SIEPSA realised its primary purpose of implementing the state criminal administration policy, confirmed by the fact that in some years SIEPSA had incurred significant losses.43 In C-18/01 Korhonen, the Court referred to a statement from the Finnish government that companies like the municipally owned property company in question could never have the primary purpose of turning a profit, in that their primary concern was always the promotion of the general interest of the municipality’s residents. Conversely, the property company’s primary purpose was to attract technology companies to the municipality by ensuring the availability of appropriate premises. In its judgement, the Court also stated that it could not be excluded that, in relation to their purpose, the activities of the property company could already be deemed to be satisfying public needs outside of the industrial or commercial sphere. With reference to the fact that consideration should be given to all relevant circumstances, the Court then reviewed such other circumstances.44

C-18/01 Korhonen, para. 51. C-283/00 SIEPSA, paras. 84-85 and 88-90. 44 C-18/01 Korhonen, paras. 48 and 54. 42

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It is not, however, an absolute condition that the entity operates for profit. If it can be demonstrated that the entity is operating based on criteria such as efficiency, viability, and profit, it is not a necessity that the purpose of the activity is to turn a profit. In C-223/99 Agorà, the Court emphasised, for instance, that Ente Fiera was run according to the criteria of profit, efficiency, and viability, despite the body not operating for profit.45 In addition to the rare cases in which legislation provides the legal basis for public enterprises with the objective of turning a profit, it must be considered doubtful whether an entity established by the public sector would be able to have the purpose of turning a profit. In this regard, it should be noted that the limitations described also apply if the municipality conducts the stated activities through companies or other private legal entities. 22 Additionally, the case law of the EU Court has emphasised the importance of whether the entity itself bears the risks and losses associated with performing the entity’s activities. One element of importance with regard to whether an entity makes its acquisitions based on considerations other than strictly economic considerations is whether the entity itself bears the risks and thus potential losses associated with the entity’s activities. Even an entity whose primary purpose is to turn a profit will have a much lower incentive to base its acquisitions solely on economic considerations if the entity is safeguarded against the economic consequences of its actions. A scheme in which the public sector covers any losses stemming from the entity’s performance of its activities, or in which the risks attributed to the activity are covered externally, in full or in part, by other means, would be a key point in supporting a justification that the activity falls outside of the industrial or commercial sphere. However, it is not necessary that such a scheme, special practice, or other special circumstances be directly established so that the public sector can be relied upon to cover losses in the event of an economic emergency. The very purpose of the entity’s activities may therefore justify a presumption that the entity will ultimately not have to bear the economic risks associated with its activities and consequently, such as in an economically risky situation, will be supported by the public sector, which has an interest in the entity’s ability to continue catering for the activities. In C-223/99 Agorà, the Court emphasised that Ente Fiera – in addition to being run in accordance with the criteria of profit, efficiency, and viability – itself bears the economic risk associated with its activities, as no scheme was in place to cover any economic losses.46 In C-283/00 SIEPSA, the Court found that the Spanish state in its capacity as sole shareholder of SIEPSA would most likely take all necessary measures to avoid the company going bankrupt, in that the company performed tasks that were a fundamental element of the Spanish state’s criminal administration policy. Regardless of whether there is a public scheme for offsetting SIEPSA’s potential losses, the Court found it improbable that the company itself would have to bear the economic risks associated with its activities.47 45 C-223/99 Agorà, para 40. Conversely, in C-44/96 Mannesmann, the Court did not draw on the condition that the activities of the Austrian state printing house should be conducted on a commercial basis pursuant to the law on establishment. The fact that this was not relevant to the case, however, seems obvious given the nature of the activities of the state printing house, and given that the prices for state-printed materials were set by a publicly appointed body in accordance with commercial principles, and especially given the necessity to have the capacity for a state of emergency. See C-44/96 Mannesmann, paras. 6-8. 46 C-223/99 Agorà, para. 40. 47 C-283/00 SIEPSA, para. 91.

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In C-18/01 Korhonen, the Court referred to information that local authorities who own companies like the property company in question would rarely allow the companies to go bankrupt and, in some cases, would ensure the restructuring of the companies’ capital to enable them to continue catering for their tasks of a general character. 48 Whether an entity is to some extent financed by the public sector may also be of sig- 23 nificance. If the entity receives public-sector support, the entity’s incentive to make acquisitions solely based on economic considerations or the like could be limited. This is the case whether such support takes the form of a subsidy or whether it is by way of lessening the entity’s burden that would normally be charged to the business’s budget, thus having the same effect as a subsidy. However, it is unlikely that any form of public-sector support would indicate that an entity’s activities are not of an industrial or commercial character. There are significant differences in terms of whether the support is provided unconditionally and specifically for the entity in question, or whether it is provided by way of a widely available support scheme whereby the support is potentially earmarked for specific activities. In C-18/01 Korhonen, without further elaboration the Court made reference to the fact that the property company had received public-sector support for the property projects in question.49 To summarise the conditions mentioned, it can be stated that it is essential that the entity performs its activities by offering goods or services in free and fair competition with private enterprises and, in particular, without public-sector economic support. In such cases, to ensure its survival, the entity will generally be required to conduct its activities based on the criteria of efficiency and viability and to base its acquisitions solely on economic considerations. In earlier case law – and prior to decisions from 2003 in particular, in which the conditions described above were classified more precisely – the Court stated that public needs not of an industrial or commercial character are generally needs that the public sector chooses to satisfy itself or seeks to retain a deciding influence over for reasons of the common good. This point is also mentioned in judgements after 2003 with the description of “established case law” but is not drawn upon in the specific argumentation. The point regarding public-sector influence on the performance of activities also differs from the conditions cited above in that it relates to the general character of the activity in question and not directly to the conditions that specifically apply to each entity’s performance of the activity. Furthermore, as a criterion in the assessment of whether a specific activity is not of an industrial or commercial character, in cases of doubt this point rarely offers useful guidance. However, this point can still be characteristic of an enterprise whose purpose will often strongly indicate that its activities are not of an industrial or commercial character. A clear example is the printing of identification documents, laws, and other documents related to governmental functions, in which security of supply and compliance with confidentiality and security regulations are essential for the activity. Such documents are so closely linked with public order and the functions of state institutions that the public sector chooses to perform these activities itself or to retain a deciding influence in this respect. See C-44/96 Mannesmann.50 In C-360/96 BFI Holding, the Court emphasised that since it was possible that the fulfilment of the societal need for the removal and processing of household waste could be considered necessary for public health reasons and could not be catered for by the serC-18/01 Korhonen, para. 53. C-18/01 Korhonen, para. 53. 50 C-44/96 Mannesmann, para. 24. 48

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vices offered by private companies, a state may decide to designate that this activity be performed by public authorities or an entity over which it wishes to retain a deciding influence.51 24 It is irrelevant whether the entity has been established by law, delegated legislation, or by other means, and it is also irrelevant how the needs that the body is to satisfy are specified.52 Furthermore it is irrelevant whether the entity also performs activities other than those aimed at satisfying public needs that are not of an industrial or commercial character. Even if the entity’s catering for such needs comprises a relatively small proportion of the entity’s activities, the entity’s continued catering for these needs is sufficient for the entity as a whole to be considered a body governed by public law and therefore bound by the procurement directives. This applies regardless of any commercial nature of the entity’s other activities. In C-44/96 Mannesmann, the Court stated that an entity’s catering for activities other than those aimed at satisfying public needs not of a commercial character is irrelevant when the entity continues to undertake to satisfy such public needs and where this represents a relatively small proportion of the overall activities. The Court also stated that the procurement directives apply in general to the entity’s overall activities; i.e. the directives shall be adhered to also for procurement related to commercial activities. 53 The wording of the definition of a “body governed by public law” requires that the entity is established especially to satisfy public needs not of an industrial or commercial character as described. However, a purposive interpretation is that regardless of the wording, it is not a necessary condition that the entity is established specifically for public-sector activities. Conversely, the fact that the entity is established for this purpose cannot be considered to bind the entity if its future activities change so that they are, for instance, performed on commercial terms. In view of the purpose of the procurement directives, emphasis must be made on the fact that the entity is actually and demonstrably objectively tasked with satisfying public needs not of an industrial or commercial character, either by way of actually catering for such needs or by being obliged to satisfy such needs as they arise.54 In C-470/99 Universale-Bau, it was uncontested that the company EBS was not established in order to satisfy public needs of a non-industrial and non-commercial character, but this later became the case. EBS was established in 1976 to operate waste disposal facilities on a commercial basis, but from the mid-1980 s it was contracted by the municipality of Vienna to operate the municipality’s main wastewater treatment plant with staff supplied by the municipality. Furthermore, the municipality was required to pay remuneration for the operating costs incurred and to acquire the wastewater treatment plant established and owned by EBS if the perpetual tenancy and operating contracts were terminated. EBS did not otherwise perform this element of its operations for profit. The Court stated that when assessing whether an entity is satisfying public needs not of a commercial nature, the actual activities performed by the entity must be taken into account. The effective impact of the procurement directives cannot be achieved if the application of its rules can be discounted because the public-sector tasks not of a commercial nature were not imposed on the entity since its establishment, or because the entity’s statutes have not been revised in order to reflect actual changes to its business C-360/96 BFI Holding, para. 52. See C-360/96 BFI Holding, para. 62, and C-470/99 Universale-Bau, paras. 59-60. 53 C-44/96 Mannesmann, para. 25. 54 An entity originally established in the private sector without public-sector influence must also be assumed to be covered if a close connection later arises between the entity and the public sector as prescribed in Article 2, paragraph 1(4). 51

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area. The Court emphasised the fact that the omitted modification of EBS’s statutes regarding the company’s purpose was irrelevant, and that EBS’s catering for such publicsector tasks could be objectively established from the contracts with the municipality of Vienna.55 In the earlier ruling in C-44/96 Mannesmann, the Court stressed that the Austrian state printing house continued to undertake to fulfil the needs that the state printing house was required to satisfy.56 It therefore seems presupposed that a body that has been established especially to satisfy public needs not of an industrial or commercial character is able to change its status in relation to the definition of a body governed by public law if that body no longer undertakes to fulfil such needs. 2.1.4.2. Status as a legal person The criterion that the entity must be a legal person is essential for the definition of a 25 body governed by public law. Only in the case of an entity that is an independent legal person in relation to the state, local authorities, or other bodies governed by public law is it relevant to consider whether the other conditions have been met; i.e. whether the entity caters for public needs not of an industrial or commercial character. See section 2.1.4.1. See also section 2.1.4.3. regarding whether the association with a contracting authority is of the presupposed close nature. Conversely, an entity that is not a legal person and which is associated with a contracting authority in a manner as described in sections 2.1.2. and 2.1.3. is covered by the procurement directives, even if the entity’s activities relate only to public needs of an industrial or commercial character. It can be argued that the assessment of whether an entity is a legal person is to be 26 based on national law as long as there is no common definition of “legal person” in EU law. To support this, it can be pointed out that it must have been clear at the point of introduction of the definition of “a body governed by public law” that the term “legal person” could well have different meanings in different EU countries and that, in relation to the criterion “legal person”, Community legislators hardly intended for a general harmonisation of the term. Conversely it can be argued that the effective impact of the Public Sector Directive could not be safeguarded if the definition of the term “legal person” depended on national law. Even if the entities that are not legal persons under national law but which still have a close connection with the public sector will instead often be part of the state or a municipality, the Court will, if necessary, most probably establish a Community legal framework for the definition of the term “legal person”, with special emphasis on the definition of “body governed by public law”. In case C-44/96 Mannesmann, the Court made do with referring to the fact that the Austrian printing house was a legal person under national law. Usually the requirement that the body governed by public law be a legal person will not be in doubt. 2.1.4.3. A close connection with the public sector The definition of a body governed by public law in Article 2, paragraph 1(4)(c) of the 27 Public Sector Directive stating that there is a close connection between the entity in question and a contracting authority establishes three ways in which such a relationship may exist. The definition’s criterion accordingly aims to define the entities that generally 55 56

C-470/99 Universale-Bau, paras. 55-63. C-44/96 Mannesmann, para. 25.

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have such a close connection with the public sector that there is a risk that their activities cater for conditions other than those that are purely economic. In accordance with Article 2, paragraph 1 (4)(c), this close connection may exist as a result of public-sector financing of the entity’s operations, as a result of the public sector’s appointment of the majority of a company’s governing body etc., or as a result of the entity’s operations being subject to public-sector control so that the public sector has the opportunity to influence the entity’s decisions regarding acquisitions. The three sub-criteria regarding this close connection are called the financing criterion, the appointment criterion, and the control criterion. There is little doubt that the connection element expressed in these criteria is based on the general possibility of undue public-sector influence on the body’s procurement policy. In accordance with Article 2, paragraph 1(4)(c) of the Public Sector Directive, it is not a condition or prerequisite that a contracting authority actually control the body’s procurement or have the opportunity to do so. Refer to the control criterion below for more details. 28 Just one of the three sub-criteria needs to be met for there to be a sufficiently close connection as prescribed in Article 2, paragraph 1(4)(c) of the Public Sector Directive. In turn, the three criteria fully establish the relevant forms of close connections. The very fact that e.g. a contracting authority owns more than half of the capital in a company is not sufficient unless – and this will be the typical situation – the authority either finances more than half of the body’s operations, appoints the majority of the members in the company’s management body, or otherwise has the opportunity to exercise control over the entity’s operations and thus its procurement. In case C-44/1996 Mannesmann, the Court also referred to the fact that the Austrian state had a majority stake in the Austrian state printing house. The reference should probably be seen against the background of the referring court’s question assuming that ownership of the majority of the printing house’s capital meant that the company was subject to the state’s economic control. 2.1.4.3.1. Financing criterion 29

The content of the financing criterion is that more than half of the entity’s operations are financed by one or more contracting authorities. See Article 2, paragraph 1 (4)(c) of the Public Sector Directive. The criterion stipulates that such significant financing is likely to establish a connection between the entity and the public sector which gives the public sector the opportunity to exercise a direct or indirect influence over the entity’s decisions regarding acquisitions. Only public-sector services that finance or support the entity’s activities by way of financial contributions without any special benefit in return comprise financing in the sense of the financing criterion. Amounts paid by the public sector for contractual services do not, however, comprise such financing. This distinction is based on an interpretation of the condition’s purpose and impact. Although an entity performing contractual services for a contracting authority may also depend on the authority, this is a different form of dependence than what is covered by the financing criterion. The dependence between two parties to a contract depends on an exchange of mutual benefits and does not match the dependence that prevails where one party provides benefits unilaterally to support the other’s activities in general and without receiving a specific benefit in return. If it was to be assumed that the financing criterion also covered such dependence between two parties to a contract, the consequence would be that a private company primarily performing tasks for the public sector might also be deemed to be a body governed by public law, provided of course that the other criteria in the definition of a body 152

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governed by public law were met. See sections 2.1.4.1.-2.1.4.2. According to the circumstances, an entity may be so dependent on a contracting authority that the authority – even if this dependence is based on a contractual relationship – is able to influence the entity’s decisions regarding acquisitions, thus meeting the control criterion. In practice, the line between public-sector financing (support) and contractual remu- 30 neration is blurred. Consideration must of course be given to the reality of the relationship in which formality – such as the fact that there is a document called a contract – is irrelevant if the actual relationship is a support relationship. A key factor is whether the contracting authority has an independent interest in the supply of the service for which payment is benefit in kind so that this interest goes beyond the authority’s interest in the general support of the activities that the entity performs in the public interest. By contrast, it is less important whether the contractual services correspond to activities that the entity normally performs on the basis of public-sector support. This is illustrated by the Court’s assessment of the various payments from the public sector at issue in case C-380/98 University of Cambridge. Remuneration paid to Cambridge University by a contracting authority for its performance of specific research work was found to be benefit in kind for the university’s contractual services and not financial support, even if the contractual research work may have coincided with the university’s general teaching and research activities. The same was found to be the case in relation to a contracting authority’s remuneration to the university for the holding of seminars and conferences. However, the contracting authorities’ payment of scholarships or grants to support research work at the university was found to be public-sector financing as prescribed by the financing criterion. This was also found to apply if the recipient of the payment was a specific person who, as a service provider, was part of the university, in that this would actually be financing for the benefit of the institution as a whole in connection with its research activities. The Court argued that the fact that a subsidy benefited the university as a whole also justified the fact that amounts paid by local education authorities to support students corresponding to the tuition fees of the individual students had to be regarded as public-sector financing. When there was no contractual benefit in kind linked to such payments, these amounts also had to be considered as public-sector financing of the university’s teaching activities. In cases C-337/06 Bayerischer Rundfunk and C-300/07 Hans & Christophorus Oy- 31 manns, the Court ruled that a system of licence payments for remote services and a system of subsidy payments for health insurance were covered by this condition and therefore met the control condition of Article 2, paragraph 1 (4). In the second of the two cases, the health insurance system was required to cover the majority of workers. The contributions to the insurance funds were primarily collected directly from the employees whereby the employer took a percentage of their salary and forwarded this to the insurance fund together with its own contribution. There was no direct link between the contributions payable and the service received by each member (if a benefit was relevant). The contribution was determined by the insurance funds themselves, although there were certain control mechanisms that ensured that the contributions were held within reasonable confines in that the insurance funds were to run neither for profit nor at a loss and the contributions, as a rule, were only to cover the costs and were therefore to be balanced against this. Unlike in the cases of Bayerischer Rundfunk and Hans & Christophorus Oymanns, in 32 case C-526/11 Ärtzekammer Westfalen-Lippe, the Court found that the financing criterion had not been met. The case concerned an assessment of whether a professional association of doctors was covered by the concept of a body governed by public law. The

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associations were tasked with e.g. providing professional health advice, preparing expert opinions, promoting and catering for the members’ professional training, and promoting and catering for quality assurance in the healthcare sector by way of certification. Similarly, the legislation enabled the association to determine and request contributions from members for the services it provided. Unlike the other two cases, the body had a broad degree of discretion for determining the size of the payment. In accordance with the law, the determination of the contribution was also subject to control by a supervisory authority, and although this control was not as intensive as in the other cases, its sole purpose was to ensure a balanced budget. The Court made the comparison with the previous judgements, as well as with the Ärtzekammer situation, pointing out that although the legislation had “enumerated the tasks of the body, the opening ruling dictates that the situation is characterised by a high degree of independence, which it enjoys in relation to this law with regard to determining the character, scope, and implementation of the actions it takes to perform its tasks and the subsequent determining of the budget in order to perform these tasks, and thus the contribution amount it requires from its members.” The Court went on to rule on the determining of the budget, stating that the fact that the regulations establishing the need are to be approved by a supervisory authority is irrelevant “because this authority is limited to verifying whether the budget of the body in question is balanced; i.e. whether the body ensures sufficient income through member contributions and its other resources to cover all the costs associated with its operations under the rules it has itself adopted.”57 33 An assessment of the entity’s public-sector financing shall be made in relation to the entity’s total income, including the income deriving from business activities, to ascertain whether public-sector financing accounts for more than half of the entity’s operating financing. In the calculation of the total basis for assessment, different sources of income and different activities to which the income relates cannot be differentiated from one another. The size of the public-sector funding shall also be calculated as a whole. Any public-sector support received by the entity should therefore be combined, even if this support is from different contracting authorities without any community of interests. “More than half ” shall be understood literally; i.e. as more than 50%. There is no basis for a qualitative differentiation between different sources of financing, nor for a differentiation based on the possibility of control over the entity’s operations in the field of public-sector contracts, which an individual case of support may involve. Conversely, substantial public-sector funding that does not account for more than half of the entity’s operating financing means that the financing criterion has not been met, nor has it been met if the contracting authority providing the financing requires a specific procurement policy as a condition of the financing. In such a situation, the control criterion will be considered as met, however; while TFEU provisions may limit such requirements. 34 The assessment of whether more than half of an entity’s operating financing comes from contracting authorities must be made for one financial year at a time. If the figures for expected income available at the start of the financial year indicate more than half will come from public-sector financing, the entity will be a contracting authority for the entire financial year, provided that the other criteria in the definition of a body governed by public law have been met. This is the case even if the entity’s income changes in relation to expected income during the financial year so that public-sector financing accounts for half or less than half of the entity’s total income for the year. 57

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Subsequent changes to the entity’s composition of income are irrelevant to procurement processes commenced within the financial year in which the entity is qualified as a contracting authority on the basis of the financing criterion. In relation to the procured contract, the entity will be bound by the rules of the Procurement Directive until the procurement process is complete, even if a change in the entity’s composition of income takes place during the procurement process, resulting in the entity no longer being a contracting authority. The Court clearly assumes that the assessment based on expected financial figures at the start of the financial year can, in general, form the basis for the rest of the financial year, but it has not explicitly taken a position as to whether this is the case if the proportion of public-sector financing at the start of the financial year is not expected to amount to more than half of the entity’s total income but over the course of the year actually does amount to more than half. The fact that the share of public-sector financing and thus the entity’s possible status as a contracting authority are considered on an annual basis is practical compared with the alternative, which would require the authority to continually evaluate its composition of income since both the size of its total income and of its public-sector financing will almost always change during the year. 2.1.4.3.2. Appointment criterion Another way in which a close connection between an entity and the public sector 35 may exist is where one or more contracting authorities may appoint more than half of the members of the entity’s administrative body, management body, or supervisory body. See Article 2, paragraph 1, no. 4, point c) of the Public Sector Directive. The reason for the criterion is that a majority of such appointed members will typically give the contracting authority appointing these members the opportunity to control the entity’s operations. This would pose the risk of the entity being influenced by interests other than purely economic interests in its procurement policy, which the contracting authorities may have an interest in catering for. “More than half ” must be understood literally in the same way as the financing crite- 36 rion. The provision offers no basis for distinguishing the reasons or purpose of the appointment, nor the interests that the public-sector appointed members shall cater for. All members must be included when determining the total number of members in the management, administrative, or supervisory body. This includes employee representatives in a company’s board of directors, in that the decisive factor is whether the contracting authorities in their power to appoint more than half of the board members have the opportunity to decide on the entity’s acquisitions. In contrast to the wording of former procurement directives, under Article 2, paragraph 1, no. 4, point c) of the Procurement Directive, it is insufficient that a contracting authority is entitled to appoint more than half of the members of an administrative, management, or supervisory body. Cf. the earlier wording “may appoint”. Consequently, the right of appointment shall now be applied to counting in relation to the control criterion. An unused right of appointment may be a factor in the assessment of whether the entity’s operations are under a contracting authority’s control. See details regarding the control criterion below. Nor can it be assumed that more than half of the members of the bodies in question could be appointed by the same contracting authority. Even in a situation whereby different contracting authorities may independently appoint members who together make up more than half of the body, the appointment criterion must be considered to have been met.

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If on the basis of its ownership share, a body governed by public law appoints four of a company’s nine board members, and if e.g. a municipality appoints one board member on the basis of an operating agreement, this must be assumed to satisfy the appointment criterion. Thus, if the municipality fails to appoint its member, the appointment criterion is not met. In the latter situation, the high proportion of board members appointed by the body governed by public law will, however, be a factor in determining whether the entity’s operations are subject to the body’s control. 37 The administrative or management body will usually comprise a management committee, a board of directors, an annual general meeting, or a shareholders’ committee. The terms must be defined functionally, so that any body responsible for the administration or management of the entity is covered. There must, however, presumably be the limitation that the body shall be able to exercise (but not necessarily utilise) the right to make decisions regarding the entity’s acquisitions, or be able to influence such decisions. In any case, in situations where the body has limited functionality that does not enable a direct or indirect influence on procurement, the public sector’s right to appoint the majority of the body’s members hardly results in the requirement for a close connection being met for that reason. Usually, bodies to which the public sector can appoint members will have functionality and authority that enable them to have an influence over procurement. The size of the administrative or management bodies cannot be assumed to be relevant in relation to the calculation of the half. An administrative organisation can, in principle, consist of just one person. In case C-44/96 Mannesmann, the Court referred to the fact that the Austrian state printing house’s director general was appointed by a body dominated by publicly appointed persons. Where an administrative or management body is normally internal in relation to the legal person, a supervisory body is typically understood as an external body that independently supervises the entity. It is probable however, that “supervisory body” in Article 2, paragraph 1, no. 4., point c) of the Procurement Directive refers to an internal supervisory body so that the appointment shall refer to a supervisory body within the entity itself. The importance of the entity being subject to external public-sector supervision would then have to be judged based on the control criterion. See immediately below. In support of this, reference can be made to case C-237/99 OPAC/HLM, where the close connection was assessed based on the control criterion, not the appointment criterion, although the assessment related to e.g. various external supervisory and control functions that the HLM companies were subject to. 2.1.4.3.3. Control criterion 38

The control criterion is broader and less well-defined than the financing and appointment criteria. It assumes that the entity’s operations are subject to the control of one or more contracting authorities but without further defining the nature or degree of such control. The Court has ruled that the assessment of whether the control on the part of the public sector is relevant shall be made based on whether such control creates a connection between the entity and the contracting authorities so as to give the latter the ability to influence the entity’s decision in the field of public-sector contracts. This connection must be comparable with the connection that exists when the financing or the appointment criterion is met. It cannot be assumed that the ability to influence the legal person’s decision in the field of public-sector contracts shall be understood to mean that the contracting authori156

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ty must necessarily be granted an express power to approve the entity’s decisions regarding acquisitions. More generally, the ability to directly or indirectly exercise control over the legal person’s economic activities must be sufficient. Often, as the judgement mentioned below illustrates, there will be a multitude of different powers for the contracting authority in relation to the operations of the legal person that provide a basis for determining a sufficient degree of control. In case C-237/99 OPAC/HLM, the Court referred to a number of powers given to the French authorities under law concerning non-profit housing organisations (the HLM companies). These powers included: the determining of both the technical requirements and the prices relating to the construction of the HLM companies’ buildings by way of an administrative decision; that the HLM companies’ statutes were to contain provisions in accordance with standard legal provisions that were very detailed with regard to the companies’ purpose; that the companies were subject to the control of the ministers for finance and housing without specifying the limits to this control or, as claimed by the French government, whether such control consisted solely of a general review of the accounts; that the housing minister had the power to appoint a liquidator, to suspend the companies’ governing bodies, and to appoint a temporary administrator; that this power related to cases of serious irregularities or errors relating to the companies’ operations or negligence of the governing bodies, which was found to consist of control of the operating policy of the company in question, and not just control of legal compliance; that the housing minister could impose a particular operating profile on the HLM companies either by way of requiring a minimum level of dynamism or by limiting their activities to the extent that might be considered excessive; and that a joint ministerial control commission was established in the field of social housing with the power to e.g. undertake inspections of the public housing organisations, propose measures, and to check compliance with centrally determined measures. The Court’s judgements in cases C-353/96 and C-306/97, Irish Foresty Board I and II, demonstrate that a number of powers must be involved in the assessment of whether there is a relevant degree of control. The judgements concerned the original procurement directive’s definition of “legal person governed by public law” which, in the case of Ireland, was “other public authorities whose public procurement agreements are subject to state control”. The Court found that although no provisions expressly established state control over the Irish Forestry Board’s procurement, the Irish state could at least indirectly exercise control even over the Irish Forestry Board’s procurement. The Court referred in detail to state powers of instruction concerning the Irish Forestry Board’s operations and the Irish state’s ability to control the Irish Forestry Board’s economic activities through e.g. requiring state approval for investments above a certain amount and the state’s authority to impose economic targets. The control criterion includes control based on a legal basis (de jure control), whether 39 this basis is regulations pertaining to public law – as in the OPAC/HLM judgement referenced above – or powers pertaining to civil law that depend on agreements, ownership rights, etc. The criterion must also cover the actual control exercised by a contracting authority without legal basis to do so (de facto control).58 The fact that a contracting authority is the majority owner of a company or other legal entity will usually mean that the authority has control over the legal person’s opera58 Inspiration may be found in the group concept of corporate law and in the merger concept of competition law in the assessment of whether the operation of an independent body is subject to the control of a contracting authority. These jurisdictions are partly defined in EU legislation and practice and partly in national law, and it must be emphasised that both of these concepts as regards controlling interest cannot uncritically form the basis for determining the control concept of procurement law.

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tions. However, there may be situations in which the ownership interest is not matched by the usual administrative powers, and the ascertainment of which ownership interest the authority has in the entity should therefore in principle be supplemented by a study of the voting rights and other powers that the authority has. Veto rights for a contracting authority, whether general or relating to specific areas and decisions, may also involve a relevant control depending on the circumstances, if such rights enable the authority to influence the entity’s acquisitions decisions, possibly together with other powers. Akin to veto rights is the situation in which joint control exists between several owners; i.e. where the owners have to agree on decisions concerning the business they jointly control. A classic example is one in which two owners are equal in relation to voting rights, the appointment of management representatives, etc., and in which the equal footing of the parties is not derogated by way of agreement. Even if only one of the owners is a contracting authority, its accession will be necessary for important decisions concerning the operation of the entity, and a control situation may therefore exist as prescribed by the control criterion. If the entity is subject to external public-sector supervision, it must be assessed based on the control criterion whether this supervision enables the public sector to influence the entity’s decisions regarding acquisitions. In accordance with the wording of the provision, neither a supervisory body’s organisational location, nor the basis (legal, contractual or otherwise) on which the supervision is established and has authority in relation to the entity, can be considered relevant pursuant to the control criterion. Conversely, it is required that the supervisory function and authority relate to the entity’s operations and are such that this – possibly in conjunction with other factors – enables the public sector to directly or indirectly influence the entity’s decisions regarding acquisitions. If the supervision relates solely to compliance with legislation, this does not indicate the existence of the necessary control, though of course this depends on the precise nature of the legislation and the supervision. 2.1.4.4. Associations of contracting authorities 40

The category “associations” must be seen as an expression of intent on the part of Community legislators that the procurement directives shall also cover cooperation with public-sector participation, whereby there are entities that are not independent legal persons and which – even based on a functional interpretation – cannot be considered part of local and regional authorities or a body governed by public law. This category is thus a category of accumulation covering forms of cooperation and organisation established with the participation of contracting authorities without the establishment of an independent legal person. Conversely, cooperation which takes place through an independent legal person shall be assessed in relation to the category “body governed by public law”. See section 2.1.4. Article 2(5) ‘public contracts’ means contracts for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities and having as their object the execution of works, the supply of products or the provision of services;

2.1.5. Public contracts59 41

The definition of a public contract in Article 2, para. 1(5) of the Public Sector Directive defines the kinds of contracts covered by the Directive, and thus essentially determines its scope. The definition is supplemented in Articles 2, para 1(6) to Articles 2,

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para 1(9) by the definitions of public works contracts, public supply contracts and public service contracts, thus defining the different kinds of public contracts. The Procurement Directive’s definitions of the contracts it covers are important for ensuring that the Directive is applied so as to fulfil its purpose. When interpreting public contracts as public works contracts, public supply contracts and public service contracts it is important to be aware that the purpose of the Public Sector Directive is to open up access to public contracts and thus help remove restrictions on freedom of establishment and freedom to provide services. The definitions of contracts should be interpreted according to their purposes and with a view to ensuring the effectiveness of the Public Sector Directive. 60 A number of elements are common to all kinds of contracts, regardless of whether 42 they concern building or civil engineering works, goods or services. For example a contract must be entered into by a contracting authority and it must be a contract for pecuniary interest. These general elements of a public contract are included in the definition of a public contract in Article 2, para. 1(5) of the Public Sector Directive and they are commented on in sections 2.1.5. of this Commentary. As for the different kinds of contracts, see this Commentary on Article 2, para.1(6)-(9). The general elements of a public contract are: – The contract is between one or more contracting authorities on the one hand and one or more economic operators on the other hand. – The contract must be in writing. – The contract must be for pecuniary interest. – The contract must be for the execution of works, the supply of goods or the performance of services that are covered by the Procurement Directive. 61 Even without the express definition in Article 2, para. 1(5) of the Public Sector Directive there would be little doubt that the concept of a contract in the EU’s procurement directives is an independent EU legal concept whose content must be determined on the basis of Union law which applies equally to all EU Member States.62 The definitions of ‘agreements’ or ‘contracts’ in the national laws of the member States are thus not relevant to determining which contractual relations apply under the procurement directives. The same applies to the individual elements of the definition in Article 2, para. 1(5) of the Public Sector Directive. For example, what constitutes a contract for pecuniary inter59 See Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 385 et seq.; Sune Troels Poulsen, Peter Stig Jakobsen & Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, p. 179 et seq.; Martin Trybus, Roberto Caranta & Gunilla Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, p. 24 et seq., Christopher Bovis, The Law of EU Public Procurement, p. 371 et seq., Christopher Bovis (ed): Research Handbook on EU Public Procurement Law, p. 89 et seq. 60 See also the Introductory chapter of this Commentary on the purposes of the procurement directives. As emphasised in Case C-399/98 Ordine degli Architetti di Milano, para. 55, the assessment of a situation in terms of the definitions in the directives must be such as to ensure that the Directive is not deprived of practical effect, particularly where a situation displays special characteristics because of the provisions of national law applicable to it. 61 In this context, it is not relevant whether a given contract concerns meeting a need of general interest; see Case C-264/03 Commission v France, para. 48. 62 See Case C-220/05 Auroux, para. 40, where the Court of Justice of the European Union (CJEU) denied that the legal classification of works in French law was relevant to whether the contract was subject to the earlier Directive for the procurement of building or civil engineering works. The CJEU referred to the fact that the Directive made no express reference to the laws of the Member States for the purpose of determining its meaning and scope, and the legal classification of the contract in French law was irrelevant for determining whether the contract fell within the scope of the Directive.

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est does not depend on the laws of the Member States but is an independent concept of Union law. The term ‘written’ or ‘in writing’ is directly defined in Article 2, para. 1(18) of the Public Sector Directive. 2.1.5.1. The parties The Public Sector Directive’s procedural rules for entering into contracts only apply to public purchases. For there to be a public contract, as defined in Article 2, para. 1(5) of the Directive, at least one of the parties to the contract must be a ‘contracting authority’. For these purposes a public body is not limited to State or local authorities, but includes other bodies governed by public law; see the Commentary on Article 2, para. 1(4) of the Directive.63 The counterparty or parties to the contract must be one or more economic operators, i.e. one or more suppliers, contractors or service providers, depending on whether the contract is for the supply of goods, execution of building or engineering works or provision of services. However, these terms do not impose requirements as to the nature or extent of the business carried on by the counterparty. In order to be a supplier, contractor or service provider it is sufficient that the party is able to supply the goods, execute the works or provide the services, including via subcontractors, and is thus able to offer these goods and services on a market.64 It is not relevant to the application of the procurement directives whether a contracting authority delegates authority to some other entity to carry out an EU procurement procedure, award of the contract or otherwise administer purchases with a view to meeting the needs of the contracting authority. If a contract is entered into with a contracting authority as a party, which thus obtains rights and obligations under the contract, the contract is attributable to the contracting authority for the purposes of the definition of a contract in Article 2, para. 1(5). If an entity other than a contracting authority acts in its own name and for its own account to make a purchase, the obligation to carry out an EU procurement procedure will depend on the circumstances of the other party, but if the purchase is transferred to a contracting authority it will arise out of the relation between the other entity and the contracting authority.65 44 Where a contracting authority enters into a purchase agreement on behalf of an entity that is not bound by the procurement directives, the directives do not apply provided that from the start the purchase as a whole is for the purposes of the entity that is not bound.66 In Case C-44/96 Mannesmann, the CJEU stated that a contracting authority’s transfer of its rights and obligations under a public works contract to an undertaking that was not a contracting authority did not mean that the contract ceased to be a public works contract.67 43

63 On the other hand, Directive 2014/25/EU of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors (the ‘Utilities Directive’) applies to entities other than the contracting authorities covered by the Public Sector Directive; see Article 4 of the Utilities Directive and section 4 in Part II of this Commentary. 64 See section 2.1.10. of this Commentary on the definitions of ‘economic operator’ in Article 2, para. 1(10) of the Procurement Directive. The concept of economic operators also covers contracting authorities, including entities that may be wholly or partly owned by contracting authorities. 65 On contracts, including framework contracts, entered into by a central purchasing body, whereby other contracting authorities buy either from the central purchasing body or in accordance with contracts entered into by the central purchasing body, see the Commentary on Article 37. 66 Case C-44/96 Mannesmann, para. 44. 67 Case C-44/96 Mannesmann, para. 43.

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2.1.5.2. In writing The Public Sector Directive only applies to written contracts. The term ‘written’ or ‘in 45 writing’ is specifically defined in Article 2, para. 1(18), and includes information transmitted and stored by electronic means. According to the wording of the Public Sector Directive, a contracting authority can enter into an oral purchase contract without following the procedures of the Directive. However, it is usual for purchase agreements of a value that exceeds the thresholds of the Public Sector Directive to be in writing so there is secure evidence of the rights and obligations of the parties under the agreement. The presumption that agreements of such value are entered into in writing is such that an oral contract would presumably be regarded as an attempt to circumvent the requirements of the Directive, unless the contracting authority could show reasonable grounds for not entering into a written contract. Furthermore, given the purpose of the Public Sector Directive, the requirement for writing must presumably be interpreted as covering any written statement of the parties’ rights and obligations under the contract between the parties. This means that the form of the written document should not matter, nor whether the parties have signed it, as long as the written document contains all the important terms setting out the parties’ primary obligations under the contract. There are good reasons for treating oral orders placed on the basis of economic operators’ standard terms of trade and list prices as written orders. This must at least apply if an oral order is confirmed in writing. A contracting authority’s actual receipt of goods or services on the basis of standard delivery terms might also be regarded as constituting a written agreement. In contrast to the procurement directives, under the Treaty on the Functioning of the 46 European Union (TFEU) a contracting authority is not required to contract in writing; see section 0.3.2.4 of this Commentary. This means that an oral contract that falls outside the scope of the procurement directives will usually still be covered by the obligation to ensure adequate advertising. 2.1.5.3. Pecuniary interest The procurement directives only cover contracts for pecuniary interest. This element 47 of the definition of a contract is significant for defining the scope of the procurement directives, among other things in relation to benchmark offers and in-house procurement; see sections 2.1.5.3.3. and 12. of this Part of Commentary.68 On the significance in relation to concession contracts and framework agreements, see the Commentary in Part I, section 33 and Part III. 2.1.5.3.1. Bilateral performance The requirement that a contract should involve reciprocal obligations is relevant to a 48 situation where only one of the parties is bound to provide consideration. If a contracting authority undertakes obligations towards a body or person without that body or per68 It is peculiar that the different language versions of the Public Sector Directive are not identical in the requirement put forth in this part of the definitions. In the Danish edition the expression is equivalent to a bilateral contract or a synallagmatic contract. In the English version of the Public Sector Directive the term is “contracts for pecuniary interest”, in the German edition the term is “entgeltliche Verträge” (contracts with a payment), while the French version apparently is similar to the Danish version with the expression “contrats à titre onéreux” (agreement with obligations). The content of the versions seems very different and set the ground for very different interpretations of the concept.

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son having any obligation to the contracting authority, this is not covered by the procurement directives. Thus a unilateral provision of a subsidy or support for a specific activity is not covered by the procurement directives.69 However, in practice it can be difficult to assess whether a given sum constitutes payment for the provision of some service, for example, or unilateral provision of support that is subject to a condition that the recipient of the support must use the support for a specific purpose. The distinction between these two is illustrated in Case 380/98 University of Cambridge, which concerned the distinction between payment of support for research and payment for the provision of a service, and even the definition of a contracting authority; see Article 2, para. 1(4) of the Public Sector Directive and the Commentary on it. The CJEU’s judgment is also relevant to distinguishing between contracts for pecuniary interest and the unilateral provision of support.70 49 A contract will not be for pecuniary interest if a contracting authority receives goods or services as a gift, without an obligation to provide reciprocal consideration. On the other hand, if the gift is a financial subsidy which the authority can use to make a purchase, the authority’s purchase will be covered by the procurement directives. 50 If a contracting authority is responsible for providing a service to the public, it can fulfil its responsibility by entering into an agreement with a commercial undertaking to provide the service either for payment by the authority or by paying support for individual citizens to use to buy the service from a supplier of their choice. There is little doubt that in the first situation the contracting authority is entering into an agreement covered by the Public Sector Directive and that in the second situation there is no agreement covered by the Directive. Concession contracts for the provision of services are not covered by the Public Sector Directive; for further on concession contracts, see Directive 2014/23 and the Commentary to this. A contracting authority may also establish a general group of suppliers and enter into contracts with all undertakings, without any restriction other than that they must meet objective, proportionate and non-discriminatory requirements laid down by the authority. 51 A contract for pecuniary interest does not necessarily mean that the good or construction work will be owned by the public authority. Instead, the requirement is that the contract must be of direct economic benefit to the contracting authority. 71 Such an economic benefit can be held to exist in three different circumstances. First, such a benefit is clearly established in situations when the contracting authority is to become owner of the subject of the contract. Second, such a benefit may also be held to exist “where it is provided that the contracting authority is to hold a legal right over the use of the works which are the subject of the contract, in order that they can be made available to the public..”.72 Finally, the economic benefit may also lie in the economic advantages that the contracting authority may derive from the use or transfer of the work etc., in the fact that it contributed financially to the realization of the work, or in the assumption of the risks were the work to be an economic failure, see C-451/08, Helmut Müller, para. 52. Such economic benefit may in other words arise in very different circumstances.

69 However, the general prohibition of State aid in Article 107 TFEU, and other rules on State aid, such as granting exclusive or special rights, could be relevant. 70 Case C-380/98 University of Cambridge, paras 22-24. 71 C-451/08, Helmut Müller, para. 49. 72 C-451/08, Helmut Müller, para. 51 and C-399/98, Ordine, paras. 67, 71 and 77.

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2.1.5.3.2. On the basis of agreement This means that purchasing of goods, services or construction works is covered by the Directive only in so far as it is based on contracts; whereas the provision of services on other bases, such as law or regulations, or employment contracts, is not covered (originally expressed in 8th recital in the preamble to Directive 92/50/EEC).73 It is hard to see why the recital should not continue to be generally applicable since both before and now it concerns the general concept of a contract which is the same for both procurement directives. Moreover, this recital should not be allowed to form the basis for significant exceptions to the scope of the procurement directives; see directly below.74 As for employment contracts, Article 10(g)of the Public Sector Directive provides that the Directive does not apply to employment contracts; see section 10 of this Commentary. The reason why the procurement directives only cover contracts for pecuniary interest is that they are linked to the general concept of a contract which must be assumed to apply equally to all kinds of public contracts, whether for public works, public supply or public services. The fact that contract fulfilment is part of the performance of a task required by law, and possibly directly required by law, does not mean that the contract fulfilment is to be regarded as being provided on the basis of a law or administrative regulation. This would presumably require the legislation to indicate that a specific undertaking should provide the service, either by the legislation naming an undertaking or by its general provisions resulting in a situation in which only a specific undertaking shall provide the service. An example of the first situation is Case C-275/98 Unitron Scandinavia, concerning Danish legislation on the ear-tagging, registration and movement of pigs, which was formerly the basis for Danske Slagterier’s administration of an ear-tagging scheme for pigs; until 2001 it was explicitly stated in the Executive Order that ear tags for pigs were to be supplied by Danske Slagterier. If an undertaking does not provide a service or supply goods on some ‘other basis’, such as on the basis of legislation, the contracting authority must be assumed to have placed an order. However, this might be further qualified by stating that the contracting authority must be bound by the legislation to use the undertaking in question, or even that the legislation must regulate all the circumstances for the provision of the service or supply of the goods, so that the contracting authority has no possibility of supplementing the legislative provisions by an agreement with an economic operator on price or other terms. The purpose of the Public Sector Directive, which is to counter the risk of a public authority favouring certain undertakings, favours the idea that a condition for a transaction falling outside the scope of the Procurement Directive must be that the ‘other basis’ for performing a task (such as legislation) does not leave the contracting authority any choice with regard to who shall perform the task, or that there is no scope for opting out of the provisions of the legislation.

See also C-451/08, Helmut Müller, paras. 56 and 57. In this connection, there is no question that the procurement directives also apply to contracts where there is only one possible supplier and where this is based on exclusive rights; see Article 32 of the Public Sector Directive which allows for a negotiated procedure without publication of a contract notice in such cases. 73

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If, while complying with the TFEU, it is provided that a given service shall be provided (or a good shall be supplied) by a given undertaking, so as to exclude a scope for competition, there does not seem to be any reason why the parties should not supplement the terms of the legislation, provided the terms for performing the task comply with the legislation. Any other result would be highly impractical. Case C-399/98 Ordine degli Architetti di Milano concerned Italian legislation under which, as a condition for obtaining planning permission, a private property developer had to undertake to carry out certain infrastructure work, such as building roads, sewers, links to public utilities and building various institutions, which were made necessary by the property developer’s work, but where the municipality retained the right to carry out the work instead of the property developer and to demand payment for the work from the developer. With reference to the authority’s choice in the matter, and to the fact that the developer and the municipal authority in any case had to agree a development plan for the infrastructure work, the CJEU found that there was such a contractual arrangement as referred to in Article 2, para. 1(5) of the Public Sector Directive. Thus the legislation did not involve the carrying out of a task on some ‘other basis’ than a contract.75 56 Article 11 of the Public Sector Directive contains a provision that might be thought to suggest that public contracts only include contracts entered into on the basis of an agreement. According to this provision, the Public Sector Directive does not apply to service contracts awarded on the basis of an exclusive right which the service provider enjoys pursuant to a published law, regulation or administrative provision. As described in the Commentary on Article 11, this provision only applies to the exclusive rights of some other contracting authority, so the general assumption about contracts being entered into on the basis of an agreement is not restricted by this.76 As expressly provided in relation to the exception in Article 11 of the Public Sector Directive, there is a general assumption that a law or administrative provisions that provide the basis for procurement must comply with the TFEU and other Union law principles. 2.1.5.3.3. Benchmark offers 57

A legal person cannot enter into a contract for pecuniary interest with itself. This means that if a contracting authority carries out a task for itself, possibly under an agreement with an entity that is part of the authority, it will not be covered by the procurement directives’ concept of a contract; see the commentary on Article 12 on the in-house rule. Similarly, tenders submitted by an internal unit of a contracting authority are not regarded as tenders within the meaning of the procurement directives. Such internal tenders or benchmark offers are often a technique used by contracting authorities to assess whether it is appropriate for a task to be performed by an external entity. If the benchmark offer, and thus the internal performance of a task, is judged to be more appropriate for the contracting authority, so that no internal tender is accepted and the task is carried out in-house, the procurement procedure will be annulled as the contracting authority will have abandoned the intention to make an external purchase.

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2.1.5.4. Contracts for executing works, supplying goods or performing services An important element of the concept of a contract in the procurement directives is 58 that it only covers contracts that involve a purchase, and it is the contracting authority that makes the purchase. The purchase can consist of the contracting authority purchasing the execution of works, the supply of goods or the provisions of services that are covered by the Public Sector Directive; see Article 2, para. 1(5). Contracts that do not concern such purchases fall outside the scope of the procurement directives. For example, contracts whereby a contracting authority sells assets or provides a service are not covered by the Public Sector Directive to the extent that the authority does not make a purchase as part of the sale.77 Sometimes a contract for the sale of the assets of a contracting authority, for example an undertaking, can be linked to a contract whereby the purchaser shall provide services to the authority in future, possibly including services based on the asset purchased.78 Such a contract would involve the contracting authority concluding a contract within the meaning of Article 2, para. 1(5) of the Public Sector Directive. If a contracting authority rents out premises it owns, the contract will not contain the necessary element of a purchase. This will be so even if the tenant maintains the premises. However, if the tenant’s obligation to maintain the premises covers more than the property rented, the contract will involve the authority making a purchase. 2.1.5.5. No limitation of the number of potential suppliers Recent case law from the CJEU shows that when a public purchase is organised with- 59 out any limitation on the number of economic operators gaining access to deliver there will be no basis for the use of the procurement directives. In C-410/14, Falk Pharma, the Court established that arrangements where the contracting authority does not intend to limit the number of potential suppliers to the specific public market but where all interested companies have the opportunity to participate as long as certain conditions are met are not covered by the directive. In paragraph 42 the Court stated that for a contract scheme “such as that in the main proceedings, through which a public entity intends to acquire goods on the market by contracting throughout the period of validity of that scheme with any economic operator who undertakes to provide the goods concerned in accordance with predetermined conditions, without choosing between the interested operators, and allows them to accede to that scheme throughout its validity, does not constitute a public contract within the meaning of that directive.” This means that such arrangements is not covered by the procurement directives and thereby not subject to the procedures contained in the directives. However, the Court also stated that the general EU law principles must be respected if there is a clear cross-border interest. The application of these principles will probably lead to an obligation to publish the criteria that are relevant for the contract and that all applicants must be treated equal – a very lenient requirement. 77 However, there may be a requirement for an EU procurement procedure under other rules. First, the TFEU may impose an obligation to ensure adequate advertising; see the principle in Case C-324/98 Telaustria. Second, it may be appropriate to carry out an EU procurement procedure with a view to ensuring that the sales transaction does not involve unlawful State aid, see e.g. Commission Communication on State aid elements in sales of land and buildings by public authorities (OJ C 209, 10.7.1997, p. 3), and the Commission’s XXIIIrd Report on competition policy (1993), paras 402-403, with regard to the sale of public undertakings. 78 An example is C-145/08, Club Hotel Loutraki, covering a sale of a public company combined with provision of services.

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The decision means that in Member States where the public sector uses so-called free choice-schemes, i.a. models according to which the public authorities are obligated to provide certain services to the citizens but when the citizen has freedom to choose the specific supplier, the public authority must ensure, typically, that the potential providers and suppliers have the necessary capabilities and qualifications and will have different options as to how to organise such group of suppliers. Based on the Falk Pharma-case the public authority can establish the level of quality, deliver, price etc. allowing every economic operator meeting such standards to be part of the group of suppliers/ providers.79 Article 2, para 1(6) ‘public works contracts’ means public contracts having as their object one of the following: (a) the execution, or both the design and execution, of works related to one of the activities within the meaning of Annex II; (b) the execution, or both the design and execution, of a work; (c) the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority exercising a decisive influence on the type or design of the work;

2.1.6. Public works contracts80 The concept of construction works is basically continued from the precious directives. A few precisions are intended, however, and these are presented in recital 8 and 9 in the preamble: ”A contract should be deemed to be a public works contract only if its subject-matter specifically covers the execution of activities listed in Annex II, even if the contract covers the provision of other services necessary for the execution of such activities. Public service contracts, in particular in the sphere of property management services, may, in certain circumstances, include works. However, in so far as such works are incidental to the principal subject-matter of the contract, and are a possible consequence thereof or a complement thereto, the fact that such works are included in the contract does not justify the qualification of the public service contract as a public works contract. However, in view of the diversity of public works contracts, contracting authorities should be able to make provision for contracts for the design and execution of work to be awarded either separately or jointly. This Directive is not intended to prescribe either joint or separate contract awards. The realisation of a work corresponding to the requirements specified by a contracting authority requires that the authority in question must have taken measures to define the type of the work or, at the very least, have had a decisive influence on its design. Whether the contractor realises all or part of the work by his own means or ensures their realisation by other means should not change the classification of the contract as a works contract, as long as the contractor assumes a direct or indirect obligation that is legally enforceable to ensure that the works will be realised.” 62 A public works contract is a public contract that thus contains the general elements of the definition of a public contract in Article 2, para. 1(6) of the Public Sector Directive. There must be a contract for pecuniary interest in writing between one or more economic operators and a contracting authority; see section 2.1.5. of this Commentary on the general elements of a public contract. 61

79 Such arrangements are also not covered by the Concessions Directive, see recital 13 in the preamble to Directive 2014/23 /EU. 80 See Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 399 et seq.; Sune Troels Poulsen, Peter Stig Jakobsen & Simon Evers Hjelmborg, EU Public Procurement Law, p. 190; Martin Trybus, Roberto Caranta & Gunilla Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, p. 28.

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It is not a requirement that an economic operators should be able to carry out the work themselves, but that they should be able to arrange for the works to be carried out.81 The consideration for the operator’s performance must be a price that can be calculated in money.82 Special rules apply to concession contracts for public works; see Directive 2014/23. A public works contract differs from a contract for the supply of goods or the provi- 63 sion of a service as it is not defined on the basis of the kind of purchase the purchase concerns (goods or services) but rather the specific purpose of the purchase in the form of building and construction works. A public works contract can thus cover purchases of both goods and services, but only as part of a specific context. Given the specific purpose associated with the purchase of the goods and services, a public works contract must necessarily be defined as encompassing both supply contracts and services contracts. This is reflected in the definitions of the different types of contracts in Article 2, para. 1(6) of the Public Sector Directive. The connection between goods and services required for there to be a public works 64 contract is laid down in Article 2, para. 1(6) of the Public Sector Directive, so that a public works contract is characterised by having one of the following elements: – the execution, or both the design and execution, of works related to one of the activities within the meaning of Annex II of the Public Sector Directive; – the execution, or both the design and execution, of a work fulfilling an economic or technical function; see the definition in the last sentence of Article 2, para. 1(7) of the Public Sector Directive; or – the execution of a work corresponding to the requirements specified by the contracting authority; see also the definition of a public works contract in the last sentence of Article 2, para. 1(6)(c) of the Public Sector Directive. 2.1.6.1. Based on Annex II The first of these definitions of a public works contract is based on the nature of the 65 activities carried out and, in contrast to the other two definitions, it does not relate to the result of the activities. Under the first definition it is not relevant whether the result is intended for some specific function, but only that the activities are referred to in Annex II of the Public Sector Directive.83 The activities listed in Annex II correspond to the part of the NACE nomenclature (Statistical classification of economic activities in the European Community), which classifies building and civil engineering works. However, the groups and codes as well as the descriptions and comments are based on the CPV (Common Procurement Vocabulary). In other words, the content of Annex II is the NACE classification ‘translated’ into the CPV nomenclature. Previously it was the NACE definitions that were decisive for defining the activities that are relevant to the first definition in Article II of the Public 81 Case C-399/98 Ordine degli Architetti di Milano, paras 88-96, which concerned the word ‘contractor’ in the definition of a public works contract in Directive 93/37/EEC on the coordination of procedures for the award of public works contracts. See similarly Case C-220/05 Auroux, paras 38 and 44. 82 For example, the consideration could be that the contracting authority transfers a plot of land to the contractor in consideration for the contractor constructing a building to meet the needs of the authority, and which the authority has a right to use without paying rent or for a reduced rent for a number of years. Such an agreement would be a public works contract; see the wording ‘the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority’ in Article 2, para. 1(6) of the Public Sector Directive. 83 The word ‘works’ can hardly be given independent meaning.

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Sector Directive. This has now changed and it is directly stated in Annex II that in the event of any difference of interpretation between the CPV and the NACE, the CPV will apply. The use of the CPV nomenclature’s descriptions, codes etc. in Annex II contributes substantially to clarifying which building and civil engineering works are covered by the first definition in Article 2, para. 1(6)(a), at least when taken together with the description at heading level. It ought to be, but is not always, easy to assess whether a given activity is covered by the first definition of a public works contract when this is based on a description in Annex II. This is particularly the case when a correct classification of an activity as building and civil engineering works rather than as a service, or the opposite, is decisive for determining the type of contract and thus for the obligation to carry out an EU procurement procedure given the very much higher threshold that applies to building and civil engineering works than to the supply of goods or provision of services.84 In the Ordine degli Architetti di Milano case the CJEU ruled that a number of infrastructure works were building and civil engineering works and therefore covered by the kinds of works listed in Annex II of Directive 93/37/EEC on the coordination of procedures for the award of public works contracts, then in force. The works comprised streets, leisure areas, parking spaces, sewers, networks for water, electricity and gas, street lighting, formal parks and gardens as well as community centres, and cultural and health facilities. The construction of the outer shell of a theatre was also found to be included in NACE Group 45 on the construction of buildings.85 The groups of the NACE nomenclature that form the basis for the descriptions and CPV codes etc. listed in Annex II of the Public Sector Directive under section F: construction, including the following sub-groups: – – – – –

site preparation buildings of complete constructions, or parts thereof; civil engineering building installation building completion renting of construction or demolition equipment with operator 2.1.6.2. Based on the definition of a work

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The second definition of a public works contract in Article 2, para. 1(6) of the Public Sector Directive is based on the definition of a work as being ‘the outcome of building or civil engineering works taken as a whole which is sufficient of itself to fulfil an economic or technical function’. This second definition thus provides that the subject of a public works contract is the execution of or the project design and execution of building or civil engineering works as defined in Article 2, para. 1(7) of the Directive. In the Ordine degli Architetti di Milano case the CJEU ruled that the works, which under Italian law were primary or secondary infrastructure works, were activities of the kind referred to in Annex II of Directive 93/37/EEC on the coordination of procedures for the award of public works contracts, then in force, but they also constituted works sufficient in themselves to fulfil an economic and technical function. The works involved the construction of roads, leisure areas, parking space, sewers, networks for the distribution of water, electricity and gas, street lighting, pre-school facilities, primary 84 There is a corresponding problem in distinguishing between services that are subject to the EU procurement procedures and those that are not which (pursuant to Articles 74 and Annex XIV) should be made on the basis of the CPV nomenclature; see the discussion of these provisions in this Commentary. 85 Case C-399/98 Ordine degli Architetti di Milano, para. 59.

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and secondary schools, local markets, churches, sports facilities, community centres, cultural facilities and health facilities. On the other hand, the CJEU did not find that the same applied to the construction of the outer shell of a theatre which it ruled was part of building and construction works as defined in the provisions of the previous Public Sector Directive.86 This is surprising, since the work on the roof was to be carried out subsequently, and the arrangement of the work was presumably only made with regard to the division of responsibilities between the City and the property developer.87 Case C-220/05 Auroux, concerned a contract between Roanne municipality and a contractor for the construction of a leisure centre which, in the first phase, was to consist of a multiplex cinema and commercial premises which were intended to be transferred to third parties and a car park intended to be transferred to the municipality. The later phases, which would require a new contract, concerned the construction of other commercial or service premises and a hotel. The CJEU found that the leisure centre was intended to provide for commercial activities and the provision of services, so that the contract should be seen as fulfilling an economic function. The CJEU also seems to have found that the work, in all its phases, including the subsequent construction of commercial premises and a hotel, was a single construction and civil engineering work.88 In Case C-16/98 Commission v France (Sydev), the CJEU considered whether contracts for maintenance and extension of existing electricity supply and street lighting networks should be considered as one building and civil engineering works, and thus added together for the purpose of the threshold value. As for the argument that such maintenance and extension works could not be said to constitute an independent function, the CJEU found that the result of the work would constitute an integrated part of the function of the existing network. Thus the question whether there is a work must be assessed in the light of the economic and technical function fulfilled by the electricity supply and street lighting networks in question.89 The definition of a public works contract in the last sentence of Article 2, para. 1(7) of 67 the Public Sector Directive is particularly important for the application of the threshold value for public works contracts, since all contracts relating to a building and civil engineering works must be added together for the purpose of the threshold; see Article 2, para. 1(7) of the Directive. In relation to the definition of public works contracts as opposed to other kinds of purchase contracts it is difficult to see the value of the second definition as distinct from the first definition (and the third definition; see below). Presumably the second definition and its focus on the purpose rather than one the nature of the activities also covers purchases other than those included in the types of activities listed in Annex II of the Directive, if these purchases are a necessary part of the execution or design and execution of the works, as defined in Article 2, para. 1(7); i.e. they are included in the building and engineering activities resulting in a work with an independent function.

Case C-399/98 Ordine degli Architetti di Milano, paras 59-60. Particularly in the light of the CJEU’s comments in Case C-16/98 Commission v France (Sydev), paras 35-48, on the definition of public works on the basis of a corresponding definition in Article 1(2)(b), last sentence, in Directive 93/38/EEC coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors, whereby the CJEU found that the economic and technical function was decisive, even though several contracts had been entered into by different contracting authorities. In relation to the threshold for the value of the works, there is no doubt that the total value of all the work on the theatre should be taken into account. 88 Case C-220/05 Auroux, paras 41-42. 89 Case C-16/98 Commission v France (Sydev), para. 38. 86

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2.1.6.3. Works defined by the contracting authority 68

The purpose of the third definition of public works contracts is clearly to ensure that all building and engineering works carried out to meet the requirements specified by a contracting authority are covered by the Public Sector Directive, regardless of the means used. The costs associated with the works, including infrastructure works, means that works are often organised and financed in untraditional ways. However, if public works correspond to needs specified by a contracting authority and the agreement has the general elements of a public works contract,90 then any contract for building and engineering works carried out to meet the requirements specified by a contracting authority will be a public works contract. Among other things there will in any event be a public works contract if a contracting authority enters into a lease contract for a building that has not yet been constructed and which is constructed to meet requirements specified by a contracting authority. 91 Where a contracting authority does not specify the form of the building but enters into a leasehold contract on the basis of the owner’s design proposal, there could be found to be a public works contract, depending on the circumstances. In any case, it must be assumed that even a modest contribution by the contracting authority to the design would be sufficient, given that there is only the condition that the requirements should be specified by the contracting authority. In Case C-220/05 Auroux, Roanne municipality’s contract with the contractor for the construction of a leisure centre was found to be for building and civil engineering works pursuant to Article 1(c) of Directive 93/37/EEC on the coordination of procedures for the award of public works contracts. The leisure centre encompassed a multiplex cinema and commercial premises which were to be sold to third parties and a car park which was to be transferred to the municipality. However, it was found that the leisure centre as a whole corresponded to the municipality’s specified requirements, and it was emphasised that according to the terms of the contract the construction of the leisure centre as a whole was intended to improve the quality of life in a particular area of the town.92 In his Opinion in Case C-470/99 Universale-Bau, Advocate-General Albers found that the statement of a single functional requirement relating to the extension of the principal sewage plant in Vienna could not be regarded as a specification of the authority’s requirement whereby the contract between the City of Vienna and the contractor EBS for the operation of the plant should be treated as a building and civil engineering contract.93 That the needs should only be specified pursuant to Article 2, para. 1(6)(c) of the Public Sector Directive must be seen as expressing a stricter formal requirement com90 Including that the contract is for pecuniary interest and there is thus not a building and engineering works concession; such contracts would be subject to the Concessions Directive 2014/23, se Part III of the Commentary. 91 According to the Commission’s guidelines for the previous Directive on the award of public works contracts, Part II.4.4, this variation of the definition must be interpreted in the light of economic reality, where the contracting authority may prefer to enter into a contract for management and administration under which the building and construction work is entirely financed and carried out by the contractor who ultimately receives payment for this from the contracting authority. According to the same section, it appears that a works management contract means that the contractor constructs a building to meet the specific needs of the contracting authority which is contractually bound to buy the building once it is finished. It is also stated that the expression ‘to have public works carried out’ is aimed at all forms of contracts under which a contracting authority can award a contractor a greater or lesser number of tasks, for example financing, purchasing a building plot, design work etc., in order to be relieved of some of the traditional tasks connected with executing building and construction works. 92 Case C-220/05 Auroux, para. 42. 93 Opinion of Advocate-General Albers in Case C-470/99 Universale-Bau, points 59-60.

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pared with Article 1(c) of Directive 93/37/EEC, according which the needs were to be ‘laid down’ by the contracting authority. On the other hand, other circumstances, such as the duration of any lease, whether the lease can be terminated, and whether the contracting authority has a right or an obligation to buy, cannot be assumed to be relevant. What is relevant to the third definition is only whether the contract concerns the execution of a work corresponding to the requirements specified by the contracting authority. However, there is presumably a limitation in that under the third definition the contract must relate to building or civil engineering works. Also the third definition applies to contracts for the execution of a work the result of which must independently fulfil an economic or technical function. This requirement may be relevant to Article 10(a) of the Public Sector Directive which excludes contracts for the acquisition or rental of land, existing buildings or other immovable property from the scope of the Directive. It will at least help resolve problems of definition that arise, for example, where a contracting authority rents an existing building subject to certain reconstruction or extension being carried out. Thus, only if it is assessed that the result of the building or construction work carried out on the basis of the leasing agreement fulfils independent economic or technical functions will the leasing contract be a contract for building a construction works, otherwise it will be covered by the exception in Article 10(a) of the Directive. 94 In the light of the CJEU’s judgment in Case C-16/98 Commission v France (Sydev), see above, it can be questioned whether the definition of building and civil engineering works distinguishes between public works contracts and public services contracts in relation to existing buildings where certain building works must be carried out to meet a contracting authority’s special needs. In the Sydev case the CJEU was of the view that independent maintenance and extension works to existing electricity supply and street lighting networks, which might not be said to have an independent function in itself, would be subsumed within the function fulfilled by the networks once completed, and should be assessed on the basis of that function.95 Similarly, one can say that the reconstruction or extension of an existing building, where the work does not have an independent function, must be regarded as constituting part of the function of the building as a whole, and must thus be regarded as building and civil engineering works.96 If this cannot be assumed, the distinction must be based on the rules for mixed contracts for public works contracts and public service contracts, to the effect that the lease must be regarded as a building and construction contract unless the building and construction work is subordinate to the service provision, i.e. the part of the contract that concerns the existing building; see also section 3.2. of the Commentary on such mixed contracts, commenting on Article 3, para. 2 of the Public Sector Directive. This was the case in C-213/13, Impresa Pizzarotti, where the Court was asked to con- 69 sider whether a specific contract was to be seen as rental contract (and thereby exempt from the current Public Sector Directive Article 10 (a) or a construction contract according to Article 2, para. 1(6). The circumstances of the case was that Comune di Bari published an announcement of a market investigation with the intent to build a new head quarter for the courts in the city of Bari. In the announcement it was stated that a tenderer was to initiate the con94 See section 10 of this Commentary on this provision, including a discussion of the situation where a contracting authority wishes to rent a new building. 95 Case C-16/98 Commission v France (Sydev), para. 38. 96 The Sydev case concerned whether the value of various contracts should be added together for the purposes of the threshold. However, in principle the definition of public works contracts in Article 2, para. 1(5) of the Public Sector Directive should be interpreted in the same way in differing contexts.

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struction phase as soon as possible and indicate which economic means would be available (including the size of the rental amount) just as an official and exhaustive list of the requirements regarding structure, function and organisation in connection to the building process was annexed to the announcement. Pizzarotti was appointed to carry through the project and subsequently the planned financing was first reduced and secondly completely excluded. Pizzarotti proposed to start the construction of the buildings which according to plan were to be rented by Comune di Bari, but the municipality did not react to Pizzarottis proposal which caused Pizzarotti to initiate a case at the Italian courts. The CJEU was asked whether the contract in question was a construction contract or a rental contract. The Court stated that the qualification of the contract would be subject to EU law and not national law (paragraph 40). Furthermore the Court emphasized that the starting point would be the main purpose of the mixed contract (paragraph 41). Since the construction work was a precondition for the rental contract the former was the main purpose.97 It was a requirement that the building should fulfil the described need of the public authority.98 This will be the case when the contracting authority has established measures with the purpose of defining the character of the construction work or at least have had a decisive influence on the planning of the project.99 In the annex the contracting authority had stated the following requirements and information: The number of specific cases (criminal and others), the number of weekly meetings for each court the number of judges and public prosecutors, the number of administrative personel, police officers and security persons, the number of lawyers within the area of Bari, the required number of offices and court rooms, and rooms for conferences, meetings and filing, the size of the rooms, methods for internal communication, and some common needs, e.g. parking facilities (paragraph 46). Even though there were characteristics indicating a rental agreement (primarily that the rental costs over 18 years the value of which was considerably lower than the collective costs of building the facility) these were not sufficient and the Court pointed out that the main purpose was the decisive factor, not the payment (paragraph 50). In conclusion, the Court found that the contract concerned construction. 70 As stated above, the Public Sector Directive applies to contracts for the purchase of goods and services which together are intended to realise a specific purpose in the form either of building and engineering works covered by Annex II of the Public Sector Directive or a public works contract as defined in Article 2, para. 1(7) of the Directive. The particular context in which goods or services are included in a contract for works must also be fundamental to distinguishing between public works contracts on the one hand and contracts for the supply of goods or provision of services on the other hand, for example where the same kind of good may be supplied and installed in a new building, but can also be supplied and installed in an existing building as an isolated purchase. It must be assumed that in distinguishing between public supply contracts and public works contracts there is an emphasis on whether the purpose of the contract is to make movable property available to the contracting authority or to transfer the result of building and engineering works to the authority, where this result constitutes a building or buildings or a construction incorporated in an existing building or buildings. 71 In C-451/08, Helmut Müller GmbH, the Court was presented with a situation concerning the sale of a piece of land (Witterkind barracks) in Wildeshausen, Germany. The C-213/13, Impresa Pizzarotti, para. 42. C-213/13, Impresa Pizzarotti, para. 43. 99 C-213/13, Impresa Pizzarotti, para. 44.

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Court had to consider whether the contract in question was a construction contract. In the process of the sale there were several interested buyers and these had different requirements in their offers. The municipality was primarily acting as a public authority considering an authorization for the use of the area. The municipality therefore had some requirements regarding the use of the area and the buildings and in relation to this process the question arose whether the conditions connected to the purchase and the entire process in reality was a construction contract as this concept is established in the directive. The Court stated that “In the Member States of the European Union, the execution of building projects, at least those of a certain size, is normally subject to prior authorisation by the public authority having urban-planning powers. That authority must assess, in the exercise of its regulatory powers, whether the execution of the works is in the public interest. However, it is not the purpose of the mere exercise of urban-planning powers, intended to give effect to the public interest, to obtain a contractual service or immediate economic benefit for the contracting authority, as is required under Article 1(2)(a) of Directive 2004/18.”100 The Court therefore concluded that there was not a public contract since the public authority acting as a regulatory authority does not provide the necessary economic benefit. In the Helmut Müller-case the Court also had to consider whether the third possible definition of construction based on the wording “requirements specified by the contracting authority“ as this is used in Article 2, para. 1(6)(c) was applicable. If this were to be the case the contracting authority must have taken measures to define the type of the work or at least have had a decisive influence on its design. The Court stated that “the mere fact that a public authority, in the exercise of its urban-planning powers, examines certain building plans presented to it, or takes a decision applying its powers in that sphere, does not satisfy the obligation that there be ‘requirements specified by the contracting authority’, within the meaning of that provision.”101 The Court concluded that “the municipality of Wildeshausen, did not draw up a list of requirements relating to work to be carried out on the land occupied by Wittekind barracks. According to the order for reference, that municipality merely decided that it was minded to examine the project presented by GSSI and to embark on the procedure of drawing up a corresponding building plan.” 2.1.7. Works The definition in Article 2, para. 1(7) pertains to the construction contracts analysed 72 in the previous section. The definition reads: “ ‘a work’ means the outcome of building or civil engineering works taken as a whole which is sufficient in itself to fulfil an economic or technical function;”

The definition is basically the same as in the previous directives. The definition is fundamental to the use of the definition found in Article 2, para. 1(6)(b) and the concrete implications of the definition is apparent through the application of that part of the definition. For more, see the commentary to that part of the definition. Article 2, para. 1(8) ‘public supply contracts’ means public contracts having as their object the purchase, lease, rental or hire-purchase, with or without an option to buy, of products. A public supply contract may include, as an incidental matter, siting and installation operations;

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2.1.8. Public supply contracts102 A public supply contract is a public contract and it must thus contain the general elements laid down in the definition of public contracts in Article 2, para. 1(5) of the Public Sector Directive. It must be a contract for pecuniary interest, entered into in writing between an economic operator and a contracting authority; see section 2.1.5. of this Commentary on the general elements of a public contract. 74 As for the object of a public supply contract, Article 2, para. 1(8) of the Directive provides that the it shall concern ‘purchase, lease, rental or hire-purchase, with or without an option to buy, of products’, and that such a contract may include, as incidental to the purchase etc., the siting or installation of the products. As in the case of public service contracts, public supply contracts concern a particular kind of purchase, without the purpose or context of the purchase being relevant. However, it is no longer expressly stated in the definition in Article 2, para. 1(8) of the Public Sector Directive that a public supply contract is other than a public contract for building and engineering works. Regardless of the change of wording this still means that the purpose of a purchase must nevertheless be considered to ensure that a public supply contract is not a public works contract as defined in Article2, para. 1(6) of the Directive, and thus it may not have as its object the execution of building or engineering activities as listed in Annex II of the Directive. If goods are purchased with a view to the carrying on a utilities activity, this is also not a public supply contract within the meaning of the Public Sector Directive, but a contract falling within the scope of the Utilities Directive 2014/25; see Article 7 of the Public Sector Directive. ‘Goods’ are any form of physical object other than real property.103 Electricity, gas, heat etc. are also considered ‘goods’.104 If their manufacture is complex and individually adapted to the needs of the contracting authority, it is sometimes difficult to determine whether a contract concerns the supply of goods or the provision of a service that results in a physical object.105 If a contracting authority has some other interest in the manufacturing process than in the production of the good, this suggests that the contract concerns services.106 Even where the authority’s true interest is in acquiring the product, the manufacturing process can be so important for the product meeting the individual needs of the contracting authority that it may nevertheless constitute a service. Contracts for standard products, where the contracting authority is only interested in the product are public supply contracts. If the authority supplies the materials or a major part of the materials used in the manufacture of the products, then the contract will be for manufacture and it will thus be a service contract.107 Other factual circumstances can also be relevant. The Court has indicated in 73

102 See Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 406; Sune Troels Poulsen, Peter Stig Jakobsen & Simon Evers Hjelmborg, EU Public Procurement Law, p. 196; Martin Trybus, Roberto Caranta & Gunilla Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, p. 35. 103 See the discussion in this Commentary on Article 10(a), on the exception for the acquisition of real property. 104 See Case C-393 Almelo, para. 28. 105 It must be assumed that even though the manufacture of a product involves considerable activities which, on their own, might be regarded as a service, this does not deprive the finished product of its character as a good pursuant to the EU procurement rules if the purpose of the contract is solely to acquire possession of a finished product. 106 A clear example of this is the removal and recycling of waste, where the interest in the removal is at least equal to the interest in ensuring that products are made with the recycled waste to reduce the burden on natural resources.

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C-300/07, Hans & Christophorus Oymanns, that the CPV nomenclature creates a presumption as to the classification under the directive.108 A classic example of the distinction between goods and services is computer software. Standard software is considered a good, while individually developed software is considered a service. Purchases can also include purchases on credit and purchases that are dependent on 75 the occurrence of a specific event. Leasing covers both operational leasing and presumably also the purchase of goods via financial leasing. However, the purchase of goods via financial leasing will also involve a financing service, which is a service subject to an EU procurement procedure; see Article 2, para. 1(9) and Article 10(e) of the Public Sector Directive. Hire or leasing of products is covered whether or not the contracting authority has an option to buy the hired or leased products.109 The siting and installation of goods can be regarded as incidental to a public supply 76 contract; see Article 2, para. 1(8) of the Public Sector Directive. Thus, when siting and installation is an integral part of the supply of goods it should not be treated as a service when it is part of a contract for the supply of the goods. Siting and installation should not be assessed as a service for the purpose of a valuation under Article 2, para. 1(8) of the Directive if a contract covers services other than the siting and installation and is thus a mixed contract; see further in Part I, section 3.2. of this Commentary. 110 Article 2, para 1(9) ‘public service contracts’ means public contracts having as their object the provision of services other than those referred to in point 6

2.1.9. Service contracts 2.1.9.1. Public service contracts111 A public service contract is a public contract and it must thus contain the general ele- 77 ments laid down in the definition of public contracts in Article 2, para. 5 of the Public Sector Directive. It must be a contract for pecuniary interest, entered into in writing between an economic operator and a contracting authority; see section 2.1.5. of this Commentary on the general elements of a public contract. The consideration for the economic operator’s services must be a price that can be calculated in money. For concessions contracts for services, see the Concessions Directive 2014/23. Traditionally the objects of public service contracts have been defined negatively 78 (defining what a service contract is not) by defining them in relation to public works contracts and public supply contracts. This negative definition is partly maintained in 107 Whether the cost of the materials contained in the product are higher than the cost of the manufacturing service will often be incidental to whether the contract is for goods or services. However, it is possible that the relative costs of the materials and the manufacturing costs can affect the assessment of whether the contract is for goods or services. This assessment must not be confused with the situation where there is a mixed contract for both goods and services to which Article 3, para. 2 of the Public Sector Directive applies for determining the correct classification of the contract. 108 C-300/07, Oymanns, para. 61. 109 In this context, an option to buy must be assumed to include all forms of options to buy. 110 On the other hand, there is no basis for treating service and maintenance contracts entered into together with the purchase of goods as being included in the definition of a public supply contract alongside siting and installation unless the service is part of the purchase of the goods, as in the case, for example, of computer contracts where maintenance primarily consists of updating the software. 111 See Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 409; Sune Troels Poulsen, Peter Stig Jakobsen & Simon Evers Hjelmborg, EU Public Procurement Law, p. 196; Martin Trybus, Roberto Caranta & Gunilla Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, p. 33.

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Article 2, para. 1(9) of the Public Sector Directive, which states that a public service contract is a public contract that is not a contract for building or engineering works (through the reference to point 6 in the provision) while not addressing the supply of goods.112 In C-300/07, Hans & Christophorus Oymanns, the Court stated that the line between goods and services should be based on the CPV nomenclature113 in the way that the nomenclature creates a presumption for something being a good or a service. Previously, the definition of a public service contract in the Public Sector Directive 2004/18 also included a seemingly positive definition of a public service contract in that it stated that a public service contract would concern the services referred to in Annex II of the previous Public Sector Directive. There has been a change of regime in regards to services which is why this positive definition is no longer present. Thus the negative definition of public service contracts is decisive. If there is doubt about the nature of a public procurement contract, it is firstly necessary to determine whether it is for public works. If the contract is not for works, it will be a public service contract covered by the provisions of the Public Sector Directive for such contracts. 114 79 Given that public service contracts include, by exception, procurement contracts that are not public works contracts, it has been necessary to lay down a number of exceptions for public service contracts for which the (full) requirement to follow an EU procurement procedure is judged not to be appropriate. Previously this exception was comprehensive, but now there are a number of obligations even though the required procedure will not be at the level of a full tender procedure following the general rules of the directives. Article 74 of the Public Sector Directive excludes specific kinds of public procurement contracts from its scope (the light regime); see Article 74 in this Commentary. 80 The negative definition of the object of a public service contract does not mean that a procurement contract that concerns both service and construction works will in all cases be a public works contract, and thus covered by the provisions that apply to such contracts. The same applies to the relation between goods and services. Article 3, para. 2 of the Public Sector Directive provides that where a contract is for both goods and services, the designation of it as a public service contract or a public supply contract must depend on the proportionate values of the goods and services covered by the contract (as an indication of the main purpose of the contract); see further in section 3.2. of this Commentary. As for contracts for both services and building and engineering works, according to Article 3, para. 2, what matters is the main purpose of the contract; see section 3.2. of this Commentary. Article 2, para 1(10)-(12) (10) ‘economic operator’ means any natural or legal person or public entity or group of such persons and/or entities, including any temporary association of undertakings, which offers the execution of works and/or a work, the supply of products or the provision of services on the market; (11) ‘tenderer’ means an economic operator that has submitted a tender; (12) ‘candidate’ means an economic operator that has sought an invitation or has been invited to take part in a restricted procedure, in a competitive procedure with negotiation, in a negotiated procedure without prior publication, in a competitive dialogue or in an innovation partnership; 115

112 On the definitions of contracts for building and engineering works and for the supply of goods, see the discussion of Article 2, para. 1(6)-(8) in this Commentary. 113 C-300/07, Oymanns, para. 61. 114 Unless it falls within the scope of one of the Public Sector Directive’s express exceptions; see e.g. Article 10. 115 See Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 592; Christopher Bovis, The Law of EU Public Procurement p. 91; Martin Trybus, Roberto Caranta & Gunilla Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, p. 106 et seq.

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2.1.10. The concept of ‘economic operator’ Depending on whether a contract concerns building and engineering works, goods or 81 services, the (private) counterparty will be either ‘contractor’, ‘supplier’ and ‘service provider’, respectively. As a collective term for these, the term ‘economic operator’ is used. Article 2, para. 1(10) of the Directive lays down that economic operators can be any natural or legal person or public entity or any group of such persons and/or entities. There is no restriction on what forms contractors, suppliers or service providers can take. The person, entity or group must offer the execution of works, the supply of products or the provision of services on the market. This means that there is no special requirement for the extent or content of the undertaking of the person, entity or group offering services, goods or building and engineering works, or for how the undertaking is carried on. Moreover, under the Public Sector Directive a person or group that is not itself able to provide the goods, services or construction works directly will be considered a supplier, service provider or contractor if they can provide the goods, services or building works via others. In Case C-399/98 Ordine degli Architetti di Milano the CJEU regarded the owner of a property, on which certain infrastructural work was to be carried out and which was subsequently to be transferred to the City of Milan, as a contractor within the meaning of Directive 93/37 on the coordination of procedures for the award of public works contracts, then in force, as it was found sufficient that the owner was able to have the work carried out by providing the necessary guarantees.116 Article 71 of the Public Sector Directive allows contracting authorities to ask tender- 82 ers to indicate in their tender any share of the contract they may intend to subcontract to third parties and any proposed subcontractors. Similarly, under Articles 63 of the Directive an economic operator may refer to the capacities of other entities with a view to establishing that they fulfil the economic, financial and technical requirements for participating in an EU procurement procedure, regardless of the legal nature of the links with them, as long as the tenderer can show that it will have at its disposal the resources necessary to fulfil the contract in question.117 See this Commentary on Article 19 of the Directive on the requirements for the legal form of economic operators. On the situation where a participant in a group is changed during an EU procurement procedure, see section 19 of this Commentary. Public entities can also be economic operators, as expressly stated in the definition in 83 Article 2, para. 1(10) of the Public Sector Directive. This must apply to any public entity, for example state or municipal, as long as it offers services, goods or building and engineering works on the market.118 The fact that, due to their general subventions and their special possibilities for obtaining financing, public entities may be able to submit tenders with lower prices than private undertakings does not prevent them from being suppliers, service providers or contractors with the rights that follow from this under the procurement directives. In Case C-94/99 ARGE Gewässerschutz the CJEU ruled that the mere fact that contracting authorities allowed bodies which received subsidies, enabling them to submit tenders at prices appreciably lower than those of the other unsubsidised tenderers, to Case C-399/98 Ordine degli Architetti di Milano, paras 90-96; and Case C-220/05 Auroux, para. 44. See also Case C-176/98 Holst Italia, paras 26-29. 118 On the question of whether a public entity has authority to operate on the market, see the literature on administrative and local government law. 116

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take part in a procedure for the award of a public procurement contract did not amount to a breach of the principle of equal treatment.119 Recital 4 of the previous Public Sector Directive (2004/18/EC) stated that Member States should ensure that the participation of a body governed by public law as a tenderer in a procedure for the award of a public contract should not cause any distortion of competition in relation to private tenderers. Article 69 of the Public Sector Directive concerns the procedure to be followed where a contracting authority establishes that a tender is abnormally low because the tenderer has obtained State aid. As for the situation where a contracting authority has an ownership interest in or is otherwise closely connected with an independent legal person that submits a tender to the authority, see section 24 (on conflict of interest) of this Commentary. 84 In C-305/08, CoNISMa, the Court addressed whether public entities might be seen as economic operators in the sense of the directives. The decision has full effect also after the adoption of the new directives. The Court specifically addressed if a collaboration of public entities and universities could be considered to be an economic operator and stated in that context ”that the provisions of Directive 2004/18, in particular those in Article 1(2)(a) and (8), first and second subparagraphs, which refer to the concept of ‘economic operator’, must be interpreted as permitting entities which are primarily non-profitmaking and do not have the organisational structure of an undertaking or a regular presence on the market – such as universities and research institutes and consortia made up of universities and public authorities – to take part in a public tendering procedure for the award of a service contract.”120 85 The provision in Article 2, para. 1(10) also states that it is without significance whether the entity is subject to private or public ownership as long as the unit offers works, services or goods in the market. It is not entirely clear what offering services etc. in the market entails. In C-305/08, CoNISMa, the Court stated that it is insignificant ”whether it is active as a matter of course on the market or only on an occasional basis”.121 In that context it must be assumed that if an entity only directs itself towards the public market (and thereby not to the private market) and the acitivity only happens occationally the unit will still be covered by the concept of economic operator. In order to ensure the free movement rules and the rights that any company or other entity enjoy the concept of economic operator must be subject to a wide interpretation. 2.1.11. Tenderer 86

Article 2, para 1(11) and (12) of the Public Sector Directive also defines the two procedural terms of ‘tenderer’ and ‘candidate’. These terms are designations for economic operators at the differing stages of the EU procurement procedure, and they are thus of a technical nature. A ‘tenderer’ is a service provider, supplier or contractor that has submitted a tender. 2.1.12. Candidate

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A ‘candidate’ is an economic operator (service provider, supplier or contractor) that has sought an invitation or has been invited to take part in a restricted procedure, in a competitive procedure with negotiation, a competitive dialogue or an innovation partCase C-94/99 ARGE Gewässerschutz, paras 24-32. C-305/08, CoNISMa, para. 45. Besides the concept economic operator in the procurement directives the decision can also be seen to have a (implicit) background in TFEU Article 345 which precribes neutrality between public and private ownership within EU law. 121 C-305/08, CoNISMa, para. 42. 119

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nership and thus it is not used in connection with the open procedure. On the other hand there is no special designation for applicants encouraged or selected to submit tenders.122 It is slightly imprecise not to mention applicants in connection to the open procedure 88 since this procedure also requires the contracting authority to assess the selection documents and thereby also if the economic operator is fulfilling the requirements for further participation in the tender procedure. At the same time the economic operator is also tenderer which is why the distinction between applicant and tenderer is less significant. Article 2, para 1(13) (13) ‘procurement document’ means any document produced or referred to by the contracting authority to describe or determine elements of the procurement or the procedure, including the contract notice, the prior information notice where it is used as a means of calling for competition, the technical specifications, the descriptive document, proposed conditions of contract, formats for the presentation of documents by candidates and tenderers, information on generally applicable obligations and any additional documents;

2.1.13. Procurement document The concept “procurement document” was not defined in the previous procurement 89 directives the reason being that there never was a need for a definition since all the specific references to documents with a role in the procurement process were described in the concrete provisions of the directives. There have been certain situations in which references to non-defined terms such as the “procurement conditions” or the “procurement document” which are general and broad concepts covering the collective written foundation for the procurement procedure have been made. On this background there has been a need to clarify what exactly the concept of procurement document covers. The definition is characteristic in the sense that it is not exhaustive which means that there can be additional types of documents included in the concept of procurement document. If, instead, the list would have been exhaustive you would have excluded the contracting authority’s opportunity to include other types of documents in the procurement process. Or rather: it would be unclear how such types of documents ought to be handled and how they should feature in the complete procurement document. The definition entails that the procurement documents exclusively cover the docu- 90 ments produced or referred to by the contracting authority while the documents from a tenderer or an applicant are not covered. Documents referred to by the contracting authority are also part of the procurement 91 documents. Such documents must be generally and easily accessible. Article 2, para 1(14) (14) ‘centralised purchasing activities’ means activities conducted on a permanent basis, in one of the following forms: (a) the acquisition of supplies and/or services intended for contracting authorities, (b) the award of public contracts or the conclusion of framework agreements for works, supplies or services intended for contracting authorities;123

2.1.14. Centralised purchasing activities Even though the previous Public Sector Directive explicitly allowed contracting au- 92 thorities to use centralised purchasing activities it was not until the 2014-Directives that 122 ‘Selected candidates’ is probably closest. In practice, it is usual for the term ’tenderer’ to be used generally for undertakings that enter into EU procurement procedures, whether or not they have in fact submitted a tender. 123 See Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 535 et seq.

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such activities have been clearly regulated. The provisions regulating centralized purchasing activities or common purchasing activities are Articles 37-39, see the commentary to these provisions below in Part I. 93 The preambular recitals 69 to 73 contribute to the interpretation of the use of centralized purchasing activities. Recital 69 states: “Centralised purchasing techniques are increasingly used in most Member States. Central purchasing bodies are responsible for making acquisitions, managing dynamic purchasing systems or awarding public contracts/framework agreements for other contracting authorities, with or without remuneration. The contracting authorities for whom a framework agreement is concluded should be able to use it for individual or repetitive purchases. In view of the large volumes purchased, such techniques may help increase competition and should help to professionalize public purchasing. Provision should therefore be made for a Union definition of central purchasing bodies dedicated to contracting authorities and it should be clarified that central purchasing bodies operate in two different manners. Firstly, they should be able to act as wholesalers by buying, stocking and reselling or, secondly, they should be able to act as intermediaries by awarding contracts, operating dynamic purchasing systems or concluding framework agreements to be used by contracting authorities. Such an intermediary role might in some cases be carried out by conducting the relevant award procedures autonomously, without detailed instructions from the contracting authorities concerned; in other cases, by conducting the relevant award procedures under the instructions of the contracting authorities concerned, on their behalf and for their account.” 94 The definition of centralized purchasing activities and the definition of centralized purchasing bodies are closely related (see Article 2, para. 1(16). This follows from recital 69 even though there is no explicit connection tying the two definitions together. Article 2, para. 1(16) mentions centralized purchasing activities but Article 2, para. 1(14) does not mention centralized purchasing bodies and based on the wording it is not clear that the activities are primarily meant as being conducted by centralized purchasing bodies. The connection between the two concepts appears from recital 69: even though centralized purchasing activities in principle could be conducted by any kind of entity it is only when conducted by centralized purchasing bodies that the exception from the following the procurement procedures is available. If another entity will conduct the same centralized purchasing activities the contracting authority will have to put such services out to tender. 95 The Public Sector Directive Article 2, para. 1(14) establishes 2 different models for central purchasing: – the acquisition of supplies and/or services intended for contracting authorities (the wholesale model) – the award of public contracts or the conclusion of framework agreements for works, supplies or services intended for contracting authorities (the intermediary model) The fundamental difference between the two models is that the central purchasing body in the wholesale model is conducting procurement in its own name and on its own account with the intention of selling the goods or the services to another contracting authority. In the intermediary model the central purchasing body is entering into a contract on behalf of the contracting authority or entering into a framework agreement providing a basis for the contracting authority to enter into specific contracts. Furthermore, it should be noticed that the wholesale model will only be applicable in regards to the purchase of goods and services, whereas the contract model can be applied in all situations including works contracts. 180

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The wholesale model is most relevant in regards to goods where the central purchas- 96 ing body is buying and selling goods to the contracting authorities. The procurement of the central purchasing body might be based on a specific requisition from the contracting authority but could also take the form of general purchases for stocking goods with the intent of later sale according to requisition. The wholesale model is also applicable to services contracts, e.g. if the central purchasing body has entered into a framework agreement on cleaning services with the purpose of providing services to contracting authorities in immediate need of a cleaning services supplier. Article 2, para. 1(14) does not imply that the sale has to be conducted on the same conditions as the purchase, i.e. that the sales price has to be the same as the purchasing price. The central purchasing body will obviously have its own costs for administration, keeping stock etc. related to the purchasing activities and these costs have to be covered either through a general payment from the contracting authorities using the central purchasing body or through the prices for the goods or services. There are no indications that there are any legal limits as to how the price (or the fee for the distribution or selling services) for the sale to the contracting authority is set. There are also no indications that the central purchasing body must conduct the activity based on non-profit conditions. 124 Recital 69 states that the centralized purchasing activities can be conducted “with or without remuneration”. Obviously some kind of remuneration will come in play since there are costs to be covered. If the centralized purchasing body is organized as a company owned by a number of local authorities the costs could be covered indirectly through the ownership. It must be assumed that the activities of the central purchasing body concerning the selling of goods or services must be limited to the specific central purchasing functions. When using the wholesale model the central purchasing bodies will probably not be allowed to process or adjust the goods or services since the goods or services will not be identical to the goods and services bought by the central purchasing body. In doing so the central purchasing body would not distribute the goods and services but rather participate in the manufacturing process. It follows that the exception in Article 37 does not apply if the central purchasing body manufactures and delivers goods and services to a contracting authority. 97 The intermediary model contains two variants: – On the one hand a central purchasing body can enter into a contract on behalf of another contracting authority, e.g. a specific contract on services or goods. In this case, the central purchasing body can be seen as authorized by the contracting authority. – On the other hand a central purchasing body can engage in a framework agreement which will be accessible for other contracting authorities and these authorities can use the agreement as a base for their specific deliveries. This approach is by far the most common in practice. The central purchasing body will not be able to deliver other services than the distribution of the goods, services and works on the basis of the exemption from following a ten-

124 .As mentioned earlier private entities can be co-owners of the central purchasing body if this is organised as a body governed by public law. The access for central purchasing entities to set a price for their activities means that the public participants in central purchasing bodies can actually gain/seek profit. On the other hand, such constructions might lead to the criticism that the pursuit of considerations of general interest could be seen to be conducted on commercial terms potentially leading to the entity not continuing to be a body governed by public law.

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dering procedure which follows from Article 37. However, the exception also covers ancillary purchasing activities, see Article 2, para. 1(17). Article 2, para 1(15) (15) ‘ancillary purchasing activities’ means activities consisting in the provision of support to purchasing activities, in particular in the following forms: (a) technical infrastructure enabling contracting authorities to award public contracts or to conclude framework agreements for works, supplies or services; (b) advice on the conduct or design of public procurement procedures; (c) preparation and management of procurement procedures on behalf and for the account of the contracting authority concerned;

2.1.15. Ancillary purchasing activities This concept is new compared to the previous Public Sector Directive. The previous directive allowed purchasing activities to be handled by central purchasing bodies but there was no explicit mentioning of ancillary activities in the rules. Such activities are intrinsically connected to purchasing activities and it is of practical importance that such activities could be included in the purchasing activities. Furthermore, the implications of non-central purchasing bodies conducting such services is established in Article 2, para. 1(17), see the commentary below. In recital 70 of the preamble to the (new) Public Sector Directive it is stated, that “It should also be permitted for such public service contracts to include the provision of ancillary purchasing activities. Public service contracts for the provision of ancillary purchasing activities should, when performed otherwise than by a central purchasing body in connection with its provision of central purchasing activities to the contracting authority concerned, be awarded in accordance with this Directive.” This principle is established in Article 37, para. 4. It is therefore clear that only ancillary purchasing activities that are conducted in connection to a central purchasing body’s central purchasing activities but not similar activities of other entities are subject to an exemption from the procurement rules. This will probably also imply that if a central purchasing body is conducting the central purchasing activity itself but requires help for the ancillary services such services will have be to procured subject to the Public Sector Directive. The reason is that the central purchasing body is a contracting authority and therefore has to follow the procurement rules when they are in need of procuring services. If this is done the contracting authority using the central purchasing body will of course be able to choose the entire central procurement activities package, including the ancillary services, from the central purchasing body without requiring a tender procedure from the contracting authority. 99 The ancillary list mentioning the ancillary activities in Article 2, para. 1(15) is not exhaustive (see the use of the words “in particular”) but is nonetheless indicative as to which activities could be included. The use of the term “technical infrastructure” would probably primarily mean any IT-solutions used for the tendering procedure itself. The Public Sector Directive contains a number of situations in which the use of IT is required and therefore such technical structures will fall within the concept of technical infrastructure. 100 An increasing number of contracting authorities are using advisors and consultants in order to ensure that the contract itself is governed in optimal fashion. Looking at the wording of Article 2, para. 1(15) and the examples provided in the rule it seems obvious that the access to combine central purchasing activities to ancillary activities will not include post-procurement services. Therefore it must be assumed that in general contract management services cannot be attained without a tender procedure. This distinction may produce a few grey areas including cases where it might be necessary to amend or 98

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change a contract and the public authority feels a need to ensure that such an adjustment is in accordance with the Public Sector Directive Article 72. Correct handling of contract changes requires respecting the procurement rules (Article 72) which could suggest that consulting services on how to conduct these changes correctly would be covered by ancillary purchasing activities. However, since this is a part that is not subject to formalized rules it seems to fall outside the scope of ancillary purchasing activities. Another question raises in regard to the management of framework agreements: Is such management considered to be ancillary purchasing activities in the meaning of Article 2, para. 1(15)? This must be the case: such activities might be post-tendering of the overall framework agreement, but it is not post-tendering of the specific contracts entered into by the contracting authority. Therefore this should be something that the central purchasing body should be able to offer without the contracting authority being obliged to conduct a tender. Article 2, para. 1(15)(c) makes reference to “preparation” of procurement procedures. 101 This part of the purchasing activities is also regulated in the Public Sector Directive Art. 40 and 41. According to those provisions contracting authorities are allowed to seek advice with the intent to prepare for a procurement procedure. Articles 40 and 41 do not, however, allow for the contracting authority to receive such services without considering the procurement procedures. If any preparation services will exceed the economic thresholds the contract will be subject to public tendering. Therefore there is no overlapping or conflict between Article 2, para. 1(15) and Articles 40-41. Article 2, para 1(16) (16) ‘central purchasing body’ means a contracting authority providing centralised purchasing activities and, possibly, ancillary purchasing activities;

2.1.16. Central purchasing body Rules on central purchasing bodies were introduced in the 2004-directives based on a 102 need to harmonize the practice showing aggregation of public purchasing in most Member States. Since the 2004-directives there has been a need for further rules supplementing the previous regulatory regime and, as a consequence, the new directive displays an increased level of detail in the rules concerning such aggregated procurements, see Articles 37-39. The content of the provision in Article 37, para. 4, if using the present definition, is 103 that a contracting authority can leave it to a central purchasing body to conclude a contract with the interested economic operators including conducting a tendering procedure if so required. The contracting authority might subsequently purchase the goods, services or works through the central purchasing body since the obligation to conduct a competitive tendering process has been assumed by the central purchasing body on behalf of the contracting authority. This is a very distinct and important deviation from the starting point that any contract between a contracting authority and any other legal entity is subject to the procurement procedures. The starting point covers awards to any other legal entity, including other contracting authorities.125 The definition in Article 2, para. 1(16) requires the central purchasing body to be a contracting authority. Hence, units which are not contracting authorities cannot be central purchasing bodies with the effect that contracting authorities cannot procure through such units without initiating a tendering procedure (Article 37). There is noth125 .See C-107/98, Teckal, para. 49. In relation to the so-called in-house rules this starting point is also modified, see more in the commentary to Article 12 in Part I.

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ing to prevent non-contracting authorities from conducting the service of purchasing activities for a contracting authority but the award of such service has to respect the procurement rules: if the service represents a contract value exceeding the economic threshold set in Article 4 of the Public Sector Directive an agreement can only be conducted after a tendering procedure. A central purchasing body can be the state, a local or regional authority, a body governed by public law or an association of any of these entities, see the definition of a contracting authority in Article 2, para. 1(1). A central purchasing body might be a municipality which enters into a framework agreement and which has agreed with the neighboring municipality that this also will be able to make use of the framework agreement. A central purchasing body might also be an independent organization like, e.g., a permanent purchasing collaboration between a number of municipalities or it can be a specific legal entity established with the purpose of central purchasing activities. In the latter case the legal entity must be a contracting authority in order to be labeled a central purchasing body. Such a specific legal entity will have to be a body governed by public law, see the specific conditions for such contracting authorities in Article 2, para. 1(4). 104 Based on the wording of Article 2, para. 1(16) it is not a condition that the central purchasing body is fully publicly owned (as opposed to the main conditions for in-house procurement according to Article 12). Therefore, also central purchasing bodies that are contracting authorities in the meaning of Article 2, para. 1(4) on bodies governed by public law are caught by Article 2, para. 1(16) even though such entities might have a substantial private element. The definition of a body governed by public law furthermore requires that the entity is focusing on meeting needs of general interest and not having an industrial or commercial character. It might be considered whether the primary purpose of a central purchasing body can be seen as representing a general interest, not having a commercial character. It is very debatable whether this is the case: if the central purchasing body is only conducting the procurement activities based on remuneration from the municipalities (or from the economic operators) this could be argued to be activities of a commercial activities. However, it must be remembered that just a few activities meeting general public needs and not having a commercial character is enough to qualify an entity as a body governed by public law even if the majority of its activities have a commercial character.126 Article 2, para. 1(16) does not require that the central purchasing body is a contracting authority which is only engaged in central purchasing activities. There seems to be no obstacles for the central purchasing body to be able to conduct other acitivities not related to the contracting authorities. Article 2, para 1(17) (17) ‘procurement service provider’ means a public or private body which offers ancillary purchasing activities on the market;

2.1.17. Procurement service provider 105

The definition in Article 2, para. 1(17) is closely connected to the definitions in para. 1(15) and (16). The concept covers entities providing ancillary purchasing activities in a market. It is also stated that the entities might be public or private which is in concordance with the case law of Court of Justice on economic operators according to which such are covered regardless of their legal status.127 At the same time it could be noticed 126 .See 127

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that the provision does not use the concept economic operator as covering the entity providing these activities. The reason for that could be an intention to distance these providers from the concept of economic operators and thereby avoid the expectation of an obligation to conduct a tender procedure. The definition seems misplaced or unnecessary at worst. The wording of the definition is not elegant and the title ”procurement service provider” indicates services relating to the core purchasing activities, whereas the content points in the direction of ancillary services. Another issue is whether the definition is necessary. It seems as if there are no specific consequences tied to the definition: if a contracting authority wants to award a contract on the subject-matter covered by Article 2, para. 1(17) to an entity that is not a central purchasing body this award will simply require the normal reaction of any contracting authority: follow the procedure of the Public sector Directive. Article 2, para 1(18) (18) ‘written’ or ‘in writing’ means any expression consisting of words or figures which can be read, reproduced and subsequently communicated, including information transmitted and stored by electronic means;

2.1.18. Written or in writing The provision in Article 3, para. 1(18) determines what is in writing and this is pri- 106 marily important in relation to electronic communication, i.e. information transmitted and stored through electronic means, see the definition of electronic means, Article 2, para. 1(19). Electronic communication is also considered written in the context of the directive and this has specific importance in relation to the provisions that require electronic communication. The definition of in writing has been carried through from the previous Public Sector Directive. According to Article 22 of the Public Sector Directive communication in the procure- 107 ment process will be electronic communications (by 2018 all of it). The derogation from using written communication (including electronic communication) is only covering a very few situations, see Article 22, para. 2 (on oral communication). For more, see the commentary to Article 22. Actually as for oral communication there is still a requirement to document such communication and this might happen through written documents, see Article 22, para. 2. Article 2, para 1(19) (19) ‘electronic means’ means electronic equipment for the processing (including digital compression) and storage of data which is transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means;

2.1.19. Electronic means The definition of electronic means in Article 2, para. 1(19) is connected to the defini- 108 tion of “written” or “in writing” in Article 2, para.(18). The definition has been carried through from the previous Public Sector Directive. Different from the previous directive is, however, that electronic means play a vastly increased role in the directive. Traditionally the concept of electronic means has not been subject to any major lack of clarity and the main part of the focus in regard to the use of electronic means relates to the requirements posed for usage of such means. These rules are found in Article 22 which combined with Annex IV constitutes the complete regulation of communications issues in procurement procedures.

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Article 2, para 1(20) (20) ‘life cycle’ means all consecutive and/or interlinked stages, including research and development to be carried out, production, trading and its conditions, transport, use and maintenance, throughout the existence of the product or the works or the provision of the service, from raw material acquisition or generation of resources to disposal, clearance and end of service or utilisation;

2.1.20. Life cycle The term life cycle and life cycle costs are new in a public procurement context. Including life cycle issues is new to the procurement regime compared to the 2004-directives. However, the Defense and Security Directive contained the first elements including the life cycle of goods and services, and the current provisions on life cycle have been further developed from the said provisions. The definition is fairly clear and is not seen to represent any lack of clarity. Whereas the definition is very comprehensive and precise the implications of the concept has been subject to further explanation. After the introduction of life cycle the concept plays a role in a number of different situations during a tender procedure. As it is clear from recitals 96 and 97 the issue is specifically important in relation to the award of the contract (see Article 68 in particular) and in relation to supporting social and environmental elements. 110 The background for introducing this concept is explained in the preambular recital 97 where it is stated that “with a view to the better integration of social and environmental considerations in the procurement procedures, contracting authorities should be allowed to use award criteria or contract performance conditions relating to the works, supplies or services to be provided under the public contract in any respect and at any stage of their life cycles from extraction of raw materials for the product to the stage of disposal of the product, including factors involved in the specific process of production, provision or trading and its conditions of those works, supplies or services or a specific process during a later stage of their life cycle, even where such factors do not form part of their material substance.” The recital also provides an example as it mentions criteria and conditions referring to such a production or provision process in stating “that the manufacturing of the purchased products did not involve toxic chemicals, or that the purchased services are provided using energy-efficient machines.” Another example is award criteria or contract clauses relating to fair trade products and recital 97 explains “Criteria and conditions relating to trading and its conditions can for instance refer to the fact that the product concerned is of fair trade origin, including the requirement to pay a minimum price and price premium to producers.” Finally, the “contract performance conditions pertaining to environmental considerations might include, for example, the delivery, package and disposal of products, and in respect of works and services contracts, waste minimization or resource efficiency.”128 111 The definition of life cycle is very broad and rightfully so since this seems to be the best way to describe the scope of the life cycle as it is intended to be applied. The main delimitation of the concept is that it only concerns issues that are related to the subjectmatter of the contract in question. This leaves out general corporate policies since such are not directly related to the subject-matter of the contract but have a more general scope. This holds true whether the general policy is pursuing legitimate issues (e.g. environmental or social responsibility) or not, 112 The most typical use of life cycle-considerations could probably be expected in the award stage of the tendering procedure. Recital 96 clarifies the scope for application of 109

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life cycle elements in relation to the specific criteria “life cycle costs” and the more general award criteria “best ratio between price and quality”: “It should hence be made clear that, except where it is assessed on the basis of price only, contracting authorities can determine the most economically advantageous tender and the lowest cost using a lifecycle costing approach. The notion of life-cycle costing includes all costs over the life cycle of works, supplies or services. This covers internal costs, such as research to be carried out, development, production, transport, use, maintenance and end-of-life disposal costs but can also include costs imputed to environmental externalities such as pollution costs caused by extraction of the raw materials used in the product or caused by the product itself or its manufacturing, provided they can be monetized and monitored. The methods which contracting authorities use for assessing costs imputed to environmental externalities should be established in advance in an objective and non-discriminatory manner and be accessible to all interested parties. Such methods can be established at national, regional or local level, but they should, to avoid distortions of competition through tailor-made methodologies, remain general in the sense that they should not be imposed so as to specifically conform to a particular public procurement procedure.” For more on life cycle costs, see the commentary to Article 68. Article 2, para 1(21) (21) ‘design contests’ means those procedures which enable the contracting authority to acquire, mainly in the fields of town and country planning, architecture and engineering or data processing, a plan or design selected by a jury after being put out to competition with or without the award of prizes;

2.1.21. Design contests The Public Sector Directive 2004/18 contained definitions on the different procure- 113 ment procedures. With the 2014-rules the legislators have left that approach since the descriptions of the procedures are set forth in the specific provisions regulating the procedures. The exception to this trend is the case of design contests which is still a part of the definitions. A design contest is a specific procedure which can be viewed as an alternative to the 114 ordinary procurement procedures in cases when a contracting authority is procuring a planning service. The subject-matter involved in such a project is primarily services and this is why design contests only constitute an alternative to the traditional procurement procedures in the area of services. Apart from the definition the provisions on design contests cover Articles 78-82 regulating the use of design contests and Article 32, para. 4, which allows for services contracts to be entered into through a negotiated procedure without a call for tenders when this is based on the result of a design contest. A design contest is characterized by the fact that the operator executes the service ahead of the competition and competes on the basis of the final result. In its clearest form the competition occurring in a design contest only relates to the quality of the project while suggestions and other parameters will not be included in the competition. Furthermore, the remuneration of the operators will be made according to the rules on competition prices and payment for participation. A design contest differs from a regular procurement procedure by way of the fact that it is an assessment committee and not the contracting authority that will select the project which fulfills the relevant criteria for evaluation of the contest. That the assessment committee must make the selection is part of the definition of a design contest (selected by a jury) and must therefore be seen as a vital part of a design contest procedure. On the specific requirements for the composition and function, see more in the commentary on Articles 78-82. Michael Steinicke

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Through a design contest the demanded service is aimed at producing a solution to an identified assignment and such a project will represent a significant creative element. In line with this, design contests are well suited when the contracting authority requests a particular solution which extends the generally well-known solutions. This might be because the project is of a character making it impossible to specify the requirements to an adequate level, but most commonly the contracting authority requests such a solution in order to hold a competition based on creativity – even if it costs more in the form of payments to several participants. Design contests are particularly relevant for tasks relating to town and country planning, architecture and engineering or data processing. The list is not exhaustive and other services can be covered, provided that the public authority is in demand of a planning or project work which includes a significant creative element and not just the execution of a solution described in advance. 115 Apart from the planning and projecting tasks which are to be carried out as part of the design contest the competition might also form the base for services contracts involving other services connected to the subject-matter of the design contest. Such a contract can be entered into through the negotiated procedure without a prior publication if the contracting authority has obligated itself to follow the jury’s assessment and award the contract to the winner of the design contest, see Article 32, para. 4. 116 A design contest can be carried through as an open design contest where all interested can participate by submitting a project or as a limited design contest, where only the chosen operators can participate. Article 2, para 1(22) (22) ‘innovation’ means the implementation of a new or significantly improved product, service or process, including but not limited to production, building or construction processes, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations inter alia with the purpose of helping to solve societal challenges or to support the Europe 2020 strategy for smart, sustainable and inclusive growth;

2.1.22. Innovation Innovation is one of the most promoted concepts in the new directives. It is found in a number of recitals and it plays a role in connection with many provisions and issues in a tendering procedure. While the importance of innovation and innovative processes is unquestionable the importance of the definition in Article 2, para. 1(22) is not quite clear. First of all there are only few provisions where there are actual legal implications based on the concept (cf. Article 31 on innovation partnerships which is only applicable to contracts including an innovative element). Secondly, the concepts of innovation and the concept of research & development (R&D) are closely related and will in many cases be synonymous. Whereas innovation is covered by a definition this is not the case for R&D. Even though this might not hold major practical implications for the use of the provisions covering these terms it might still create a potential for uncertainty. The preamble shows the overlap of the two terms in their description of the reason why innovation plays a greater role in the procurement regime. 118 The wording of the definition contains very different elements. First of all the initial part of the sentence seems very concise in regard to delimiting an overall description of innovation and what is the nature of such innovation. According to this part of the definition innovation covers implementation of a new or significantly improved product, services or process. This is followed by a number of examples which for some parts do 117

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not seem obvious in a public procurement process. However, they are to some degree illustrative of what it takes to be covered by the notion of innovation. The preamble mentions some of the areas in which innovation (and research and de- 119 velopment) can be incorporated in the procurement system (recitals 47-49). The very reason for the increased focus on innovation is described in recital 47: “Research and innovation, including eco-innovation and social innovation, are among the main drivers of future growth and have been put at the centre of the Europe 2020 strategy for smart, sustainable and inclusive growth. Public authorities should make the best strategic use of public procurement to spur innovation. Buying innovative products, works and services plays a key role in improving the efficiency and quality of public services while addressing major societal challenges. It contributes to achieving best value for public money as well as wider economic, environmental and societal benefits in terms of generating new ideas, translating them into innovative products and services and thus promoting sustainable economic growth.”

In regard to the specific instruments used for promoting innovative solutions the 120 preamble makes reference to the Commission Communication of 14 December 2007 entitled ‘Pre-commercial Procurement: Driving innovation to ensure sustainable high quality public services in Europe’. This document relates to the Public Sector Directive Article 14 covering research and development services. This provision was part of the 2004-directive and has been continued in the new Public Sector Directive. This specific provision allows for attaining services on developing innovative products without such services agreements being subject to procurement procedures in certain situations. See more in the commentary on Article 14. Furthermore, also the use of variants is mentioned (see Article 45 in the Public Sector Directive). In short variants are alternative solutions offered by the economic operators following permission from the contracting authority. Finally, there is a reference to the new procedure innovation partnerships (the Public Sector Directive Article 31). This is a new comprehensive procedure that allows for substantial collaboration on innovation followed by a subsequent delivery of the new product or service. Article 2, para 1(23) (23) ‘label’ means any document, certificate or attestation confirming that the works, products, services, processes or procedures in question meet certain requirements;

2.1.23. Labels The definition of labels and label requirements (in Article 2, para. 1(24)) relate to the 121 key terms in connection to the Public Sector Directive 2014/24 Article 43 on labels. This provision covers labels which are instruments that used to be part of the rules on technical specifications (now Article 42), but are now regulated in separate provisions, see Article 43. Labels still provide a supplemental instrument (compared to the technical specifications in Article 42) in order to describe the product which is the subject-matter of the contract. Recital 75 to the Public Sector Directive states: “Contracting authorities that wish to purchase works, supplies or services with specific environmental, social or other characteristics should be able to refer to particular labels, such as the European Eco-label, (multi-)national eco-labels or any other label provided that the requirements for the label are linked to the subject-matter of the contract, such as the description of the product and its presentation, including packaging requirements.” The definition is complemented by some additional requirements for labels estab- 122 lished in Article 43. For more, see the commentary to Article 43.

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Article 2, para 1(24) (24) ‘label requirements’ means the requirements to be met by the works, products, services, processes or procedures in question in order to obtain the label concerned.

2.1.24. Label requirements 123

The definition in Article 2, para. 1(24) is closely linked to the definition of labels in Article 2, para. 1(23). The definition is new in a procurement contest (as is the definition and specific regulation of labels). The conditions for setting up requirements according to this provision are presented in recital 75 of the preamble to the Public Sector Directive: “It is furthermore essential that those requirements are drawn up and adopted on the basis of objectively verifiable criteria, using a procedure in which stakeholders, such as government bodies, consumers, manufacturers, distributors and environmental organizations, can participate, and that the label is accessible and available to all interested parties. It should be clarified that stakeholders could be public or private bodies, businesses or any sort of non-governmental organization (an organization that is not a part of a government and is not a conventional business).” The recital goes farther than the definition and the specific requirements mentioned are not found in the definition, but rather in Article 43 on labels. The question could be posed as to whether this definition would be necessary at best or whether it is superfluous at worst. The definition merely points out that there are certain requirements to be met, which is already mentioned in Article 2, para. 1(23). The nature of such requirements are, however, not mentioned at all in the definition but can be found in Article 43. Article 2, para 2 2. For the purpose of this Article ‘regional authorities’ includes authorities listed non-exhaustively in NUTS 1 and 2, as referred to in Regulation (EC) No 1059/2003 of the European Parliament and of the Council, while ‘local authorities’ includes all authorities of the administrative units falling under NUTS 3 and smaller administrative units, as referred to in Regulation (EC) No 1059/2003.

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This part of Article 2 complements the provisions in Article 2, para. 1(1)-(4) on contracting authorities. The significance of Article 2, para. 2 is primarily related to the application of the economic thresholds in Article 4 and 5. In Article 2, para. 1(2) and (3) there is a distinction between state authorities and non-state authorities. The latter category is comprised of local authorities, regional authorities and bodies governed by public law. The definition of a body governed by public law is found in Article 2, para. 1(4), whereas Article 2, para. 2 contains the only definition on local and regional authorities. Regulation 1059/2003 has the purpose of ensuring statistical data regarding the regional authority level and the different authorities are listed in one of three lists annexed to the Regulation. The lists are non-exhaustive and are very brief compared to, e.g., Annex I to the Public Sector Directive covering the state authorities. The NUTS-lists and Regulation 1059/2003 are basically contributing with some very basic and obvious references without the complexity of the abovementioned Annex I to the Public Sector Directive.

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Article 3 Mixed procurement 1. Paragraph 2 shall apply to mixed contracts which have as their subject-matter different types of procurement all of which are covered by this Directive. Paragraphs 3 to 5 shall apply to mixed contracts which have as their subject-matter procurement covered by this Directive and procurement covered by other legal regimes. 2. Contracts which have as their subject two or more types of procurement (works, services or supplies) shall be awarded in accordance with the provisions applicable to the type of procurement that characterises the main subject of the contract in question. In the case of mixed contracts consisting partly of services within the meaning of Chapter I of Title III and partly of other services or of mixed contracts consisting partly of services and partly of supplies, the main subject shall be determined in accordance with which of the estimated values of the respective services or supplies is the highest. 3. Where the different parts of a given contract are objectively separable, paragraph 4 shall apply. Where the different parts of a given contract are objectively not separable, paragraph 6 shall apply. Where part of a given contract is covered by Article 346 TFEU or Directive 2009/81/EC, Article 16 of this Directive shall apply. 4. In the case of contracts which have as their subject-matter procurement covered by this Directive as well as procurement not covered by this Directive, contracting authorities may choose to award separate contracts for the separate parts or to award a single contract. Where contracting authorities choose to award separate contracts for separate parts, the decision as to which legal regime applies to any one of such separate contracts shall be taken on the basis of the characteristics of the separate part concerned. Where contracting authorities choose to award a single contract, this Directive shall, unless otherwise provided in Article 16, apply to the ensuing mixed contract, irrespective of the value of the parts that would otherwise fall under a different legal regime and irrespective of which legal regime those parts would otherwise have been subject to. In the case of mixed contracts containing elements of supply, works and service contracts and of concessions, the mixed contract shall be awarded in accordance with this Directive, provided that the estimated value of the part of the contract which constitutes a contract covered by this Directive, calculated in accordance with Article 5, is equal to or greater than the relevant threshold set out in Article 4. 5. In the case of contracts which have as their subject both procurement covered by this Directive and procurement for the pursuit of an activity which is subject to Directive 2014/25/EU, the applicable rules shall, notwithstanding paragraph 4 of this Article, be determined pursuant to Articles 5 and 6 of Directive 2014/25/EU. 6. Where the different parts of a given contract are objectively not separable, the applicable legal regime shall be determined on the basis of the main subject-matter of that contract. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 442; Marta Andrecka, ‘Institutionalized Public-Private Partnerships as a mixed Contract under the regime of the New Directive 2014/24/EU’, EPPL, 2014, p. 174-186; Caranta, ‘Mapping the margins of EU public contracts law: covered,

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mixed, excluded and special contracts’, in Lichére, Caranta and Treumer (eds), Modernising Public Procurement: The New Directive, p. 75; Caranta, General Report, p. 116; Poulsen, Jacobsen and KalsmoseHjelmborg, EU Public Procurement Law, p. 200. 3.1. Different types of mixed procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2. Mixed contracts within the Public Sector Directive . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.1. Primary purpose of the contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3. Separable and inseparable contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.1. Defence and security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4. Separable contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.1. Awarding of sub-contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.2. Awarding of a single contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5. Public Sector Directive or Utilities Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6. Inseparable contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 7 15 18 27 28 29 30 35 36

The provision in Article 3 is new compared to Directive 2004/18. Previously there were separate provisions concerning certain types of mixed contracts. These were primarily explicit provisions on how to manage contracts for services that included both A and B services (Directive 2004/18, Article 22), and rules on the management of contracts that included services and the procurement of goods, as well as building and engineering works (Directive 2004/18, Article 1, paragraph 2, point d). Similar provisions exist in the Utilities Directive 2014/25, Articles 5 and 6; the Concessions Directive 2014/23, Articles 20 to 23; and in the Defence and Security Directive 2009/81, Article 1, no. 5, Article 3 and Article 17, although these also contain some differences. The essence of the rules is pursued, even if the specific provisions are not. In contrast with the past, all potential mixed contracts are regulated. Consequently, the directive can imply a distribution basis for all types of mixed contracts, broken down by the subject matter of the contract (services, social or other specific services, goods, and building and engineering works) and by the various directives. Directive 2004/18 previously contained no rules regarding mixed contracts relating to services covered by multiple directives or other legal regimes such as TFEU. By contrast, the Utilities Directive 2004/17 contained a provision in Article 9 for the distribution basis across directives. Subsequently the rules in Article 3, paragraphs 3 to 6 on mixed contracts extending over multiple directives are the first explicit regulation of contracts across directives. 2 The rules on mixed contracts are one indicator of one of the areas requiring interaction between the various directives in order to ensure the application of the correct rules. Consequently there are cross references between the directives in order to ensure that the correct directive is applied. The provision in Article 3 is essential for the purpose of coordinating the application of the various directives in relation to one another, and consequently Article 3 is of huge practical importance in relation to the many situations where several services are involved. The intention is that the system set out in Article 3 and the corresponding provisions of the other directives, as well as relevant EU legal practice, must be a cohesive and comprehensive system in relation to the distribution of contracts in accordance with the correct rules of law. It is essential that the result is the same no matter which provision is applied. 3 Contracts entered into by contracting authorities and covered by the procurement directives are many and various and will naturally often cover many different services or a mixture of services, goods and building and engineering works. How such mixed contracts are dealt with depends on the nature of the procurement. There are many variables: 1) contracts involving multiple services which fall within the Public Sector Directive, 2) contracts involving services which fall within various procurement directives, 3) 1

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contracts involving services which are partly covered by the Public Sector Directive and which partly fall outside of the directive’s scope of application, and 4) contracts involving services which are partly covered by the Public Sector Directive and which partly involve elements other than procurement (e.g. sales).

3.1. Different types of mixed procurement Article 3, paragraph 1 sets out the basic procedure for how the contracting authority 4 should go about finding out which set of rules apply to mixed contracts. The starting point is that there are different procedures depending on whether all the services fall within the Public Sector Directive. In cases where all the services fall within the scope of the Public Sector Directive, considerations should cover whether the contract should be seen as construction works, a service, or the procurement of goods. The categorisation determines under which rules the procurement should be made. The detailed procedure for determining whether the contract should be considered as construction, services, or the procurement of goods can be found in Article 3, paragraph 2. In cases where the contract includes subject-matter that fall within the Public Sector Directive and subject-matter that fall within other legal regimes, paragraphs 3 to 5 of the provision should be applied instead in order to determine which rules apply to the conclusion of the contract. Based on the wording of the provision and the purpose of the categorisation of the 5 individual contracts, it is clear that the time of the assessment hereof is prior to the start of the procurement in that the relevant directive and the relevant subject-matter should be clear at the point of publication. A further starting point is that it will usually be possible to determine this before commencing the procurement process. There will also be situations in which it may be difficult to determine in advance the governing subject matter, or even the basis on which directive the procurement should be made. When the primary purpose of the contract is the guiding principle, it will usually be possible to determine this before commencing the procurement process. The same applies to contracts where the expected value of the contract’s different types of subjectmatter is the deciding factor, although this may sometimes be difficult to determine. This is because one cannot know the ultimate value of the contract. Firstly, it is difficult to determine the precise value that the individual parts of the contract are expected to have. Secondly, this uncertainty makes a comparison between the expected values of the individual parts of the contract even more difficult. Consequently, although there may sometimes be a degree of uncertainty surrounding this assessment, it must be made based on what the contracting authority knows at the time the procedure commences. In relation to mixed contracts covering more than one directive, the possibility of 6 separating the contract plays a central role. By contrast, no reference is made in the rules regarding contracts within the Public Sector Directive to the possibility of separating the contracts. Consequently this has no bearing in relation to mixed contracts exclusively within the Public Sector Directive.

3.2. Mixed contracts within the Public Sector Directive Article 3, paragraph 1 sets out the basic procedure for how the contracting authority 7 should go about finding out which set of rules apply to mixed contracts. The starting point is that there are different procedures depending on whether all the types of subject-matter fall within the Public Sector Directive. In cases where all the types of subjectmatter fall within the scope of the Public Sector Directive, considerations should cover whether the contract should be seen as building and engineering works, a service, or the

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procurement of goods. The categorisation determines under which rules the procurement should be made. The detailed procedure for determining whether the contract should be considered as construction, services, or the procurement of goods can be found in Article 3, paragraph 2. In cases where the contract includes services that fall within the Public Sector Directive and services that fall within other legal regimes, paragraphs 3 to 5 of the provision should be applied instead in order to determine which rules apply to the conclusion of the contract. 8 Based on the wording of the provision and the purpose of the categorisation of the individual contracts, it is clear that the time of the assessment hereof is prior to the start of the procurement in that the relevant directive and the relevant services should be clear at the point of publication. A further starting point is that it will usually be possible to determine this before commencing the procurement process. There will also be situations in which it may be difficult to determine in advance the governing subject matter, or even the basis on which directive the procurement should be made. When the primary purpose of the contract is the guiding principle, it will usually be possible to determine this before commencing the procurement process. The same applies to contracts where the expected value of the contract’s different types of subjectmatter is the deciding factor, although this may sometimes be difficult to determine. This is because one cannot know the ultimate value of the contract. Firstly, it is difficult to determine the precise value that the individual parts of the contract are expected to have. Secondly, this uncertainty makes a comparison between the expected values of the individual parts of the contract even more difficult. Consequently, although there may sometimes be a degree of uncertainty surrounding this assessment, it must be made based on what the contracting authority knows at the time the procedure commences. 9 In relation to mixed contracts covering more than one directive, the possibility of separating the contract plays a central role. By contrast, no reference is made in the rules regarding contracts within the Public Sector Directive to the possibility of separating the contracts. Consequently this has no bearing in relation to mixed contracts exclusively within the Public Sector Directive. 10 Article 3, paragraph 2, section 2 makes it clear that mixed contracts consisting of services covered by both the light regime (i.e. social and other specific services – Article 74) and the rules for general services, and by both goods and services, will have to be categorised based on which of the estimated values is greater. The last part of the provision can be read in different ways in that provided the contract consists of both goods and general services, it will be covered by section 2 of Article 3, paragraph 2. The question is whether contracts consisting of goods, general services, and social and other specific services should be assessed in the same way in accordance with section 2 of Article 3, paragraph 2, or whether such contracts should fall under the general rule of section 1. It seems obvious that these contracts should be assessed in accordance with Article 3, paragraph 2, section 2. Another question is how to handle mixed contracts involving all types of subjectmatter, i.e. construction works, general services, social and other specific services, and goods. This situation will probably occur rarely, although the occurrence of such contracts cannot be excluded. It must be assumed that such contracts should be assessed based on their primary purpose; i.e. in accordance with section 1 of the provision. The provision in Article 3, paragraph 2, section 1 also covers e.g. contracts containing elements of both services and building and engineering works. This combination is not explicitly mentioned but is covered by the obligation to categorise such a contract based on the primary purpose of the contract. For this combination there is a change to the 194

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contract categorisation method – at least in relation to the formulation: in accordance with Directive 2004/18, Article 1, paragraph 2, point d), section 3, which describes mixed contracts involving services and building and engineering works as being considered service contracts if the contract concerns services and only ancillary activities with regard to the contract’s subject matter covering building and engineering works. It must be assumed that although the formulation is different compared with the new directive, the essence of the previous provision reasonably appears as though it can be read as if the contract’s primary purpose is the deciding factor, by which the legal position is largely retained. Article 3(2), 2nd section of the Public Sector Directive says nothing about how the 11 values of the goods and services should be calculated. However, it must be assumed that the values of the individual elements should be based on the estimated amount payable; see the principle in Article 5 of the Directive on the calculation of values for the purposes of the thresholds. It is more open to question whether the specific calculation rules in Article 5 for the thresholds are applicable to Article 3(2). The answer must be that the provisions on the thresholds that are based more generally on the purposes of the Directive should also apply to Article 3(2). This is presumably the case for options (see Article 5(1)), ensuring that the total potential value of a contract is taken into account. On the other hand it can hardly be a general principle that contracts for an unlimited duration and without an overall price should be regarded as being for four years when calculating their value. Only very seldom will it be possible to calculate precisely the values of goods and services in a contract. As when calculating values in relation to thresholds, the contracting authority must estimate the values – in this case of the differing kinds of procurement – on an objective and well-informed basis.1 In many of the cases in which a contract covers a number of purchases which are 12 treated differently under the procurement directives, it can be difficult for a contracting authority to determine the extent to which it is required to follow an EU procurement procedure for those of the purchases which, taken in isolation, would be subject to stricter requirements. With contracts for both goods and services this question must be regarded as having been settled by Article 3(2) of the Public Sector Directive so that in this case there is not a requirement to separate the contracts. This conclusion is supported by the fact that Articles 3(3), 3(4) and 3(6) are very explicit about severability of the specific contracts. Previously, if a mixed contract involved so-called “B” services, and if the part of the contract involving these B services represented the highest value, the whole contract would be removed from the scope of the Public Sector Directive (with a few exceptions). This resulted in a circumvention risk whereby B services could be combined in contracts with other services or the procurement of goods with the aim of bringing the entire contract outside the scope of the directive. Against this background, the possibilities for combining different types of contracts (including B services) could be limited in order to mitigate circumvention intentions. With the abolition of the B services category and the introduction of the social and other specific services category, the motivation to try to circumvent the rules seems to have weakened. This is because social and other specific services do not exempt the contracting authority from conducting a procurement process as was actually the case under Directive 2004/18. For example, the rules on social and other specific services require the publication of a procurement notice and the establishment of criteria for the awarding of the contract. 1

Opinion of Advocate General Fennelly in Case C-76/97 Tögel, points 45-49.

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The definition of a public supply contract in Article 2(1)(8) of the Public Sector Directive clearly states that the incidental service of siting and installing goods purchased is included as part of a public supply contract. This must be included in the assessment in Article 3(2) 2. section regarding which parts of the contract constitute supply elements respectively service elements, since in such a contract it is not relevant whether the goods or the services (siting and installation work) have the greater value. If a contract also covers services other than siting and installing the goods, it must be assumed that the value of the siting and installation work should be included in the valuation of the goods, and not be calculated as a service. 14 Where a contract only covers goods and social services etc., and where the value of the goods exceeds the relevant threshold but is nevertheless below the threshold for social services, Article 3(2) of the Directive will result in the contract not only being subject to the light regime in Articles 74-77. Where a contract covers goods, ordinary services and social services, it is first necessary to assess whether the contract is a public supply contract or a public service contract pursuant to Article 2(1)(8) and (9) of the Public Sector Directive. If it is found that the contract is for services, then the allocation between ordinary services and social services will be assessed pursuant to Article 74 of the Directive. The result of this could be that the value of the social services is greater than the value of the ordinary services. If this is the case, there may be several consequences. Firstly, the value of the social services etc. is estimated to be between the level of the threshold values for ordinary services (EUR 207,000) and the level of the threshold values for social services (EUR 750,000). In these situations, it must be assumed that the contract is not bound by the rules of the directive but must follow the general principles of EU law and the rules on freedom of movement if the contract has a “clear cross-border interest”.2 Secondly, the value of the social services may exceed EUR 750,000, at which point the contract should be concluded in accordance with the procedural rules of Articles 74 to 77 (the light regime). 13

3.2.1. Primary purpose of the contract One of the key conditions in the assessment of mixed contracts is the contract’s main purpose. The primary purpose is thus crucial for both “internal” mixed contracts (projects solely within the Public Sector Directive) and mixed contracts concerning different rules of law. The concept is not defined in the directive, and so is based on the practice of the EU Court. The first case in which the concept was defined was C-331/92, Gestión Hotelera. 16 Case C-331/92 Gestión Hotelera concerned two invitations to tender, one of which concerned the award of a concession for the installation and opening of a gaming establishment on the premises of a hotel, and the other of which concerned the use of the hotel installations and the operation of the hotel business. These contracts, which were entered into before services were covered by the EU’s procurement directives with the entry into force of Directive 92/50/EEC on the coordination of procedures for the award of public service contracts in 1993, had not been put out to public tender pursuant to Directive 71/305/EEC on coordination of procedures for the award of public works contracts, then in force. Among other things, it was a requirement of the contract that the contractor should carry out necessary alterations, rebuilding and repairs, in addition to 15

2 This can often be assumed to be the case if the scope of the ordinary services is already believed to have a clear cross-border interest; cf. transgression of these threshold values.

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installations, with a view to the hotel continuing to be classified as a 5-star hotel, spending at least 1 billion pesetas for this purpose. In its judgment, the CJEU established the general interpretation of a public works contract, saying that, as the works to be carried out in the hotel and casino were merely incidental to the main object of the contract, taken in its entirety the contract could not be characterised as a public works contract.3 On the other hand the CJEU did not give a general ruling on how to determine what the object of a contract is. In its comments on the actual circumstances, the CJEU started from the position of the general description of the principal objective of the contracts and found that the principal objectives of the installation and opening of a gaming establishment and the operation of the hotel business unquestionably fell within the scope of the then Directive 71/305/EEC on coordination of procedures for the award of public works contracts. Next, the CJEU referred to the fact that the procurement documentation did not contain any description of the subject-matter of the works to be carried out, either as regards the installation and opening of the casino or the operation of the hotel, that there was no provision for remuneration for those works and that the successful tenderer was not in a position to carry out the works itself, because of the strict definition of its object. 4 On the other hand the CJEU did not consider the relative values of the construction works and the services. From the Gestión Hotelera case it must be assumed that it is necessary to determine whether the principal purpose of a contract is building and engineering works by seeing the extent to which the contracting authority’s procurement specifications give evidence of an ‘interest’ in building and engineering works, for example by specifying the work to be carried out by setting a budget for them. It will presumably also be relevant whether the undertakings that are interested in tendering for the contract are part of the building or civil engineering industry, or whether they will subcontract such work to other undertakings.5 The relative extents of construction works and services, and thus their relative values, must be taken into account when assessing the main purpose and principal object of a contract. None of the elements referred to can be assumed to be exclusively decisive for whether the main purpose of a given contract is works or services, and in a specific situation other elements than those referred to could – and should – be included in the assessment of the main purpose.6 The simplest and thus perhaps the most tempting weighting of the relative values of one or the other of the kinds of purchases, as ex3 Case C-331/92 Gestión Hotelera, paras 26-27. The CJEU also referred to the sixteenth recital of Directive 92/50/EEC on the coordination of procedures for the award of public service contracts, where it was stated that: ‘public service contracts, particularly in the field of property management, may from time to time include some works; whereas it results from Directive 71/305/EEC that, for a contract to be a public works contract, its object must be the achievement of a work; whereas, in so far as these works are incidental rather than the object of the contract, they do not justify treating the contract as a public works contract’. 4 See Case C-331/92 Gestión Hotelera, paras 23-24. While the assessment of whether the building and construction work was incidental was left to the referring court, the CJEU’s remarks leave little doubt that its view was that this must have been the case. 5 Case C-331/92 Gestión Hotelera, para. 24, where, as a special variation of this, the CJEU emphasised that the procurement conditions prevented the successful tenderer executing the works itself. 6 E.g. in some cases it will be clear that one kind of purchase constitutes (a part of) the payment for another kind. Also there should not be an overemphasis on whether the building work which a public works contract concerns already belongs to or will later be transferred to the contracting authority; see Case C-331/92 Gestión Hotelera, where the hotel building belonged to the contracting authority. In such a context the duration of the contract, the possibility of getting a return on capital during the period of operations, the value of the building at the termination of the contract and other relevant matters must be considered.

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pressed in Article 3(2) 2nd section of the Public Sector Directive, cannot be used as the decisive criterion. This must be the result when comparing Article 3(2) 1 st and 2nd section respectively. In Case C-220/05 Auroux, the contract between Roanne municipality and a utilities company covered the establishment of a leisure centre, and the main purpose of the contract was the execution of the works as a whole, which amounted to the execution of a public works contract as defined in the Public Sector Directive. The CJEU noted that the service elements in the agreement, such as the acquisition of property, obtaining finances, organising an architectural and/or engineering competition and marketing the buildings, were part of the execution of the work.7 In case C-145/08, Club Hotel Loutraki, the Court had to consider the primary purpose of a contract that involved building and engineering works, services, and the purchase of shares in a public company. The building and engineering works and services were (seen in isolation) covered by the procurement rules, while the sale of shares was not covered by the procurement directives. As the contract was deemed to be inseparable the decisive factor for whether the contract would be subject to the procurement regime was the main goal of the contract. The Court does not seem to have made any in-depth investigation but rather based its decision mainly on the interpretation of the situation as presented by the court making the reference. The Court pointed out that the remarks of the court making the reference indicated that the primary purpose of the mixed contract was the sale of 49% of the shares in EKP to the bidder making the best offer, and that the portion relating to “construction works” and the portion relating to “services” were subordinate to the primary purpose, irrespective of whether the latter constituted a public service contract or a service concession. The national court making the reference also noted that the portion relating to “building and engineering works” was subordinate to the portion relating to “services”.8 The Court felt that the conclusion regarding the primary purpose was supported by the fact that the income which AEAS (the private party) received as a shareholder was substantially higher than the payment the company would have received as a supplier of services. Moreover, AEAS received this income indefinitely, while operating activities expired after ten years. Since this conclusion meant that the primary purpose was the sale of shares, the contract was therefore not covered by the procurement directives.9 17 A further example of the assessment of the primary purpose can be seen in C-213/13 Impresa Pizzarotti. Here the Court had to decide whether a contract that had been formally designed as a lease agreement between a municipality and a contractor was in effect a building and engineering contract. The contracting authority wanted a company to build a new courthouse in the municipality of Bari in Italy so that the contracting authority could then rent space in the premises. Since the contracting authority provided comprehensive and detailed specifications for the building and engineering works, the Court maintained that this was not a lease agreement but a construction contract in accordance with (now) Article 2, paragraph 1, no. 6, point c). 7 Case C-220/05 Auroux, para. 46, and likewise in point 40 of Advocate General Kokott’s Opinion on the case. In points 35-38 of her Opinion Advocate General Kokott also reviewed the difference in the legal classification of design services included in the definition of public works contracts, and other services whose inclusion means that a contract is a mixed contract. 8 C-145/09, Club Hotel Loutraki, para. 55. 9 In connection with this, the Court stated that this conclusion “did not exclude” the applicability of TFEU general principles to the awarding of the contract.

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3.3. Separable and inseparable contracts One of the innovative aspects in the relation to the rules on mixed contracts was introduced in Article 3, paragraph 3, wherein the deciding factor is whether the various parts of a given contract are objectively separable. Previously the possibility of separating the components of a contract was of little significance under the auspices of the directives in assessing which rules should be applied to a contract containing different types of services. Article 3, paragraph 3 establishes a system featuring three different situations in relation to contracts that include services covered by the Public Sector Directive, as well as services covered by other rules, including other procurement directives. The three situations are: 1) the contract can be separated into different parts and the contracting authority will assign tasks separately (based on the characteristics of the individual parts), 2) the contract can be separated into different parts but the contracting authority chooses to award a single contract (here the method depends on the legal basis in play), or 3) the contract cannot be separated (here, the awarding of the contract is based on the rules regulating the task that comprises the primary purpose of the contract). Recital 11 of the preamble to Directive 2014/24 states that emphasis should be placed on whether a contract can be separated into several contracts, or whether a given contract should be seen as one single contract. It states: “In the case of mixed contracts, the applicable rules should be determined with respect to the main subject of the contract where the different parts which constitute the contract are objectively not separable. It should therefore be clarified how contracting authorities should determine whether the different parts are separable or not. Such clarification should be based on the relevant case-law of the Court of Justice of the European Union. The determination should be carried out on a case-by-case basis, in which the expressed or presumed intentions of the contracting authority to regard the various aspects making up a mixed contract as indivisible should not be sufficient, but should be supported by objective evidence capable of justifying them and of establishing the need to conclude a single contract.” Legislators illustrate their thinking regarding inseparability with the following example: ”Such a justified need to conclude a single contract could for instance be present in the case of the construction of one single building, a part of which is to be used directly by the contracting authority concerned and another part to be operated on a concessions basis, for instance to provide parking facilities to the public. It should be clarified that the need to conclude a single contract may be due to reasons both of a technical nature and of an economic nature.” (Our emphasis added). There are a number of cases relating to when individual parts of mixed contracts should be considered as separable parts. The relevant decisions are primarily cases C-145/08 and C-148/08 Club Hotel Loutraki, C-215/09 Oulun Kaupunki, as well as the earlier cases C-3/88 Commission v Italy, C-331/92 Gestión Hotelera Internacional, C-220/05 Auroux et al., C-412/04 Commission v Italy, and C-536/07 Commission v Germany. The judgment in Case C-3/88 Commission v Italy was the first use of separation of contracts. The case concerned provisions in a previous directive – provisions that are not in the current directives. However, the principles regarding separability can be transformed to the current situation. The case concerned a contract for the establishment and operation of data-processing systems prior to the entry into force of Directive 77/62/EEC coordinating procedures for the award of public supply contracts. In this case Italy argued that the interdependence of the services associated with establishing and operating a data-processing system and the purchase of the hardware for that system reMichael Steinicke

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quired the contract to be awarded to a single contractor. The CJEU rejected this argument, saying that the purchase of the equipment for a data-processing system could have been separated from its design and operation, and that the contracting authority could have invited companies specialising in software development to design the data-processing systems and could have purchased hardware to meet the technical specifications laid down by such companies, thus complying with the Directive.10 In the Gestión Hotelera case the CJEU did not refer to the severance of the incidental building and engineering works. However, even though this was not referred to in the question referred for a preliminary ruling, in his Opinion on the case Advocate General Lenz considered the question and concluded that the contract could not have been severed without altering its legal structure, as it was not the authority’s intention to award a works contract on its own account, but to find a company which would have the building works carried out in the framework of its obligations to the authority.11 Advocate General Lenz thus appears to have been prepared to recognise the contracting authority’s right to decide how it ordered its own contractual arrangements, even affecting the application of the procurement directives. In regard to the situation covered in Gestion (including – then – elements outside the directive) such situation are now subject to a separability assessment. 22 In C-145/08 and C-149/08 Club Hotel Loutraki, the Court had to decide whether the former Public Sector Directive should be applied to a contract that included services liable for procurement and elements other than services liable for procurement. The case concerned contracts for the renovation and operation of a casino and hotel business. The circumstances were that a decision was made in Greece to partially privatise the company EKP, a subsidiary of the wholly state-owned company ETA. A procurement process was initiated (but not in accordance with the procurement directives), structured as a combined contract. This primarily comprised the sale of 49% of the shares to a private company (AEAS), the transfer of operations of a casino, and the renovation and improvement of two hotels. Regarding the contract, the Court first maintained that the contract was a mixed contract and that the legal position of this was as follows: “It follows from the case-law of the Court that, in the case of a mixed contract, the different aspects of which are, in accordance with the contract notice, inseparably linked and thus form an indivisible whole, the transaction at issue must be examined as a whole for the purposes of its legal classification and must be assessed on the basis of the rules which govern the aspect which constitutes the main object or predominant feature of the contract...”12 This approach and conclusion apply in accordance with the Court’s statement irrespective of the issue of whether the part that constitutes the primary purpose of the contract falls under one of the procurement directives or not (premise 49). The agreement essentially consisted of ETA selling 49% of the shares in EKP to AEAS, an agreement under which AEAS would take over the operation of the casino in return for payment (the service), and an agreement under which AEAS would undertake to implement an improvement programme for the casino premises and adjacent hotels, including the adaptation of the surrounding outdoor space (the building and engineering works).13 In relation to the specific conditions, the Court noted that the contract was part of a partial privatisation of a public casino business, advertised as part of a combined proCase C-3/88 Commission v Italy, paras 18-19. Opinion of Advocate General Lenz in Case C-331/92 Gestión Hotelera, points 39-40. 12 C-145/08 and C-149/08 Club Hotel Loutraki, para 48. 13 C-145/08 Club Hotel Loutraki, para 47. 10

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curement. The Court stated that it appeared from the case (particularly from the terms in the supplementary procurement notice) “that the mixed contract at issue in the main proceedings is in the form of a single contract relating jointly to the sale of shares in EKP, the acquisition of the right to nominate the majority of the members of the board of directors of EKP, the obligation to assume management of the casino business and to offer high-level services in a profitable manner, and the obligation to refurbish and improve the sites concerned and surrounding land.” (paragraph 52). Furthermore the Court stated that “these findings” made it necessary to conclude the mixed contract with a single counterparty; cf. para 53. The Court thus concluded that the contract comprised an indivisible whole. Thereafter a decision had to be made regarding the assessment of the primary purpose of the contract. For more details about the primary purpose, please see section 3.2.1 above. In C-215/09 Oulun kaupunki, the Court again considered the handling of contracts 23 involving services that fall both within and outside of the Public Sector Directive. This case dealt with the establishment of a joint venture between Oulun kaupunki and a private partner. The cooperation agreement in question resulted in the parties dividing the capital equally between them so as to facilitate joint management. The activities of the company consisted of supplying services in the health and well-being sector, primarily directed at private customers. The company’s two partners (also with Oulun kaupunki as the contracting authority) undertook to buy statutory health services from the joint venture for a transition period of four years. The value of these services exceeded the relevant threshold values in Directive 2004/18. By way of a non-cash contribution, the partners transferred their respective units that had previously performed these services. The city council of Oulun kaupunki gave the following justifications regarding the decision to transfer the services over a four-year period: 1) this approach ensured employment for employees transferred from municipal employment to the joint venture, 2) Oulu kaupunki’s current contract was advantageous and competitive, and 3) the agreement provided good conditions for the start-up of the joint venture. The Court stated that the case was ultimately about whether the transfer of the services could be seen as an inseparable part of the overall agreement regarding the establishment of the joint venture. To assess this, the Court referred to the Club Hotel Loutraki judgement, and primarily to the question of whether the service agreement could be objectively separated from the establishment agreement. As a basis for the Court’s assessment of whether the service could be separated, three arguments were made to justify the transfer of the assignment to the joint venture, to justify the fact that the value of the obligation to buy health services formed part of its non-cash contribution to the joint venture’s capital, and to justify that the non-cash contribution was a financial condition of the venture’s establishment. The Court began by stressing that the intentions of the parties to consider the different parts as inseparable were insufficient. Instead, the assessment should be based on objective factors that justify and substantiate the need to conclude a combined contract. 14 The Court stated in paragraph 40 regarding the security of employment for municipal workers who were transferred that “such a guarantee could also have been made under a procedure for the award of a public contract in accordance with the principles of non-discrimination and transparency, in which the requirement relating to that guarantee would be part of the conditions to which the award of the contract would be subject.” That argument does not seem convincing. The carrying out of a procurement process would actually provide no assurance that the joint venture (with the former municipal 14

C-215/09 Oulun kaupunki, para 39.

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employees) would win such a procured contract, and thus provide no assurance for the employees. However, there is no basis for assuming that security of employment in itself would have been sufficiently important for not conducting a procurement process. In relation to Oulu kaupunki’s arguments that the contract is advantageous and competitive, and that the transfer of the service creates good conditions for the start-up of the joint venture, the Court stated that the failure to carry out a procurement process for the transfer from a public entity to a half-public venture contravenes procurement rules in that this transfer gives a private company that owns a share of the half-public venture a competitive advantage; see premise 41. Furthermore the Court stated that “the alleged but unsubstantiated inclusion of the value of the undertaking entered into by Oulun kaupunki with respect to its capital contribution to the joint venture constitutes, in those circumstances, a legal technicality which does not justify the view that that aspect of the mixed contract is indivisible from the latter.”15 It appears to be of crucial importance that following the transition period, Oulun kaupunki would conduct a procurement process for the service, which must be seen as an admission that the service is separable from the rest of the mixed contract (premise 43). Similarly, the fact that the joint venture had operated since 2008 without this aforementioned element seems to point to the potential separability of the specific service (premise 44). Based on the reported situation, the Court concluded that the service could be objectively separated from the establishment agreement, and that the service agreement could therefore be concluded in accordance with the then current Procurement Directive, 2004/18. 24 The outcomes of Club Hotel Loutraki and Oulun kaupunki can be difficult to amalgamate. This is partly due to the fact that the Court’s approach to the two decisions appears to be different in many respects, and that the Court’s arguments in the two cases do not appear to be completely uniform. In the Club Hotel Loutraki case, the Court appears to use the assessments of the referring court as the basis for its own assessment. In addition, the Court appears to use as its basis that the conclusion of a single contract indicates that this must be the case. In its decision, the Court does not appear to have performed any in-depth investigation into whether the relationships presented by the parties have a bearing on the inseparability of the contract. Conversely, the Court’s approach in Oulun kaupunki appears to be more sceptical of the parties’/referring court’s assessment of the separability of the contract. It is difficult to see areas where the cases differ markedly, and the outcomes of the cases may also seem relatively similar. In general, it must therefore be assumed that in the case of Oulun kaupunki, the Court has engaged in a more intensive examination of the objective conditions forming the basis of the contract’s indivisibility. 25 A contracting authority that allows the submission of separate part-tenders for goods or services thereby accepts the principle of the possible separation of the kinds of purchases, and this must be relevant to whether the contract can be regarded as one contract pursuant to Article 3(3) of the Public Sector Directive, at least if it means that a purchase of goods which would otherwise be subject to EU procurement procedures is not subject to them. 26 As can be seen from preamble recital 11, the inseparability can be based on technical and economic factors. Club Hotel Loutraki and Oulun kaupunki emphasise that it is often economic factors that lead to the inseparability. Typically, services would be inseparable if the financing of one or more of the services would be linked to the contract’s 15

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other services. The example in the preamble identifies a contract involving both general public contract elements (publicly funded) and a concession element (funded by users of the contract’s services). Another example can be seen in Club Hotel Loutraki, whereby remuneration paid for the acquisition of part of a business is offset by certain obligations relating to the acquisition of the business (the performance of various tasks). The objective inseparability of the contract means that the contracting authority’s (or someone else’s) subjective assessments, intentions, etc. may not have any bearing on the assessment of inseparability. 3.3.1. Defence and security In addition to the focus on whether contracts can be separated, Article 3, paragraph 3 27 contains a specific definition in relation to contracts in the area of defence and security. It states that “Where part of a given contract is covered by Article 346 TFEU or Directive 2009/81/EC, Article 16 of this Directive shall apply.” For more on this provision, see the commentary to Article 16.

3.4. Separable contracts The starting point for dealing with contracts containing separable elements is that the 28 contracting authority essentially has the option to choose between awarding a single contract or assigning the task as several sub-contracts. There seem to be no reservations in relation to the contracting authority’s freedom of choice in relation to either of the two models. In other words, nothing compels the contracting authority to prioritise one approach over the other. Recital 12 of the preamble to Directive 2014/24 states: “In the case of mixed contracts which can be separated, contracting authorities are always free to award separate contracts for the separate parts of the mixed contract, in which case the provisions applicable to each separate part should be determined exclusively with respect to the characteristics of that specific contract. On the other hand, where contracting authorities choose to include other elements in the procurement, whatever their value and whatever the legal regime the added elements would otherwise have been subject to, the main principle should be that, where a contract should be awarded pursuant to the provisions of this Directive, if awarded on its own, then this Directive should continue to apply to the entire mixed contract.”

This consideration clearly shows the thinking behind the handling of separable contracts. It clearly shows that the uncertainty associated with awarding a single contract, even if it can be separated into sub-contracts which can subsequently be handled within the context of the specific regulatory framework pertaining to the sub-contracts, should be handled according to the precautionary principle in order to ensure as high a degree of competition as possible. This is a possible approach for addressing the risk of circumvention of the procurement rules that could occur in the awarding of combined contracts, which may contain elements that do not fall within the procurement directives; i.e. where there is a risk that the contract is not subject to an express requirement for exposure to competition. For more details, see section 3.4.2 below. 3.4.1. Awarding of sub-contracts According to Article 3, paragraph 4, if the awarding of individual sub-contracts that 29 the mixed contract is separated into should take place, it is based on the characteristics of the sub-contracts. The characteristics that serve as the decisive criterion have not previously been applied, and there is no clear indication of what is implied by this criterion. It is clear from the context that the criterion is related to the separable parts of a mixed Michael Steinicke

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contract. The sub-elements of a contract will ultimately be specific services, goods, or building and engineering works, and naturally these must be the characteristics that are referred to in relation to the characteristics of the contract. Conversely, this part of Article 3, paragraph 4 covers the type of contracts covered by different legal bases; i.e. both the Procurement Directive and other rules. In this context, it makes sense instead to look at the characteristics that determine whether an element falls under one rule rather than another. These could be the elements of a contract which are concession-like in nature (i.e. based on a payment method different to traditional payment from the contracting authority) or the sales aspect of a contract package. Here the relevant characteristics will be the conditions that point towards the relevant set of rules – e.g. the Concessions Directive. 3.4.2. Awarding of a single contract Where the contracting authority decides to award a single contract (regardless of the possibility of separating the contract into several smaller contracts), the affiliation of the contract is determined following closer analysis on the basis of the applicable legal basis (in addition to the Procurement Directive). According to the methodology, Article 3, paragraph 4 concerns contracts to which the Public Sector Directive is relevant, with the other potential legal bases being the Concessions Directive, the Defence and Security Directive, or other legal bases excluding the Utilities Directive (see Article 3, paragraph 5). 31 In relation to defence and security contracts, Article 3, paragraph 4 stipulates that such contracts must be assessed in accordance with Article 16 of the directive. For more details, see the commentary to Article 16. 32 If, in accordance with Article 3, paragraph 4, section 2, the contract does not contain a defence or security element, the Public Sector Directive applies to such mixed contracts. This is the conclusion regardless of the legal regime these would have been subject to. This part of the provision in effect means that legal regimes other than the procurement rules are involved, in so much as (in addition to the Defence and Security Directive referred to in this section) it deals with the relationship with the concession directive in Article 3, paragraph 4, section 3 and the Utilities Directive in Article 3, paragraph 5. These other legal regimes could be other secondary EU sources of law such as Regulation 1370/2007 concerning the procurement of transport services or the Commission communication on subsidy elements in connection with the sale of land or buildings by public authorities, EFT 1997 C 209, 3. However, there may also be other legal regimes involved, such as the provisions of the TFEU. 33 With regard to the relationship between the Public Sector Directive and the Concessions Directive, a determination model is applied different to that under Article 3, paragraph 4, section 2. Consequently, Article 3, paragraph 4, section 3 states that mixed contracts that in part involve circumstances covered by the Public Sector Directive and in part circumstances covered by the concession directive should be awarded in accordance with the Public Sector Directive if the parts covered by the Public Sector Directive exceed the threshold values of this Directive. Specific reference is made to the threshold values in Article 4 of the Public Sector Directive, and the calculation methods set out in Article 5. If such a contract contains both services and building and engineering works that fall within the scope of the Public Sector Directive and which also exceed the threshold values, the provision states that it is the Public Sector Directive that is applicable but not necessarily which rules of the Public Sector Directive should be used. Here it must be assumed that the general rules for the allocation of mixed contracts within the Public Sector Directive (Article 3, paragraph 2) must be applicable and determined in each specific case based on the primary purpose of the contract. If the primary purpose 30

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is building and engineering works, the contract will be covered by the Public Sector Directive’s rules for building and engineering contracts. As pointed out above, there are various options for the awarding of combined con- 34 tracts, even when the contract can be divided into sub-contracts, reflecting a precautionary approach that should ensure a basic level of competition. The prioritisation of individual regulatory frameworks indicates that the Public Sector Directive should be prioritised ahead of the concession directive and other legal bases than the Public Sector Directive (this presumably includes sales or other circumstances that fall outside of the scope of the directives). Similarly, it must be noted that in the vast majority of cases where the public sector grants privileges (exclusive rights, making sales, etc.), the TFEU requires the establishment of transparency and equal treatment, which de facto implies the establishment of a certain level of competition.16 Consequently, even cases in which a mixed contract would fall completely outside the scope of the Public Sector Directive or other directives will most often be amenable to competition.

3.5. Public Sector Directive or Utilities Directive Article 3, paragraph 5 clarifies the way in which it is determined whether the Public 35 Sector Directive or the Utilities Directive is applicable to a particular contract. It states that where elements fall under both directives, it should be determined which provisions are applied in the application of Articles 5 and 6 of the Utilities Directive. With this, the deciding assessment is incorporated into the Utilities Directive. See commentary to Articles 5 and 6 of the Utilities Directive. With regard to a possible conflict in relation to the basis of Article 3, paragraph 4, it is stated that where there is a differentiation between the Public Sector Directive and the Utilities Directive, Article 3, paragraph 4 is not applicable.

3.6. Inseparable contracts Article 3, paragraph 6 covers situations involving contracts that cannot be separated 36 into smaller parts. The provision states: “Where the different parts of a given contract are objectively not separable, the applicable legal regime shall be determined on the basis of the main subject-matter of that contract.” The description in Article 3, paragraph 6 relates to mixed contracts outside the procurement directives; see Article 3 paragraph 3, point 2, according to which paragraph 6 comes into play for contracts that are objectively inseparable. In these situations, the primary purpose of the contract is the deciding factor, and in this respect the concept is interpreted in the same way as presented above. It is unclear whether the risk of circumvention should play a role in the application of 37 the rules on mixed contracts. In certain situations, a contract is not subject to the full procurement obligation in accordance with the directives, even if the contract contains parts which, on their own, are liable to procurement. This question will often arise in connection with public works contracts where there is a considerably higher threshold than for public supply contracts and public service contracts. However, the problem can

16 See e.g. Club Hotel Loutraki, para 63, in which the Court somewhat cryptically stated that the fact that the procurement directives were not applicable did not mean that the contract was not covered by the TFEU and the general principles of EU law. Further clarity was provided in C-203/08 Sporting Exchange in which the Court stated that transparency and equal treatment should be ensured in cases where a Member State was to award an exclusive right to engage in gaming activities to one company (see para 46). See the corresponding C-64/08 Ernst Engelmann, para 2.

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also arise in other ways, for example in relation to Article 74 of the Directive, which concerns social services etc. The sporadic regulation of mixed contracts in earlier directives resulted in considerations of whether there was a basis for protection against circumvention situations. It must be assumed that such considerations no longer have a bearing. This is primarily due to the new directives appearing to take a position with regard to all matters regarding the categorisation of mixed contracts. In addition, in this context no provisions concerning circumvention situations have been introduced. Where the new rules do take a position regarding a number of situations that could be seen to give rise to the potential for circumvention, this potential appears not to have been of much concern to EU legislators. Similarly, no options for exceptions have been made for circumvention situations.

Section 2 Thresholds Article 4 Threshold amounts This Directive [Directive 2014/24/EU on public procurement (the ‘Private Sector Directive’)] shall apply to procurements with a value net of value-added tax (VAT) estimated to be equal to or greater than the following thresholds: (a) EUR 5,186,000 for public works contracts; (b) EUR 134,000 for public supply and service contracts awarded by central government authorities and design contests organised by such authorities; where public supply contracts are awarded by contracting authorities operating in the field of defence, that threshold shall apply only to contracts concerning products covered by Annex III; (c) EUR 207,000 for public supply and service contracts awarded by sub-central contracting authorities and design contests organised by such authorities; that threshold shall also apply to public supply contracts awarded by central government authorities that operate in the field of defence, where those contracts involve products not covered by Annex III; (d) EUR 750,000 for public service contracts for social and other specific services listed in Annex XIV. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 448 et seq.; Martin Trybus, Roberto Caranta and Gunilla Edelstam (eds):,EU Public Contract Law. Public Procurement and Beyond, p. 25 et seq.; Poulsen, Jakobsen and Kalsmose-Hjlemborg, EU Public Procurement Law, p. 213.

4.1. The relevance of threshold amounts 1

Carrying out an EU procurement requires resources, and only procurements above a certain value can be expected to attract economic operators from other EU Member States. For this reason the procurement directives only apply to purchases which reach or exceed certain amounts, called ‘threshold amounts’. In most cases the threshold amount determines whether the procurement directives are applicable to a given contract. In contrast to what was applied previously, the threshold amounts also apply to design contests; see the special rules in Article 78. Framework agreements and dynamic purchasing systems are not in themselves public contracts, but contracts entered into on

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the basis of a framework agreement or dynamic purchasing system constitute public contracts: see Article 5(5). The threshold amounts do not stand alone. It is also important that the value of a 2 purchase is calculated correctly. There are detailed rules on this in Article 5 of the Public Sector Directive; see the commentary on Article 5. If the value of a purchase reaches or exceeds the relevant threshold amount, the pro- 3 curement directives apply and as a general rule there is an obligation to follow a procurement process according to Union rules. If the value of a purchase is below the threshold amount the procurement directives do not apply, but this does not mean that the purchasing authority is free from obligations under Union law. There are still obligations under the Treaty on the Functioning of the European Union (TFEU), such as the prohibition of discrimination on the ground of nationality, the principles of freedom of movement of goods and freedom to provide services, and the principles of proportionality and transparency. In Case C-59/00 Vestergaard, the Court of Justice of the European Union (CJEU) unsurprisingly found that the basic principles of the TFEU must be complied with when a contracting authority makes a purchase that falls below the threshold amounts, and that the failure to add the words ‘or equivalent’ to the designation of a product in the contract documents may be a hindrance to trade pursuant to Article 34 TFEU as it may deter economic operators offering similar products from taking part in the tendering procedure. In contrast, in its ruling in the case the Danish Complaint Board for Public Procurement had relied on the fact that purchases that are below the threshold amounts are generally not of interest in an EU context and so for such purchases it would make disproportionate demands on resources to comply with the specifications of the procurement directives. The Board had incorrectly ruled that, where a contracting authority specifies a particular named product, the TFEU does not require the specification of the make to be followed by the words ‘or equivalent’ for contracts below the threshold amounts. In Case C-6/05 Medipac, the CJEU stated that, according to its settled case-law, even if the value of a procurement contract does not reach the threshold amount so that the contract does not fall within the scope the procurement directives, contracting authorities are nevertheless bound by the general principles of Union law, such as the principles of equal treatment and transparency. However, it should not be concluded that the TFEU’s general principles impose detailed regulations, corresponding to those in the procurement directives, on purchases that are below the threshold amounts. See the discussion in section 0.3.2.4. A purchasing authority that makes a purchase below the value thresholds of the Pub- 4 lic Sector Directive may publish a contract notice in the Official Journal of the EU, even though there is no obligation to do so; see Article 51(6) of the Directive. Such a voluntary publication does not mean that the contracting authority is bound by the other provisions of the Public Sector Directive as long as the publication makes it clear that the purchase is not subject to the Union rules on procurement and that these rules will not be followed. Neither Article 51(6) nor the other provisions of the Public Sector Directive generally oblige a contracting authority to comply with the rules of the Directive for contracts published in the Official Journal that are below the threshold amounts. This cannot be regarded as being governed by the judgment in Case C-87/94, Commission v Belgium (the Walloon Buses case), where the CJEU stated that, while a contracting authority can choose between various forms of procurement procedures, it is bound to comply with the rules of the chosen procedure.

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However, if a contract notice for a purchase that is below the threshold amount is published so that the procurement appears to be covered by the full procedure of the Public Sector Directive then under the transparency principle the contracting authority can be bound to follow the general rules of the Directive, i.e. as if the contract had a value at or above the relevant threshold amount. Where, a contract for a purchase is put out to tender in isolation and the contract value is below the relevant threshold amount, economic operators may not know whether the contract is part of a larger purchase which is to be assessed collectively in relation to the threshold amount and is above the threshold, though the purchase is divided up and dealt with in several contract notices for lesser amounts. If there is publication in the Official Journal of the EU for a purchase that is below the threshold amount, in the contract notice the contracting authority should indicate whether the rules of the Public Sector Directive will be followed. However, this does not apply if the contracting authority decides to follow the Directive rules in full, as an alternative to determining their own procurement terms for the procurement procedure. For further on the obligation to comply with the procurement procedures pursuant to Article 51(6), see the commentary on that provision. 5 Article 4(b) and (c) both refer to Annex III to the Public Sector Directive. This Annex contains a list of products regarding contracts in the field of defence. According to the Annex, the only text applicable for the purposes of this is the text in Annex 1, point 3, of the World Trade Organisation Agreement on Government Procurement (GPA), on which the indicative list of products is based. The distinction between the two threshold amounts applies to contracting authorities in the field of defence in relation to goods that are or are not covered by Annex III. For goods covered by Annex III the lower threshold amount of EUR 134,000 applies, whereas the higher threshold amount of EUR 207,000 applies to products that are not listed in Annex III.

4.2. An overview of the threshold amounts 4.2.1. The threshold amounts in the Public Sector Directive Most contracting authorities only need to take account of two threshold amounts. The choice between these is quite simple as one threshold amount applies to goods and services and another, considerably higher, applies to public works contracts. 7 A contracting authority that is a state authority listed in Annex I of the Public Sector Directive (referred to in the Annex as ‘Central Government Authorities’) have three threshold amounts to consider. The two most important are the threshold amount for goods and services which is EUR 134,000 (see Article 4(b)), and the threshold amount for public works contracts which is EUR 5,186,000 (see Article 4(a)). The threshold amounts for service contracts and the difference between central governments and other contracting authorities also apply to design contests; see Article 4(b) and (c) of the Public Sector Directive). Central Government Authorities are defined in Article 2(1)(2) by reference to Annex I of the Public Sector Directive, which contains a long list of central government authorities of the various Member States. This list quickly gets out of date, but the list covers government ministries and their associated institutions, as they exist from time to time; see Article 2(1)(2). According to Article 2(1)(3), ‘non-state contracting authorities’ (‘subcentral contracting authorities’) means all contracting authorities that are not central government authorities. 6

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The Public Sector Directive also imposes obligations on others than contracting authorities. Recipients of direct subsidies of more than 50 %, given by a contracting authority for some kinds of public works contracts or related services contracts must comply with the Public Sector Directive; see Article 13 and the commentary thereto. For such contracting authorities the threshold amounts are EUR 5,186,000 for public works contracts and EUR 207,000 for related services. Certain questions of definitions can arise in connection with mixed contracts. If, in 8 isolation, a central government authority procures Part A services together with a nonstate contracting authority, one part of the purchase should be assessed against the threshold amount of EUR 134,000 and the other part against the threshold amount of EUR 207,000. The fact that the purchase is made together is not altered by the fact that the low threshold applies to the central government contracting authority and to the non-state contracting authority for the combined purchase. A more difficult question of definition concerns which threshold amount applies to 9 purchases that cover both general services, which must be offered for tender under the rules of the Public Sector Directive, and social services, where there is a limited obligation to comply with EU procurement rules; see Articles 74-77. It could be argued that this problem could be solved by analogy from the previous Article 22 of Directive 2004/18, which contained criteria for definitions based on whether (previous) Part A or Part B services constituted the greater share of the value of the purchased contract. However, the assessment of the value of a purchase in relation to threshold amounts took priority over an assessment pursuant to Article 22 which in itself depended on the Public Sector Directive applying to the purchase and was aimed at determining the extent to which the procedural rules of the Directive would be complied with when entering into the contract. The same problem arises in relation to general services and social and other specific services. There is much to suggest that it could be beneficial to interpret Article 4 so as to include a rule corresponding to Ex-Article 22, determining which of two provisions (in this case threshold amounts) should be used to evaluate a contract on the basis of the relative values. Nothing in the Directive authorises this, even though the same approach is also found in the current Article 3(2) regarding mixed contracts. While Article 22 of Directive 2004/18 did not concern the distinction between general services and social services in relation to threshold amounts, there must be some regard for the purpose of the threshold amounts in identifying purchase contracts that are of interest for economic operators in other Member States. If a contract is of such value that it would have been below the threshold amount if it had only covered general services, the fact that it covers both general services and social services ought not to mean it should be put out to tender under other than the light regime. Other than in the marginal situations described above, the full value of the overall purchase should be the basis for calculating the relevant threshold amount, whether a contract concerns general services, social services or other specific services, goods and/or public works. 4.2.2. Threshold amounts under the other directives To a certain extent the threshold amounts are similar in the other directives, even 10 though there are clear differences between how they are determined for individual services, in line with the other differences between the directives. In Directive 2014/23/EU on the award of concession contracts (the ‘Concessions Di- 11 rective’) there is a single threshold amount, even though the Directive covers both services and public works. Under Article 8(1) it applies to concessions with a value equal to Michael Steinicke

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or greater than EUR 5,186,000. This is the threshold for public works contracts in the 2014 Public Sector Directive. For the special circumstances relating to threshold amounts in the Concessions Directive, see the commentary on Articles 8 and 9 of the Directive. 12 Article 15 of the Utilities Directive lays down the following threshold amounts: ‘Save where they are ruled out by the exclusions in Articles 18 to 23 or pursuant to Article 34, concerning the pursuit of the activity in question, this Directive shall apply to procurements with a value net of value-added tax (VAT) estimated to be equal to or greater than the following thresholds: EUR 414,000 for supply and service contracts as well as for design contests; EUR 5,186,000 for works contracts; and EUR 1,000,000 for service contracts for social and other specific services.’

Articles 8 and 9 of the Defence and Secuurity Directive (2009/81/EC) contain provisions on thresholds and their calculation. While these provisions were not formulated at the same time as the adoption of the procurement directives, the thresholds and their updated levels are in accordance with the other directives. Under Article 8 of the Defence and Security Directive the thresholds are as follows: EUR 412,000 for supply and service contracts; and EUR 5,150,000 for public works contracts. These have been updated to be in line with the thresholds in the other directives. 14 Uniformity in relation to the similar kinds of services means there is no difference in the choice of directive. However, there can be a substantial incentive for a contracting authority to categorise a mixed service contract as a concession contract, as the thresholds for services in the Concessions Directive are notably higher than in the other directives. 13

Article 5 Methods for calculating the estimated value of procurement 1. The calculation of the estimated value of a procurement shall be based on the total amount payable, net of VAT, as estimated by the contracting authority, including any form of option and any renewals of the contracts as explicitly set out in the procurement documents. Where the contracting authority provides for prizes or payments to candidates or tenderers it shall take them into account when calculating the estimated value of the procurement. 2. Where a contracting authority is comprised of separate operational units, account shall be taken of the total estimated value for all the individual operational units. Notwithstanding the first subparagraph, where a separate operational unit is independently responsible for its procurement or certain categories thereof, the values may be estimated at the level of the unit in question. 3. The choice of the method used to calculate the estimated value of procurement shall not be made with the intention of excluding it from the scope of this Directive. Procurement shall not be subdivided with the effect of preventing it from falling within the scope of this Directive, unless justified by objective reasons. 4. That estimated value shall be valid at the moment at which the call for competition is sent, or, in cases where a call for competition is not foreseen, at the moment at which the contracting authority commences the procurement procedure, for instance, where appropriate, by contacting economic operators in relation to the procurement. 5. With regard to framework agreements and dynamic purchasing systems, the value to be taken into consideration shall be the maximum estimated value net of 210

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VAT of all the contracts envisaged for the total term of the framework agreement or the dynamic purchasing system. 6. In the case of innovation partnerships, the value to be taken into consideration shall be the maximum estimated value net of VAT of the research and development activities to take place during all stages of the envisaged partnership as well as of the supplies, services or works to be developed and procured at the end of the envisaged partnership. 7. With regard to public works contracts, the calculation of the estimated value shall take account of both the cost of the works and the total estimated value of the supplies and services that are made available to the contractor by the contracting authority provided that they are necessary for executing the works. 8. Where a proposed work or a proposed provision of services may result in contracts being awarded in the form of separate lots, account shall be taken of the total estimated value of all such lots. Where the aggregate value of the lots is equal to or exceeds the threshold laid down in Article 4, this Directive shall apply to the awarding of each lot. 9. Where a proposal for the acquisition of similar supplies may result in contracts being awarded in the form of separate lots, account shall be taken of the total estimated value of all such lots when applying points (b) and (c) of Article 4. Where the aggregate value of the lots is equal to or exceeds the threshold laid down in Article 4, this Directive shall apply to the awarding of each lot. 10. Notwithstanding paragraphs 8 and 9, contracting authorities may award contracts for individual lots without applying the procedures provided for under this Directive, provided that the estimated value net of VAT of the lot concerned is less than EUR 80 000 for supplies or services or EUR 1 million for works. However, the aggregate value of the lots thus awarded without applying this Directive shall not exceed 20 % of the aggregate value of all the lots into which the proposed work, the proposed acquisition of similar supplies or the proposed provision of services has been divided. 11. In the case of public supply or service contracts which are regular in nature or which are intended to be renewed within a given period, the calculation of the estimated contract value shall be based on the following: (a) either the total actual value of the successive contracts of the same type awarded during the preceding 12 months or financial year adjusted, where possible, to take account of the changes in quantity or value which would occur in the course of the 12 months following the initial contract; (b) or the total estimated value of the successive contracts awarded during the 12 months following the first delivery, or during the financial year where that is longer than 12 months. 12. With regard to public supply contracts relating to the leasing, hire, rental or hire purchase of products, the value to be taken as a basis for calculating the estimated contract value shall be as follows: (a) in the case of fixed-term public contracts, where that term is less than or equal to 12 months, the total estimated value for the term of the contract or, where the term of the contract is greater than 12 months, the total value including the estimated residual value; (b) in the case of public contracts without a fixed term or the term of which cannot be defined, the monthly value multiplied by 48. 13. With regard to public service contracts, the basis for calculating the estimated contract value shall, where appropriate, be the following:

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(a) insurance services: the premium payable and other forms of remuneration; (b) banking and other financial services: the fees, commissions payable, interest and other forms of remuneration; (c) design contracts: fees, commissions payable and other forms of remuneration. 14. With regard to public service contracts which do not indicate a total price, the basis for calculating the estimated contract value shall be the following: (a) in the case of fixed-term contracts, where that term is less than or equal to 48 months: the total value for their full term; (b) in the case of contracts without a fixed term or with a term greater than 48 months: the monthly value multiplied by 48. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 456 et seq.; Martin Trybus, Roberto Caranta and Gunilla Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, p. 25 et seq.; Poulsen, Jakobsen and Kalsmose-Hjlemborg, EU Public Procurement Law, p. 218 et seq. 5.1. The total estimated value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2. The relevance of there being one or more than one contracting authority 5.3. The subdivision of procurements and the method for calculating value. . . 5.3.1. Choice of calculation method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4. The timing of the calculation of value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5. Calculating the value of framework agreements and dynamic purchasing systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6. Calculating the value of innovation partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7. The contracting authority’s supplies for public works contracts . . . . . . . . . . . 5.8. One contract or several contracts?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8.1. Each contract as a minimum unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8.2. Division of contracts for public works or services . . . . . . . . . . . . . . . . . . . . . . . . 5.8.2.1. Division of contracts for public works. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8.2.2. Division of contracts for services into lots. . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9. Contracting by lots for purchasing goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9.1. Simultaneous contracts for lots for similar goods . . . . . . . . . . . . . . . . . . . . . . . . 5.10. Exceptions for contracts for smaller individual contracts for lots . . . . . . . . . . 5.11. Calculating the value of regular public supply or service contracts . . . . . . . . 5.12. Calculating the value of leasing and rental contracts. . . . . . . . . . . . . . . . . . . . . . . 5.13. Calculating the value of contracts for services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.13.1. Calculating the value of financial services and design services. . . . . . . . . . 5.14. Calculating the value of contracts which do not indicate a total price . . . . .

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It is extremely important that the correct threshold amount should be used, and in any event a contracting authority should not use a threshold amount that is too high. It is not difficult to find the correct threshold amount, but it is necessary to be aware that the use of differing threshold amounts depends on which directive, which type of contracting authority and which kind of purchase (public works, goods or services) is concerned. See the commentary on Article 4 on the threshold amounts. Article 5 of the Public Sector Directive deals with a more complex element of threshold amounts, namely how the values of public works contracts, framework agreements and dynamic purchasing systems are to be calculated. Article 5 lays down a number of detailed rules on calculation methods which a contracting authority must be aware of when assessing whether the relevant threshold has been reached. If these calculations methods are not followed the threshold amount may be incorrectly assessed and the contracting authority may fail to comply with its obligation to carry out a procurement procedure.

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According to Article 5(1), the main principle for calculating the value of a contract is 2 for the estimated value of a procurement to be based on the total amount payable. Thus the value of a contract is typically the amount that the contracting authority must pay under the contract; see the more detailed rules in Article 5(2) to (11). All forms of payment must be included. This includes both direct and indirect payments, transfers of goods or grants of benefits where the right to obtain the benefit is wholly or partly dependent on the contractor’s agreed performance. Payment for all performance under the contract must be included. If a contract is for the purchase of goods, payment for after sales services and operations under the contract must also be included. If a public works contract is in the form of a rental contract, the value of the contract must be calculated on the basis of the rent payable plus any other payments, including any fee for an option to purchase the rented property. The English language version of Article 5(1) refers to the ‘the total amount payable, net of VAT, as estimated by the contracting authority’. This could be understood as meaning that only the payments which a contracting authority makes should be taken into account, so that payments not made by the contracting authority are not included even if they are based on the contract with the contracting authority. However, it would be contrary to the purpose of the procurement directives for payments from a third party not to be included if such payments are effectively part of the payment to the contractor for the performance of the contract. Article 5(1) should be understood as meaning that, in calculating the value of a contract a contracting authority must include all forms of payment which the contractor will receive for an agreed performance, whether the payment is made by the contracting authority or by others; see Case C-220/05 Auroux, referred to below. In the case of the purchase of a service which the contracting authority makes available to the general public for (part) payment by users of the service directly to the contractor, the value of the user payments should also be included. This can be relevant, for example, in the case of waste disposal, where those who generate the waste sometimes pay directly for municipal waste disposal services or pay the property management if the property management typically collects the fees demanded of the tenants. Case C-220/05 Auroux concerned a contract between Roanne municipality and an undertaking to establish a leisure centre to include a multiscreen cinema and business premises which were to be sold to third parties after their construction, as well as car parks and access roads which were to be transferred to the municipality. The CJEU ruled that, given the purpose of the procurement directives, the value of the contract should be based on the perspective of potential tenderers within the EU. Thus the value of the contract should not only include the payment by the municipality, but also the revenues that would be received from third parties, as these total revenues would constitute the overall value of the contract from the perspective of potential tenderers. When calculating the value of a contract the amount of VAT payable is disregarded, 3 but other elements of payment are not disregarded, even if they concern the payment of taxes. According to Article 5(1), only payments are to be taken into account for assessing 4 the value of a contract. The subjective value of contractual services or of their results for the contracting authority is not taken into account in determining the value of a contract. While the performance of a contract may result in a product with some special value for the contracting authority, this is not relevant to its value for the purpose of the threshold amount. If a contract concerns the creation of a computer programme, for example, the value of the programme is irrelevant to the value of the contract, even if the contracting au-

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thority can use the programme other than for its own purposes, such as by granting licences. Sometimes a contracting authority cannot determine with certainty in advance the amount of payments under a contract, so the value of the contract cannot be calculated exactly. When the contracting authority has to assess the value of a contract in relation to the threshold amount, usually an economic actor will not have been chosen nor will tenders have been obtained, so the amount of payments will not be known. This is taken into account in Article 5(1) which expressly provides that, both in relation to the value of the contract and the calculation of payment, the amounts may be estimated. The fact that the payments, and thus the value of the contract, must be estimated does not mean the contracting authority can just make a rough guess of the payments required. While a contracting authority’s estimate of whether the threshold amount has been reached must be based on future circumstances, with all the uncertainty associated with this, the estimate must have an informed basis. Thus the contracting authority must research the market and the expected price of the purchase to obtain a full and thorough basis for estimating the value of the purchase. This can be expressed as saying that the contracting authority must make a proper assessment of the payment on the basis of the general market prices for such a purchase. The usual method for obtaining information about general market prices is to use consultants with knowledge of the trade sector or to obtain price information from economic operators or others, including other purchasing authorities with current knowledge of pricing, possibly by means of a procurement procedure. There can be geographic differences in prices, and a contracting authority should take account of this. Contracting authorities should also be aware of whether the performance of the contract and the specifications are sufficiently similar for payment comparisons to be made. Depending on its age, historical information can also be relevant, but it will seldom be able to stand alone. This means it will probably not be sufficient for a contracting authority to rely on the price of a former contract except in special circumstances, for example if there is a considerable margin between the estimated value and the threshold amount or if the information is very recent. In addition to gathering information, the contracting authority’s estimate of the value of a purchase must be impartial and properly considered. Thus the authority should include all relevant factors, and the weighting of the factors should be impartial and properly considered. It is probably not enough to base an assessment on the price of a single manufacturer, and with purchases of services and public works it will not be sufficient for a contracting authority to obtain a single offer which is below the threshold if the general price level on the market is above the threshold amount. If a contracting authority makes a properly balanced estimate on the basis of comprehensive information, and if the estimate leads to the relevant threshold amount not being reached, the authority can lawfully refrain from conducting a procurement procedure. This applies even if the purchase is subsequently shown to be above the threshold amount. In terms of timing, if the conclusion is that the value of the purchase is below the threshold amount so the contract is not subject to EU procurement procedures, the information should be gathered and the estimate made close to the date of entry into the contract; see the commentary on Article 5(2). A complainant probably has the burden of showing that there is a prima facie doubt about the correctness of a contracting authority’s estimate of the value of contract. Once such a prima facie doubt has been established, for example if the value of the contract 214

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actually entered clearly exceeds the threshold amount, it will be for the contracting authority to show that it has taken all the relevant factors into account in its estimate and has made a proper and reasonable weighting of the factors. This underlines the importance of a contracting authority making a well-informed and balanced estimate and, not least, ensuring that it can provide evidence of this. While a contracting authority unquestionably has a certain margin of discretion in making its estimate, this should not lead to speculation on very narrow margins between the estimated contract value and the threshold amount. For example, if the estimated payment for services if EUR 205,000 and the threshold amount is EUR 207,000 due consideration should be given to following an EU procurement procedure, unless the contracting authority is very sure of its estimate and the information on which it is based. The total estimated amount payable under a public contract must include any form of 9 payment for an option or for renewal of the contract. This takes into account that a contract will often provide for the possibility of extending the original agreement. If one party can extend a contract without the assent of the other party, it is called an ‘option’. An option can relate to the duration of the contract, so it can be extended for a specified period or for an indeterminate period. An option can also concern quantitative or qualitative aspects. As a rule an option will constitute a right of the contracting authority, but in principle it can equally well be the service provider who has the option. If the value of a public contract must be estimated for the application of the threshold amounts, any extension of the contract under an option must be included; see Article 5(1). In other words, an estimation of the total value of the contract must assume that all options will be exercised. This will also so case even if it may be unlikely that an option will be exercised, among other things because the exercise of the option is conditional on some unlikely event. The right of one of the parties to extend a contract is a typical option in public contracts. It is therefore necessary to consider whether a further reference to a possible extension of a contract is more than merely a formal emphasis on the requirement for options to extend a contract to be taken into account when calculating the value of the contract. Presumably the intention is to ensure that contracting authorities take account of all forms of extension of a contract, whether by the exercise of an option by one of the parties or otherwise. A general statement to the effect that a contract may be extended, for example subject to the agreement of the parties (and thus subject to any adjustment to the terms of the contract) must be regarded as requiring a new contract. This means that the value of such a possibility of extending the contract should not normally be included when calculating the value of the original contract. However, if there is a more substantive possibility of extending a contract with the agreement of both parties, any payment for such an extension should be included. The same applies to contracts that involve the repeated performance of services or provision of goods if, pursuant to Article 32(5), a contracting authority reserves the right to enter into a contract for this at a later stage. Any prizes or payments to candidates or tenderers must be taken into account when 10 calculating the total value of a contract. It must be assumed that this is common when procurement involves competitive dialogue and prizes, or more probably payments, are given to participants as a reward for participating in the procurement procedure; see the express provision on this in Article 30(8). However, there is nothing to prevent a contracting authority paying candidates or participants when using other procurement pro-

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cedures, for example paying tenderers whose tenders are not accepted for design work required as part of a turn-key project, if their design work is not paid for via performance of the contract. It is not relevant that the contracting authority’s payment is not conditional on anything other than the candidates’ or participants’ participation in the procurement procedure, and that the contracting authority does not obtain any continuing service for its payment, such as not being able to use elements of design proposals from rejected tenders. Any payment linked to the contract must nevertheless be included in calculating the contract value in relation to the threshold amount. It is the prizes and payments that the contracting authority can foresee that must be included. Since it is the contracting authority that decides what prizes and payments are to be given, it will only be in exceptional circumstances should payments be subsequently increased, causing the threshold amount to be reached or exceeded. 11 There are special rules for calculating the threshold amounts for design contests. Under Article 78 a distinction is made between: design contests held with a view to awarding a public service contract, and design contests held with prizes or payments being made to the participants. In the first situation the threshold amount in Article 4 is calculated on the basis of the estimated value, not including VAT, of the public services contracts, including any prizes or payments to participants in the competition. It is different where a service contract is not entered into that is covered by the collective value of the prizes or payments, including the estimated value, but excluding VAT, of public services contracts that will subsequently be entered into pursuant to Article 32(4).

5.2. The relevance of there being one or more than one contracting authority 12

As something new, there are express provisions on how a contracting authority should act, depending on whether a contracting authority comprises separate operational units. Article 5(2) states that where a contracting authority consists of separate operational units, the total estimated value for all the individual operational units must be taken into account. However, under Article 5(2), second sentence, where a separate operational unit is independently responsible for its procurement, the values may be estimated at the level of the unit in question. When considering what purchases can be relevant to look at collectively for the purpose of the threshold amount, it is natural to start on the basis of the individual contracting authority as a legal person. This will often be the right approach, though not always. For example, if two contracts are entered into by two different contracting authorities, this indicates that the contracts should be viewed separately for the purpose of the threshold amount. However, in determining whether a series of contracts concerns a single purchase or several purchases, it can be decisive whether the same contracting authority has entered into all the contracts if there is otherwise a sufficient connection between them. Objective criteria are used to determine whether there is one or more than one purchase, and these criteria do not cover whether the contracting authority must be the same. Case C-16/98 Sydev concerned the distinction between maintenance and extension works on existing electricity supply and street lighting networks in respect of which a number of municipal authorities had entered into separate contracts through a regional organisation. The CJEU ruled that the existence of a single contracting entity could be an indication of the existence of a single public works, but the number of contracting authorities is not decisive for defining a public works or for determining the purchase 216

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whose value is to be set against the threshold amount. While the judgment concerned the objective criterion for determining the contract value of public works contracts, for purchases of goods and services it is not decisive whether several part contracts have been entered into with one or more contracting authorities. On the other hand it can be argued that one might at least expect that several con- 13 tracts for similar goods entered into at the same time by entities of the same legal person must be considered as being a single purchase. The view is that, together with the objective definition criteria, there should be some kind of lower limit. Gathering together several different purchases in a single contract means that the total value of the purchases must be taken into account, even if the purchases would not have been regarded as a single purchase if they had been divided into several contracts. Correspondingly it must be argued that where a contracting authority, as a single legal person, provides a framework within which uniform purchases are made, the contracts must at least be combined for the purpose of the threshold amount. The new provision on Article 5(2) is in line with the Commission’s previous statement that there can be cases where a unit of a contracting authority can act so independently that its purchases cannot, on the face of it, be combined with the purchases of other entities of the contracting authority for the purpose of threshold amounts. The following can be relevant for assessing whether an entity is independent and responsible for its own purchases: – Does the entity have an independent budget? – Is the entity responsible for financing the contract in question? – Is the entity responsible for the procurement and the conduct of the procurement proceedings? – Can the entity decide with whom to enter into the contract? – Are the entity’s purchases for its own activities, for other entities, or for the contracting authority as a whole? – Does the contracting authority still seek to exploit its position as a large purchaser to obtain favourable terms from suppliers, even though it may have formally delegated its purchasing? The elements referred to concern both the general status of an entity as an independent operational unit and its actual relation to the contract in question. The listed elements do not directly address the highly relevant question of whether there is a requirement for the independent operational unit to refrain from acting in concert with the contracting authority when making purchases. Presumably this is not a requirement as long as the entity decides for itself whether to take advantage of the purchasing capacity of the contracting authority or to try to obtain a more advantageous offer. However, if they make joint purchases to a significant extent, this will indicate that the entity does not really act independently in making its purchases. Article 5(2) of the Public Sector Directive allows for the possibility that it is not al- 14 ways necessary to divide purchases of a contracting authority. Moreover, Article 5(3) to (14), which all concern divisions of purchases in relation to threshold amounts, does not state that an entity that combines various purchases is a contracting authority. Presumably in this context the CJEU will give weight to the purpose of the procurement directives and recognise, possibly by interpreting the objective criteria for distinguishing between one and more than one purchase, the possibility that corresponding purchases by entities within the same contracting authority need not always be combined for the purpose of the threshold amounts.

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5.3. The subdivision of procurements and the method for calculating value Article 5(3) describes two restrictions on the calculation of thresholds. First, the method for calculating the value of a purchase may not be made with the intention of excluding a purchase from the scope of the Directive. Second, a purchase may not be subdivided with a view to excluding it from the scope of the Directive. 16 A contracting authority may not choose a calculating method for estimating the value of a purchase so as to prevent the purchase being governed by the Directive. The two parts of this provision must be looked at together and have the same purpose. 17 Article 5(3) refers expressly to the intention of a contracting authority to avoid the application of the Public Sector Directive. One might believe that the intention of a contracting authority to avoid the application of the Directive is a necessary precondition for a division of a purchase into several contracts or choice of calculation method being found to be contrary to the Directive. This is not so. The procurement directives contain a number of rules on how the value of a purchase should be calculated, including when contracts that are divided into multiple lots should be combined for the purpose of the threshold amounts. These rules must be applied objectively and without regard to the intentions of the contracting authority. For example, if a contracting authority divides a contract for the purchase of similar supplies into several lots, the values of the lots must be combined; see Article 5(8). This applies whether the contracting authority has divided the purchases so as to fall below the threshold amount for each contract or whether there are other reasons for dividing up the contract. The purpose of these provisions is to prevent any risk of manipulation to avoid the application of the Directive. These provisions, and the corresponding provisions in Article 16(3) of the Utilities Directive, supplement the rules on the objective calculation of values. For example, if the duration of a contract for ongoing services is limited, with a view to bringing the contract below the threshold amount, this will be contrary to Article 5(3), even if the objective rules for calculation the value would not lead to the contract reaching the threshold. It must be emphasised that none of the provisions in Article 5 prevent a contracting authority from dividing up a contract into several lots and offering the lots separately, as long as offering such contracts complies with the EU procurement rules if their combined value reaches or exceeds the threshold amount. The aim of the provision is purely to ensure that the contracts for lots are combined for the purpose of the thresholds. 18 It will usually be almost impossible for an economic operator to establish that a contracting authority has divided up its purchases to avoid applying the procurement directives. Strange and unusual scopes of contracts that ensure that a contract value falls below a threshold amount can sometimes support a suspicion that the aim is to avoid the application of the procurement directives. Given the relative possibilities for contracting authorities and economic operators to prove the contracting authority’s motives for example about the choice of duration of a contract, if its choice does not seem normal the contracting authority must be able to establish the probability that it had proper reasons for its choice. The prohibition of dividing a contract into lots and of choosing a method for calculating the value of a contract so as to avoid the application of the procurement directives will naturally be most important where the objective criterion for the division does not cover all aspects of the contract. It is presumably less important in the case of public works contracts where divisions are made on the grounds of finance or technical functions of the works. For purchasing goods or services, the prohibition is clear in relation to the duration of a contract. 15

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5.3.1. Choice of calculation method Article 5(3), first sentence, prohibits a contracting authority choosing the method for 19 estimating the value of a contract with the intention of excluding the contract from the scope of the Directive. This provision was previously regularly included in the provision on goods and services. The prohibition is linked to Article 5(11) which provides for different methods for calculating the value of successive contracts. However, regardless of its placing in Article 5(11), it must be assumed that the prohibition applies to all methods for calculating the value of contracts referred to in Article 5; see the general wording of the prohibition of choosing calculating methods with a view to avoiding the application of the Public Sector Directive.

5.4. The timing of the calculation of value Article 5(4) of the Public Sector Directive governs the point in time that is decisive 20 for a contracting authority’s valuation of a contract. The estimated value must be valid when a call for competition is published or, if this is not required, when the contracting authority commences the procurement procedure. The latter can be the case where, for instance, a contracting authority contacts economic operators with a view to procurement. Article 5(4) fixes a date on which the contracting authority estimates the value of a contract with binding effect as to whether the contract is covered by the Public Sector Directive. This is obviously important where it is estimated that the value of the contract is below the threshold amount, otherwise the contracting authority might risk meeting objections if the general price levels in the market were to go up during the subsequent award procedure and the contract value were to reach the threshold amount. The point in time for estimating the value of a contract is determined in the second 21 part of Article 5(4), which provides that the commencement of the procurement procedure is the determining point for estimating the value of a contract; see further below. The statement in the first part of Article 5(4), that the estimated value must be valid at the moment of publishing a call for competition is published, must therefore have some other purpose. The most obvious answer is that the contracting authority’s determination of the contract value is also binding if the result is that the value reaches or exceeds the threshold amount. This will mean that a contracting authority cannot discontinue a procurement procedure once it has been commenced by the publication of a contract notice if the general price levels in the market go down and a new calculation finds that the value of the contract has now fallen below the threshold amount. Such a conclusion may seem extensive, but there would otherwise lack an explanation for why Article 5(4) provides for a fixed point in time for when a contract notice is published pursuant to Article 49 of the Public Sector Directive. This would not be the only example where a status in relation to the procurement directives is maintained even though the facts underlying the status may have changed. See Case C-380/98 University of Cambridge, where the CJEU ruled that the status of a public law body must be determined according to its status at the beginning of the budgetary year as to whether it is financed for the most part from public funds, and that this applies to procurement procedures already initiated even though a change to the body’s income sources during the procurement procedure might lead to the public body no longer fulfilling the criteria for being a public body.

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That the value of the contract is assessed as being above the threshold amount is binding at the point in time when the procurement procedure is initiated will mean that the contracting authority cannot cancel the procedure and revert to some other procedure for awarding the contract, for example if the offers received indicate a price level that is clearly below the threshold. This is in line with the principles and purpose of the procurement directives. It is more questionable how long a contracting authority is bound by its assessment of the contract value, regardless of changes to the general price level, so that contract must follow the EU procurement procedures. It is also not clear what the contracting authority should do when changes are made that are relevant to the value of the contract, such as changes to its scope, or changes to contractual requirements that affect payments under the contract, or there is a reduction of the value of the contract due to the termination of a joint purchasing arrangement with other contracting authorities etc. One may question whether the provision in Article 5(4), that the value of the contract must be valid as at the time when the contract notice is published, is a sufficient basis for requiring the EU procurement procedure to be followed in all cases, including where changes to the assumptions for the original valuation are not caused by the contracting authority’s intention to avoid the contract being subject to the EU procurement procedures. Until the precise meaning of Article 5(4) has been clarified, a contracting authority should be careful about discontinuing a procurement procedure once initiated in order to award the contract by some other means, if the original valuation showed that the threshold amount had been reached. 22 Article 5(4) refers to two different points in time which are to apply, depending on whether the contracting authority is required to publish a contract notice. If publication of a contract notice is required, the relevant date for estimating the value of the contract is the date of publication of the notice; see Article 49. There is no room for doubt about this date, which is objectively determinable. On the other hand, when publication of a contract notice is not required it is not clear precisely when a contracting authority initiates a procurement procedure, which is the fixed date for the valuation of a contract. It must be assumed that the contracting authority must at least have taken some external steps for the award of the contract, whereas the authority’s internal preparatory steps for the award of the contract, such as drafting procurement documentation, are unlikely to be sufficient. Article 5(4) gives the example that, where the contracting authority contacts economic operators in relation to the procurement, this can be the start of a procurement procedure. There is much to support the idea that the date when the contracting authority contacts the market with a view to obtaining offers or identifying a group of potential tenderers should be seen as the initiation of a contract award procedure. This gives some parallel with the publication of a contract notice, and economic operators can easily determine when the contract award procedure has been started. Whether an approach to the market is made by a public notice or by direct approaches to various economic operators cannot be regarded as decisive in this respect.

5.5. Calculating the value of framework agreements and dynamic purchasing systems 23

A framework agreement is not a public contract, but contracts entered into on the basis of a framework agreement are public contracts. Similarly, a dynamic purchasing system is also not public contract, but the actual contracts are. Both framework agreements and dynamic purchasing systems are instruments for creating contracts for specific purchases subsequently entered into on the basis of the 220

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framework agreement or dynamic purchasing system. Even without an express provision, there would be little doubt that the value of the individual contracts should be combined in order to calculate the contract value for the purpose of compliance with the threshold amount. Article 5(5) states that, in connection with framework agreements and dynamic purchasing systems, the value to be taken into consideration is the maximum estimated value (net of VAT) of all the contracts envisaged for the total term of the framework agreement or dynamic purchasing system.

5.6. Calculating the value of innovation partnerships Article 5(6) was included because of the introduction in Article 31 of the Public Sec- 24 tor Directive of innovation partnerships. For more on this provision see the commentary on Article 31. Article 5(6) provides that, for innovation partnerships, the value to be taken into consideration is the maximum estimated value (net of VAT) of the planned research and development activities during all stages of the envisaged partnership, as well as the supplies, services or works to be developed and procured at the end of the partnership. This means that the valuation must be based both on the innovation process and the 25 value of all the fruits of the partnership, regardless of whether the contract contains provisions to the effect that this will not necessarily be the case. This approach is in line with the calculations for framework agreements and dynamic purchasing systems for example, where the maximum estimated value forms the basis for the valuation.

5.7. The contracting authority’s supplies for public works contracts It is a principle for calculations relating to threshold amounts that the value of a con- 26 tract is determined by the value of all the estimated payments. Article 5(7) departs from this principle, as it provides that the estimated value must take account of both the cost of the works and of the materials and equipment made available to the contractor by the contracting authority. The value of the materials which the contracting authority purchases with a view to the public works and of the equipment which the contracting authority makes available to the contractor for carrying out a works contract must thus be added to the estimated value of a public works contract, as calculated pursuant to Article 5(1). This applies even if the materials or equipment are not part of an external contract relating to the works. Article 16(7) of the Utilities Directive likewise provides that, for the purpose of the threshold amount, contracting authorities must include in the estimated value of a works contract both the cost of the works and the total estimated value of any materials and equipment made available to the contractor. However, the provision in the Utilities Directive refers to goods and services in general, while the Public Sector Directive only covers materials and not equipment. Thus the value of the services which the contracting authority makes available for the contractor’s performance of a public works contract must be included for the purpose of the Public Sector Directive but not under the Utilities Directive. Materials and equipment must be understood as the provision of goods to be incorp- 27 orated in the public works and the equipment necessary for carrying out the work, such as cranes and lorries which the contracting authority makes available to the contractor. It must be assumed that this value will normally be calculated as the payment which the contracting authority has made for the materials and equipment. If materials and equipment are only made partly available to the contractor, this must be taken into account

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when estimating their value. In relation to equipment it must be assumed that the normal market rental cost for the period during which the equipment is made available to the contractor that must be included, rather than the acquisition cost. However, if the average lifetime of the equipment is shorter than the period for which it is made available to the contractor, the acquisition price should be included in the estimate for the purpose of the threshold amount. 28 The inclusion of supplies from the contracting authority for the purpose of the threshold amount for public works is not relevant to whether the authority’s purchase of the supplies in question should be made pursuant to an EU procurement procedure. This must be subject to the normal rules for the threshold amounts for purchases of goods. It may be that the value of the supplies to a contractor will push the value of public works over the threshold amount and that the contracting authority’s purchase of supplies will also trigger an independent procurement procedure.

5.8. One contract or several contracts? 5.8.1. Each contract as a minimum unit A contracting authority that must determine whether a proposed purchase reaches a threshold amount will typically start with the contract that it proposes to enter into. In many cases the individual contract will be the proper basis for defining the purchase whose value must be set against the threshold amount. At least the value of the individual contract will be compared with the threshold amount. A contracting authority cannot make a separate valuation of services covered by the contract. This is so even if the services are significantly different and even if the contract is entered into by several contracting authorities. Thus the contract constitutes a minimum unit whose value should be compared to the threshold amount; see the wording of Article 5(1) of the Public Sector Directive. 30 However, a contracting authority cannot merely consider the actual contract. It must take into account whether the purchase with which the contract is concerned is so connected to other purchases that they should be regarded as a single entity for the purpose of the threshold amount. This is without doubt the most difficult problem in applying the threshold amounts. Article 5(8) of the Public Sector Directive is admirably clear. If the intended purchase of public works or services is divided, all the contracts that form part of the whole must be taken into account for calculating in relation to threshold amount. There is an almost equivalent rule in Article 5(9) on purchases of goods by contracts divided into lots. If the total value of the contracts for lots is equal to or more than the threshold amount, then the provisions of the Public Sector Directive will apply in full to all the lots. For Article 5(8) to apply, a contracting authority must first determine whether the services or public works in respect of which separate contracts are to be entered into are separate purchases or parts of a single purchase. Thus the contracting authority must determine whether there is an intended purchase of public works or of services. 31 Article 5(8) of the Public Sector Directive, on combining the values of lots of a larger contract, is not intended to govern whether one or more than one contract is entered into. While a series of contracts must be considered together for the purpose of the threshold amount, the provisions on the combining of lots does not prevent a contracting authority from dividing up its purchasing contracts and entering into separate contracts with one or more suppliers. The new Public Sector Directive’s approach to the division of contracts into lots has been made much clearer; see Article 46, according to which contracting authorities are encouraged to divide contracts into lots, among other 29

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things to give SMEs greater opportunities of participating in procurement procedures. See the commentary on Article 46. Article 5(8) merely requires all contracts to be offered by means of EU procurement procedures if their combined value reaches or exceeds the threshold amount. 5.8.2. Division of contracts for public works or services 5.8.2.1. Division of contracts for public works Public works contracts differ from contracts for the purchase of goods and services by not defined in relation to a general kind of purchase (goods or services), but by the specific purposes to be realised by performance of the contract. By this distinction the demand for associated services can be said to be concentrated so there must be a high degree of connection between the services covered by a public works contract. Slightly simplified, it can be said that an assessment of whether goods are of a similar kind (see Article 5(9)) is in principle not necessary in the case of public works, since the services covered by a public works contract will presumably always be closely related, so there is no need to assess whether by their nature the services are sufficiently closely related. In reality assessing whether several contracts have such a connection that they must be considered together for the purpose of the threshold amount will only concern whether there is a sufficiently close connection between the purchases, in principle (but not actually expressed) corresponding to the connection with the timing element that is also required pursuant Article 5(9). Article 5(8), first paragraph, of the Public Sector Directive, in combination with Article 2(1)(7), contains a clear criterion for when there should be one or more than one public works contract. Under Article 5(8), if a proposed works may result in contracts being awarded in separate lots, account must be taken of the estimated total value of all lots in relation to the threshold amount pursuant to Article 5(1). What is decisive for the purpose of Article 5(8) is how the works are defined. Under Article 2(1)(7) a ‘work’ is defined as ‘the outcome of building or civil engineering works taken as a whole which is sufficient in itself to fulfil an economic or technical function’. When deciding whether the values of several contracts for works should be combined in relation to the threshold amount, it is necessary to determine whether the contracts constitute a single work, as defined in Article 2(1)(7). Where works activities concern existing buildings or structures, as in the case of renovation or maintenance work, it can be argued that the activities will not in themselves fulfil an economic or technical function. In this case the function of the works must be assessed according to the function of the existing building or installation if the result of the works will be an integral part of the function of the existing building or installation. Case C-16/98 Sydev concerned a single maintenance and development work on an existing electricity supply and street lighting network. The CJEU found that the result of this work would constitute an integral part of the function of the network and that whether it was a single public work contract should be assessed according to the economic and technical function fulfilled by the network. It follows from the criterion that must be used when defining a public work that no elements other than the economic and technical function to be fulfilled by the work are decisive for determining when a public works contract exists. Thus the definition of ‘work’ does not depend on there being only one contracting authority, or a single under-

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taking in the EU performing all the aspects of the work, or the work being carried out in continuation of the same time or location. On the other hand, such elements can be indications either for or against the existence of a single work. Thus it is clear that a coincidence of several contracts relating to the contracting authority, the undertakings carrying out the work, the geographical location (and possibly even physical integration), the time during which the work is carried out, and the procedure for entering into the contract can indicate the existence of a single work. The criterion that the work must fulfil an independent economic or technical function must presumably mean that the proposed use of the finished work must be seen in a broad perspective. For example, if there are separate contracts for the construction of school buildings and sports facilities for the school, from a narrow perspective one might argue that each of the contracts is for works with independent technical functions, i.e. teaching facilities and sports facilities. However, it must be assumed that a broader perspective will be adopted whereby the teaching facilities and the sports facilities will be regarded as having the same technical and economic function of providing the physical framework for a school. In Case C-16/98 Sydev, the CJEU found that value of the contracts for the maintenance and development of the electricity supply network should have been combined with regard to the threshold amount, since the network as a whole fulfilled the same technical and economic function of transporting and selling electricity to consumers in the region. It was not important that a number of associations of municipalities had administrative responsibility for the part of the network in their areas. In response to the arguments of the French Government, that such reasoning could be applied to the whole of the French electricity supply network, the CJEU observed that each tender for a contract must be assessed according to its context and its particular characteristics. In the Sydev case, there were important factors which favoured the contracts being aggregated, including that the invitations for tenders were made at the same time, that there were similarities between the contract notices, and that Sydev, which was made up of the joint municipal groupings responsible for electrification in the region, had initiated and coordinated the contracts within a single geographical area. On the other hand it was found that the contracts for the work on the street lighting network should not be combined since, unlike electricity supply networks, street lighting networks are not necessarily technically interdependent as they can be restricted to built-up areas and no connection between networks is necessary. Similarly, it is financially possible for each local entity to assume the financial burden of operating such a network. 36 However, the provision in Article 5(3), that an individual contract cannot be divided up for the purpose of staying below the threshold amount, also applies to public works. If a single combined contract is entered into, which constitutes several different public works on the basis of the criterion of independent technical or economic functions, the combined value that must be assessed against the threshold amount. 5.8.2.2. Division of contracts for services into lots 37

If a contract for the purchase of services is divided into contracts for lots, the estimated value of all the lots must form the basis for calculating the value in relation to the threshold amount; see Article 5(8) of the Public Sector Directive. If a contract for services is entered into, possibly combined with the purchase of goods, the value of the whole contract must be taken into account, whether the services and/or the goods are similar or not. 224

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Article 5(8) clearly provides that where a proposed provision of services may result in contracts being awarded by separate contracts for lots, the total estimated value of all such contracts must be taken into account in relation to the threshold amount. In contrast to the requirements for purchases of goods or public works, the provision does not contain any objective criterion for determining whether there is one purchase or several purchases. Article 5(11) of the Public Sector Directive provides for specific methods for calculating the value of service contracts that are regular in nature or are intended to be renewed within a given period. The provision concerns repeated purchases and it is not suitable for distinguishing between single and multiple purchases. It is unclear what the effect is of dividing a contract for services into a number of contracts for lots relating to the same project, or what defines a project. The procurement directives do not establish a usable criterion for defining the content of contracts for lots that are to be treated as one for the purpose of the threshold amount. Under Article 5(8), first paragraph, there is now an express requirement that only 38 contracts for lots that are entered into together are to be added together for the purpose of assessing the value of the contract. This cannot mean that contracts for lots should literally be entered into at the same time, but that there must be some temporal connection between them. It is not possible to say in general how close this temporal connection must be. If a contracting authority’s approaches to potential suppliers cover all the services involved, or if at the same time the contracting authority approaches the market concerning the services, the requirement for the contracts for lots to be contemporaneous will normally be satisfied, even if the actual dates for entering into the contracts may be slightly different. However, Article 5(8) does not allow a wide margin for time differences if the contracts for lots are to be regarded as having been entered into at the same time. This applies in particular if the provision is considered in the context of Article 5(11), which deals with successive contracts and contains special rules for calculating their value; see the commentary on section 5.11. Differences in the timing of purchases of services which may originally have been intended to have been bought together could be seen as an attempt to circumvent the provisions of the Public Sector Directive, unless the contracting authority can show that there are proper and objective grounds for the differences; see Article 5(3) and the commentary in section 5.3 on dividing up purchases for the purpose of avoiding the application of the Directive. However, a similarity of timing must necessarily be supplemented by criterion for 39 defining the similarity of the services in respect of which the contracts for lots are entered into. In relation to an intended purchase of services there is no clear criterion in Article 5(8), first paragraph, covering the situation that is in principle referred to in Article 5(3), i.e. where the contracting authority has planned a combined purchase of a number of services and thereafter splits up the contract into a number of lots. Presumably, in relation to purchases of services, a contracting authority can consider elements such as the market for the provision of the services and whether contracting by way of lots does usually serve the same or a similar purpose. As with the criteria for defining contracts for the purchase of goods and public works, 40 it cannot be assumed there is a requirement for contracts for lots for services to be entered into by the same contracting authority in order to be considered part of the same contract. For example, when there is municipal cooperation a purchase of services can involve several contracting authorities, and the combined value of all contracting au-

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thorities’ purchases of services must be taken into account when calculating their value against the threshold amount. 41 The fact that the services covered by contracts for lots are to be provided in different locations cannot be assumed to be decisive for determining whether a series of contracts for lots is a single contract or several independent contracts. It must be assumed that geographical differences will seldom indicate whether there is a single purchase or several purchases.

5.9. Contracting by lots for purchasing goods 5.9.1. Simultaneous contracts for lots for similar goods If a purchase of similar goods is divided into a number of contracts for separate lots which are entered into at the same time, the estimated value of all the lots must be taken into account in relation to the threshold amount; see Article 5(9) of the Public Sector Directive. If a single contract for the purchase of goods is entered into, possibly combined with a purchase of services, the value of the whole contract must be taken into account, regardless of whether the goods and/or services must be regarded as similar; see section 5.8. 43 There is no simple answer to the question of when there is such a connection between the contents of multiple contracts for lots that they must be combined for the purpose of calculating the value of the contract. This can be looked at from at least two angles. From one angle there is an emphasis on the structure of the supply market, where the starting point is that the necessary connection between the contents of multiple contracts for lots only exists if it is possible to enter into a contract with a single supplier. From the other angle, there is an emphasis on the purpose of acquiring the goods. If the goods to be acquired by multiple contracts have the same or a similar purpose, there will be the necessary connection between the contents. 44 Given the purpose of the threshold amounts, it is tempting to assume that the structure of the supply market should be the determining criterion for whether multiple contracts for lots should be treated as a single contract for calculating the threshold amount. The purpose of the threshold amount is to single out purchases which, because of their modest value, cannot be expected to interest undertakings in other Member States. When identifying purchases with such closely similar contents that they should be evaluated together for the purpose of the threshold amount, there is an obvious cause to look at the structure of the supply market. It is also necessary to be aware of the considerable uncertainty associated with an element such as the structure of the supply market. First, it requires a contracting authority to obtain sufficient current information about suppliers, not only in its home Member State but throughout the EU. Second, such an element will necessarily be based on the current market for suppliers, which will not take into account potential new suppliers including supply by cooperation between existing undertakings offering differing goods. Assessing what possibilities of supply must exist in order for goods to be regarded as similar is very much a matter of discretion and chance, in particular in developing markets. This will argue against giving decisive importance to the structure of the supply market for determining whether goods are similar. To find that goods are similar there must presumably be a connection between the goods that cannot be determined merely by a snapshot of the supply market. 45 The meaning of ‘similar supplies’ seems to require a more objective distinction to be made between different goods, where it should not be decisive whether the contracting authority’s purpose in purchasing the goods concerns the same project. For example, the 42

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purchases of pencils, desks and chairs for a new school relate to the same project. Nevertheless, it is clear that the desks and chairs can probably be considered similar goods, but the pencils cannot be considered as similar to desks and chairs. The main criterion for whether goods are similar must presumably be whether the goods usually serve the same or a similar purpose for those who buy them. Thus the core criterion should be the buyer’s needs rather than the structure of the supply market. However, over time the structure of the supply market will normally adapt to the demands of customers, so the structure of the supply market will be a strong indication of whether goods are similar. Other elements may be taken into account. For example, the fact that a contracting authority often purchases goods together could indicate that the goods are similar. While the CPV (Common Procurement Vocabulary) is not intended for use in making definitions relating to the threshold amounts, its classifications may nevertheless be relevant. For example, if goods are classified in the same sub-groups at virtually the lowest classification level, this could indicate similarity. A further requirement under Article 5(9) of the Public Sector Directive is that the 46 contracts for lots must be entered into at the same time if they are to be combined for the purpose of the threshold amounts. This requirement is unlikely to mean that the contracts for lots must literally be entered into at the same time, but that there must be a certain contemporanousness between the contracts for lots. It is not possible to say in general how close this temporal connection must be. If a contracting authority’s approaches to potential suppliers cover all the similar goods, or if at the same time the contracting authority approaches the market concerning the goods, the requirement for the contract for lots to be contemporaneous should normally be satisfied, even if the actual dates for entering into the contracts may be slightly different. However, Article 5(9) does not leave a wide margin for time differences if the contracts for lots are to be regarded as having been entered into at the same time. This applies in particular if the provision is considered in the context of Article 5(11), which deals with successive contracts and contains special rules for calculating their value; see the commentary in section 5.11. However, differences in the timing of purchases of goods which may originally have been intended to have been bought together could be seen as an attempt to circumvent the provisions of the Public Sector Directive unless the contracting authority can show there are proper and objective grounds for the timing differences; see Article 5(3) and the commentary in section 5.3 on the dividing up of purchases for the purpose of avoiding the application of the Directive. There is an example in a ruling of 29 September 2003 from the Danish Complaint Board for Public Procurement, Unicomputer, where a decision to buy printers was made after the purchase of computers, as the printers were bought with money remaining in the budget for buying computers. There was nevertheless a sufficient temporal connection. Article 5(9) does not require contracts for separate lots for similar goods to be en- 47 tered into with the same contracting authority; see section 5.2 on this. Normally an intended purchase will only concern a single contracting authority, but there can be situations where a purchase can involve several contracting authorities, for example where two or more municipal authorities combine. In such a case all the contracting authorities’ simultaneous purchases of similar goods must be taken into account, and the independent legal status of each contracting authority is not relevant.

5.10. Exceptions for contracts for smaller individual contracts for lots Article 5(10) of the Public Sector Directive allows contracting authorities to exclude 48 parts of a public works contract and parts of contracts for the provision of services from Michael Steinicke

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the scope of the Directive, and thus contracts for lots may be exempt from the obligation to follow EU procurement procedures even though the contract as a whole may be subject to such an obligation. There are corresponding provisions in Article 16(10) of the Utilities Directive, and the scope and conditions on such contracts for lots are identical in the two directives. 49 The possibility of excluding parts of contracts applies if the following conditions are met: – The contract for an individual lot has a maximum value of EUR 80,000 if the main contract is for goods or services, or EUR 1,000,000 if the main contract is for public works. – The total value of the excluded contracts for lots does not exceed 20 % of the aggregate value of all the contracts into which the proposed work has been divided. As with the threshold amounts, the maximum values of contracts for lots that can be excluded are adjusted every second year and are published in the Official Journal of the EU together with the threshold amounts. If, for example, the value of a service for waste disposal that is subject to EU procurement procedures is EUR 1,500,000, excluding VAT, the contracting authority can enter into three contracts for lots at EUR 75,000 each without these being subject to an EU procurement procedure, as the value of each contract for a lot will be below the current limit of EUR 80,000, and their combined value will be less than 20 % of the total value (in this case with the value of the main contract being EUR 1,275,000). In Case C-16/98 Sydev only one of the 19 contracts for public works on the electricity supply network was under the limit of EUR 1,000,000, and the value of that contract was far below 20 % of the total value, net of VAT. The maximum amount of EUR 80,000 prevents a contracting authority entering into a contract for services, for example for EUR 150,000, for part of the total without following an EU procurement procedure, even though the part contract may be clearly below 20 % of the value of the main contract. To ensure the relevance of the maximum value of a contract for a lot, there must presumably be a requirement for some separation between contracts for lots that are excluded from the procurement procedure. Presumably there must at least be a requirement for a relevant difference between the contracts for lots, such as there being different parties to the contracts or differences between the services under the excluded contracts. It is difficult to define the limits, but there will probably not be strict requirements for differences between the contracts as there will necessarily be some connection between the services covered by the contracts. 50 It is not a condition that an excluded contract for a lot should be called a ‘lot’, as long as the contracting authority can show that the service in question is part of a larger purchase. Nor is there any temporal limit to the possibility of excluding smaller individual contracts for lots, so this possibility can be used both before and after an EU procurement procedure for the main contract. Nor is there a requirement for any special reason for excluding a contract. 51 If the limits to the values of contracts for lots and their combined percentage of the value of the main contract are complied with, Article 5(10) allows a contracting authority not to apply the Public Sector Directive to such a contract. This does not mean that the contracting authority has a free hand. The provisions of the TFEU and the general principles of Union law derived there from also apply to excluded contracts; see recital 2 to the Public Sector Directive and the commentary in section 0.3.2.4.

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The exception in favour of contracts for lots is primarily based on the desire to allow contracting authorities to encourage small and medium-sized enterprises to participate in public contracts. This aim can be realised even if a contracting authority is required to publish its intention to enter into a contract or to address a group of economic operators. It must be assumed that this is also the case where the award of an exempt contract must be published if the provisions of the TFEU and Union law principles must be assumed to require publication of contracts that are excluded from the Public Sector Directive because of their limited value and limited interest for economic operators from other Member States.

5.11. Calculating the value of regular public supply or service contracts According to Article 5(11) of the Public Sector Directive, for public supply or service 52 contracts that are regular in nature or are intended to be renewed within a given period, the calculation of the estimated contract value should be based on: – either the total actual value of the successive contracts of the same type awarded during the preceding 12 months or financial year adjusted, where possible, to take account of the changes in quantity or value which would occur in the course of the 12 months following the initial contract; or – total estimated value of the successive contracts awarded during the 12 months following the first delivery, or during the financial year where that is longer than 12 months. Presumably the purpose of Article 5(11) is to ensure a genuine estimate of the value 53 of purchases that are ‘regular in nature’, and contracts that are of short duration and limited value. The value of the individual contract may lie below the threshold amount, but regular purchases made over a period may exceed the threshold amount, often being shared between regular suppliers without the contracting authority researching the market. A contracting authority can have proper reasons for using short contracts. If there are intervals of several months between contracts this can mean the contracts cannot be regarded as being a single project for the purchase of services or similar goods. Thus a significant share of public purchases may fall outside the scope of the procurement directives and the scope of publicity and competition for such purchases which is the purpose of the directives. However, such a procedure is countered by Article 5(11) of the Public Sector Directive and Article 16(11) of the Utilities Directive whereby a longer period is used and thus a more genuine evaluation made for the purpose of the threshold amount when frequent purchases are made. As with the other provisions in Article 5 of the Public Sector Directive, Article 5(11) only relates to how the value of a purchase should be calculated with a view to applying the threshold amount. For example, there is no objection to a contracting authority continuing an existing practice of entering into a new contract every quarter for the supply of paper, as long as each contract follows the EU procurement procedures if the combined value of the contracts is above the relevant threshold amount. However, the effect of combining regular purchases is that contracting authorities enter into framework agreements pursuant to Article 33 of the Directive instead, so as to saving the administrative resources and delays associated with procurement procedures. The contracts covered by Article 5(11) are those entered into at regular intervals or 54 which must be renewed within a given period. These are referred to as ‘successive contracts’ in sub-paragraphs (a) and (b). Thus, which contracts are covered by Article 5(11) is by no means clear. A contract for taxi services entered into every month and a conMichael Steinicke

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tract for auditing services entered into every five years are both contracts entered into regularly. Nevertheless, with regard to the temporal connection there is little doubt that the value of the first contract, but not the second, should be calculated according to the provisions of Article 5(11). It is thus necessary to interpret the provision as requiring some temporal connection between the successive contracts in order for them to be covered by Article 5(11). The content of the provision on calculating the value of successive contracts also suggests that it only applies to contracts entered into several times a year or renewed in the course of a year. 55 Article 5(11) also assumes that there is a link between the content of the successive contracts. The calculation rule in sub-paragraph (a) states that the contracts must be ‘of the same type’, and while sub-paragraph (b) does not contain equivalent wording, it must be assumed that the requirement for contracts to be ‘of the same type’ applies generally to Article 5(11). Presumably for successive contracts to be ‘of the same type’ the subject matters of the contracts must be wholly or partly similar, and intended to fulfil the same purpose. And the basic characteristics and terms of the contracts should not differ significantly. See Article 5(9), first paragraph, which states that the value of contracts awarded in the form of separate lots, for similar supplies and at the same time, must be combined for the purpose of applying the threshold amount. If this provision, with its applicability to contracts entered into at the same time, also applies under Article 5(11), which expands the time limits for when an existing contract’s value should be added to the value of other contracts, the scope of Article 5(9) with respect to timing must be defined more narrowly than Article 5(11). It can be argued that Article 5(11) requires a somewhat closer connection and similarity between contracts if their values are to be combined than would be implied by the term ‘similar supplies’ in Article 5(9). 56 Article 5(11) sets out two methods for calculating the value of successive contracts; see immediately below and a contracting authority is free to choose between these two methods. However, the choice of method must not be made in order to place the contract outside the scope of the Public Sector Directive. – The retrospective method: With this method the value is first calculated as the total actual value of the successive contracts of the same type awarded during the preceding 12 months or financial year. Then, where possible, this amount must be adjusted to take account of the changes to the quantity or value which will occur in the 12 months following the initial contract. In other words, the contracting authority must first identify the similar contracts that have been entered into in the preceding 12 months or preceding financial year. Next it must calculate the payments made to economic operators under these contracts during their periods of validity. This will typically be roughly the amount that the contracting authority has paid under the similar contracts in the previous year. This amount should be corrected for any changes to the quantity or value in the 12 months following entry into the initial contract. In the context, it is difficult to understand the ‘initial contract’ as being another than the first of the contracts entered into in the foregoing 12 months or foregoing financial year.

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– The prospective method: With the second method, the total estimated value is the value of the successive contracts awarded during the 12 months following the first delivery, or during the contractual period where that is longer than 12 months. It is not stated what is to be included in the total estimated value, but it must be assumed that, as with the first calculation method, it must include the value of contracts of the same type. Thus the total payments made to economic operators under such contracts, based on the 12 months following the first delivery, must be the minimum, but with contracts for longer periods the calculation must be based on the period which the proposed contract is to cover.

5.12. Calculating the value of leasing and rental contracts Article 5(12) of the Public Sector Directive sets out a special rule for calculating the 57 value of contracts for leasing, with or without an option to buy. The rule states that the estimated value of such contracts must be calculated on the basis of: – For fixed-term leasing or rental contracts with a term of 12 months or less, the total estimated value for the term of the contract; see Article 5(12)(a). – For fixed-term leasing or rental contracts with a term of more than 12 months, the total value including the estimated residual value; see Article 5(12)(a). – For leasing or rental contracts that are not for a fixed term or with a term that cannot be defined, the monthly value multiplied by 48; see Article 5(12)(b). Article 5(12) does not contain general rules on fixed terms for calculating the value of 58 contracts that are for long or unlimited periods for the purchase of goods without a total value. While there are points of similarity, it is not possible to apply the rules in Article 5(12) (or Article 5(14)) in the same way to a contract for an unlimited period for the purchase of goods. In the case of purchases of goods (other than under contracts for leasing or rental), the period of a contract for an unlimited period without a total value cannot be tailored so as to avoid all doubt when the value of the contract is to be calculated for the purpose of the threshold amount. With a contract for the purchase of goods, other than under contracts for leasing or rental, the whole duration of the contract must be taken into account for calculating its value for the purpose of the threshold amount. If a contract is for an unlimited period, the contracting authority may be required to estimate its expected duration. When determining whether the value of a contract reaches the threshold amount a 59 contracting authority must note whether a proposed contact for the acquisition of goods concerns a purchase or leasing/rental. This is because the value of a leasing or rental contract will usually be higher, because of the financing costs. If, prior to the procurement, a contracting authority has not decided whether the acquisition is to be made by a purchase or by leasing, then the form of acquisition that results in the higher contract value must form the basis for estimating the value for the purpose of the threshold amount. With the most common leasing or rental contracts, which are for limited periods of more than 12 months, the total value must include the estimated residual value; this refers to the value of the goods at the end of the contract period. Logically, the requirement to include the residual value should only apply where the contracting authority has an option to buy the leased goods at the end of the contract. However, Article 5(12) expressly applies, whether or not the contract includes an option

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to buy, so the provision allows no basis for not assuming that the estimated residual value must always be included as part of the value of contracts for more than 12 months. If a contract includes other services, such as the servicing of the leased or rented goods, the value of such services must also be included in the valuation of the contract. 60 With leasing or rental contracts of unlimited duration, as under Article 5(14), the contracting authority must estimate the monthly value, taking account of the full amount of payments made to the supplier, for as long as necessary to give a realistic monthly valuation. Such payments should also cover any one-off payments for taking up an option to purchase the goods leased or rented.

5.13. Calculating the value of contracts for services 5.13.1. Calculating the value of financial services and design services 61

Article 5(13)(a), (b) and (c) of the Public Sector Directive provides that, for calculating the value of contracts for services, account must be taken of the following: – In relation to insurance services: the premium payable and other forms of remuneration; – In relation to banking and other financial services: the fees, commission payable, interest and other forms of remuneration; – In relation to contracts for design services: fees, commission payable and other forms of remuneration.

The purpose of Article 5(13) is to eliminate any doubt about how to calculate payment for specific forms of services. What characterises the three kinds of services covered by this provision is that they are all aimed at generating financial value for the contracting authority which exceeds the payment made. Article 5(13) thus makes more specific what has already been expressed generally in Article 5(1). The value of a purchase must be calculated according to the payment made to the service provider and not according to the value of the acquisition of the services in question for the contracting authority, for example the value of a loan or insurance cover. Article 5(13) determines the elements of payment to be included in the kinds of services in question. The provision makes it clear that it does not limit the general principle that the calculation of value in relation to the threshold amount must be based on the total payments to the service provider. This is clear as the list of kinds of payments specified for each group of services concludes with the words: ‘and other forms of remuneration’. Article 5(13) cannot be assumed to limit the application of the other provisions in Article 5. For example, the value of a loan contract for an unlimited period must be calculated according the monthly value of the commission payable, interest and other forms of remuneration, multiplied by 48, in accordance with Article 5(14). Also, the provisions of Article 5(11) on successive contracts and Article 5(8) on combining contracts for lots for calculating value in relation to the threshold amount are just as important as calculating the value of the services referred to in Article 5(13). 63 In the case of insurance services the calculation must include the premiums paid. This refers to the payments made by the policy holder for the insurance company to take on a specific financial risk, even if the payment is called something other than a ‘premium’. The value of what is insured or the amount of risk accepted by the policy holder is not part of the calculation. On the other hand, administrative charges and other payments made in addition to the premium must be included in the valuation of the contract if they are part of the payment for the insurance company’s services. 62

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Banking and other financial services must be assumed to include loans and credit ar- 64 rangements, financial leasing, the arrangement of loans and financial advice. While it would be natural to calculate the value of a lending service as the amount of the loan or the value of the maximum credit facility allowed, under Article 5(13)(b) the value of such a contract should be based on the payments made to the service provider. Payments for financial services will typically be commission, interest and fees. The amounts of these can sometimes be difficult to predict. If a contract provides for a variable interest rate, the contracting authority must try to predict the development of interest rates during the loan period. In the case of a credit facility, it must be assumed that the facility is used up to its limit so interest payments must be calculated on the basis of the maximum credit allowed. For contracts that include design services, Article 5(13)(c) provides little help in spec- 65 ifying the payments that must be included in calculating the value of a contract. It is difficult to think of any kind of payment that will not be covered by the terms ‘fees, commissions payable and other forms of remuneration’.

5.14. Calculating the value of contracts which do not indicate a total price Article 5(14) of the Public Sector Directive contains a special calculation rule which 66 only applies to service contracts. The rule states that where a service contract does not indicate a total price, the basis for calculating the contract value shall be: – in the case of fixed-term contracts, where that term is less than or equal to 48 months: the total value for their full term; – in the case of contracts without a fixed term or with a term greater than 48 months: the monthly value multiplied by 48. The provisions in Article 5(14) are highly practical as they save the contracting authority from having to speculate about the probable duration of a contract which, in many cases, would otherwise be necessary for estimating the value of the contract. At the core of the provision is the limit of 48 months when the values of contracts for fixed but very long periods or for unlimited periods must be calculated for the purpose of the threshold amount. There is a corresponding time limit for calculating the value of contracts for the acquisition of goods where leasing or rental is involved; see Article 5(12). However, the Public Sector Directive does not include such time limits for other kinds of contracts for purchasing goods. Article 5(14) only applies to contracts for services which do not indicate a total price. 67 This condition is particularly significant for contracts lasting more than four years. For example if a five-year contract is entered into, and the total payment for the services can be definitively calculated when entering into the contract, it is this total payment that must be used in relation to the threshold amount, and not merely the payment for 48 months. The fact that a contract can be terminated during the contract period is not relevant for the purpose of Article 5(14). Thus any agreement about the non-terminability of a contract or the period of notice for termination is also not relevant for applying the provision. A contract for a fixed term is a contract under which the date when the contract 68 comes to an end, and thus its duration, is already known when the contract is entered into. With a contract for an unlimited period the date of its termination is unknown, either because the contact is to run until it is revoked or because it terminates upon the occurrence of an event, the date of which is not known when entering into the contract. Michael Steinicke

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For example, if a contract for a fixed-term of one year can be extended twice for one year at a time, the contract is still for a limited period and the option to extend it by a total of two years must be included in calculating its duration; see Article 5(1). If a contract that is originally for one-year can be extended for one year at a time, the contract is not for a fixed term and is for an unlimited duration. In the case of fixed-term contracts for 48 months or less which do not indicate a total price, under Article 5(14) the value of the contract must be calculated on the basis of its estimated value for its full term, i.e. the total of the payments to be made under the contract. In the case of fixed-term contracts for 48 months or more or of unlimited duration, under Article 5(14) the value of the contract must be calculated on the basis its monthly value multiplied by 48. 69 Presumably the monthly value of a contract, i.e. the total payments made in a month, over 48 months gives the total value of the contract for the purpose of the threshold amount. The monthly value can vary from month to month, for example if the purchasing needs are not constant, and payments can be based on periods other than months or they can be based on monthly payments and one-off payments. For this reason the monthly value must be based on the average monthly payments. Article 5(14) does not determine how the monthly value of a contract should be calculated. One suggestion could be to emphasise the 48 month limit and calculate the monthly value on the basis of the total expected payments in the course of the contract’s first 48 months. However, such a method will give the same result as if the contract’s value were calculated as the payments payable to the service provider during the contract’s first four years. If this were the intended method, there would have been no reason to use the contract’s monthly value for estimating the value of contracts for long periods or unlimited duration. 70 For fixed-term contracts for more than four years the monthly value should presumably be determined by calculating the total expected payments to the service provider during the life of the contract and dividing this by the number of months of the contract period. The resulting monthly value should thereafter be multiplied by 48 to arrive at the total value for the purpose of the threshold amount. 71 For contracts without fixed terms there is naturally no limited contract period so the value of the contract cannot be calculated on the basis of a monthly value in the same way as with fixed-term contracts. However, the fact that contract period is unknown does not prevent the calculation of a realistic monthly value. Even where the payment wholly or partly consists of one-off payments, which may vary, the contracting authority could set a monthly value by taking account of the total value paid to the service provider over a period that is sufficient to give a realistic monthly value. With contracts where payment is triggered when a task has been performed or a specified result has been achieved, the contracting authority must estimate how much time will elapse from the start of the contract until the event occurs that will trigger payment.

Article 6 Revision of the thresholds and of the list of central government authorities 1. Every two years from 30 June 2013, the Commission shall verify that the thresholds set out in points (a), (b) and (c) of Article 4 correspond to the thresholds established in the World Trade Organisation Agreement on Government Procure234

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ment (GPA) and shall, where necessary, revise them in accordance with this Article. In accordance with the calculation method set out in the GPA, the Commission shall calculate the value of these thresholds on the basis of the average daily value of the euro in terms of the special drawing rights (SDRs), over a period of 24 months terminating on 31 August preceding the revision with effect from 1 January. The value of the thresholds thus revised shall, where necessary, be rounded down to the nearest thousand euros so as to ensure that the thresholds in force provided for by the GPA, expressed in SDRs, are observed. When carrying out the revision pursuant to paragraph 1 of this Article, the Commission shall, in addition, revise: (a) the threshold established in point (a) of the first paragraph of Article 13 by aligning it with the revised threshold applying to public works contracts; (b) the threshold established in point (b) of the first paragraph of Article 13 by aligning it with the revised threshold applying to public service contracts awarded by sub-central contracting authorities. Every two years from 1 January 2014, the Commission shall determine the values, in the national currencies of the Member States, whose currency is not the euro, of the thresholds referred to in points (a), (b) and (c) of Article 4, revised pursuant to paragraph 1 of this Article. At the same time, the Commission shall determine the value, in the national currencies of the Member States, whose currency is not the euro, of the threshold referred to in point (d) of Article 4. In accordance with the calculation method set out in the GPA, the determination of such values shall be based on the average daily values of those currencies corresponding to the applicable threshold expressed in euros over the 24 months terminating on 31 August preceding the revision with effect from 1 January. The Commission shall publish the revised thresholds referred to in paragraph 1, their corresponding values in the national currencies referred to in the first subparagraph of paragraph 3, and the value determined in accordance with the second subparagraph of paragraph 3 in the Official Journal of the European Union at the beginning of the month of November following their revision. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 to adapt the methodology set out in the second subparagraph of paragraph 1 of this Article to any change in the methodology provided in the GPA for the revision of the thresholds referred to in points (a), (b) and (c) of Article 4 and for the determination of the corresponding values in the national currencies of the Member States, whose currency is not the euro, as referred to in paragraph 3 of this Article. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 to revise the thresholds referred to in points (a), (b) and (c) of Article 4 pursuant to paragraph 1 of this Article and to revise the thresholds referred to in points (a) and (b) of the first paragraph of Article 13 pursuant to paragraph 2 of this Article. Where it is necessary to revise the thresholds referred to in points (a), (b) and (c) of Article 4 and the thresholds referred to in points (a) and (b) of the first paragraph of Article 13 and time constraints prevent the use of the procedure set in Article 87 and therefore imperative grounds of urgency so require, the procedure provided for in Article 88 shall apply to delegated acts adopted pursuant to the second subparagraph of paragraph 5 of this Article.

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7. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 to amend Annex I, in order to update the list of contracting authorities following notifications from Member States, where such amendments prove necessary to correctly identify contracting authorities.

6.1. Determining and revising threshold amounts 1

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Threshold amounts are the decisive determinants for whether or not a public contract is covered by the Public Sector Directive. The levels of the threshold amounts are a matter of great political interest and are often one of the most debated points when drafting the procurement directives. The procurement directives adopted in 2004 simplified the threshold amounts as far as possible, whether or not a purchase was covered by the EU’s international obligations pursuant to the World Trade Organisation Agreement on Government Procurement (GPA). In the new directives the threshold amounts are expressed in euro and not in SDRs (Special Drawing Rights) which is the currency unit for threshold amounts in bilateral agreements between the EU and the USA, Japan and other countries that are parties to the GPA. There is still a difference from the threshold amounts which trigger obligations under the GPA. This is because state contracting authorities have somewhat lower thresholds for goods and for services that are not social services or specific services. A consequence of all thresholds being expressed in euro is that they must be regularly adjusted in order to comply with the threshold amounts in the GPA set in SDRs. For this reason Article 6 of the Public Sector Directive lays down a procedure for adjusting the threshold amounts. Every second year the Commission must calculate the value of the threshold amounts in the Public Sector Directive on the basis of the average daily value of the euro in terms of the SDRs over a period of 24 months; see Article 6(1). Thereafter, the threshold amounts in the Public Sector Directive are adjusted with effect from 1 January every second year, see Article 6(3), and the new threshold amounts are published in advance in the Official Journal of the EU at the beginning of preceding November; see Article 6(4). Article 6(3) takes account of the fact that not all Member States are part of the European Monetary Union. For these Member States values equivalent to the threshold amounts must be given in the national currency. Article 6(4) thus provides that the equivalent threshold amounts for the remaining Member States must be set in their national currencies, based on the average rates of exchange every second year with effect from 1 January 2004; these are been published in the preceding November. The threshold amounts under the new procurement directives have already been implemented in some Member States, as amended by Regulation (EU) 2015/2170/EU.

Section 3 Exclusions Article 7 Contracts in the water, energy, transport and postal services sectors This Directive shall not apply to public contracts and design contests which, under Directive 2014/25/EU, are awarded or organised by contracting authorities exercising one or more of the activities referred to in Articles 8 to 14 of that Directive and 236

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are awarded for the pursuit of those activities, to public contracts excluded from the scope of that Directive under Articles 18, 23 and 34 thereof or, when awarded by a contracting authority which provides postal services within the meaning of point (b) of Article 13(2) of that Directive, to contracts awarded for the pursuit of the following activities: (a) added value services linked to and provided entirely by electronic means (including the secure transmission of coded documents by electronic means, address management services and transmission of registered electronic mail); (b) financial services which are covered by CPV codes 66100000-1 to 66720000-3 and by point (d) of Article 21 of Directive 2014/25/EU and including in particular postal money orders and postal giro transfers; (c) philatelic services; or (d) logistics services (services combining physical delivery and/or warehousing with other non-postal functions). Literature: Sue Arrowsmith, Law on Public Procurement, 3rd ed., 6-133 et seq.; Christopher Bovis, EU Public Procurement Law, 2nd ed.; Alexander Egger, Europäisches Vergaberecht, para. 745 et seq.; Marcel Sousse in Jurisclasseur Europe, Fasc 1052, n°44; Peter-Armin Trepte, Public Procurement in the EU, 2 nd ed., 4.149 et seq.

Article 7 opens section 3 entitled ‘Exclusions’. The basic purpose behind the exclusion 1 concerning the water sector is that public tenders for the provision of water are not considered viable. Contracting authorities shall have the possibility to use springs located closely to the production site, considering that the longer the water piping, the higher the risk that the water quality might drop.1 The scope of application is explained in Recital 21 declaring that contracting authorities operating in the water, energy, transport and postal services sectors are exempted with their awards falling within the scope of those activities as they come under the Utilities Directive. In contrast, they are covered by the Directive in the context of their operation of maritime, coastal or river transport services. As far as the history of Article 7 is concerned, it combines the parallel provisions for public contracts, previously set out in Article 12, and for design contests, in former Article 68 point (a) of the previous Public Sector Directive (2004/18). The main difference with regard to the substance concerns postal services for which the previous Public Sector Directive provided for a transitional period for phasing in the previous Utilities Directive (2004/17). As Article 71 paragraph 1, has expired, that reference could be abolished. Nonetheless, the legal technique is still different for postal services. Article 7 makes the exclusion dependent on two factors: First, the exemption is open for certain contracting authorities only, and second limits it to awards concerning certain activities. That means that the exception depends on the fulfilment of two requirements.

7.1. Scope rationae personae: Contracting authorities exempted As far as contracting authorities are concerned, Article 7 provides for two categories 2 submitting them to a different regime with regard to their contracts covered by the exclusion. 1 Marc Gabriel, ‘Europäisches und Deutsches Wettbewerbsrecht’, in: Frank Montag and Franz Jürgen Säcker (eds.), Münchener Kommentar, p. 2005.

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First, there all contracting authorities exercising one or more of the activities referred to in Articles 8 to 14 of the Utilities Directive are exempted. The mentioned provisions refer to the following activities: gas and heat, electricity, water, transport services, ports and airports, postal services and the extraction of oil and gas and exploration for, or extraction of, coal or other solid fuels. For more on these provisions, see the commentary to Articles 8 to 14 in the Utilities Directive. Second, Article 7 exempts contracting authorities which provide postal services within the meaning of point (b) of Article 13(2), i.e. the legal definition of such services. According to that rule, services of clearance, sorting, routing and delivery of postal items are covered, including both services falling within as well as services falling outside the scope of the universal service set up in conformity with Directive 97/67/EC. 2

7.2. Scope rationae materiae: Excluded activities The final version can be traced back to a Presidency’s compromise submitted during Council debates,3 the informal trilogue and to EP’s opinion on 1st reading.4 Excluded are only public contracts and design contests referring to certain activities organized in four categories listed exhaustively in points (a) to (d). The link between procurement and activity is not very close as procurement need only be in some sort of connection with an activity covered by the list. They shall be ‘for the pursuit of the following activities’ meaning serving those activities as it flows e.g. from the German version. First, a basic exemption simply comprising all public contracts and design contests awarded or organised by contracting authorities exercising a utility activity under a certain condition is laid down: The contract or contest has to be awarded or organised for the pursuit of utilities activities. That link corresponds to a principle laid down in the Utilities Directive according to which the works, supplies or services are intended for the pursuit of one of the activities.5 The Court has simply confirmed this rule by stating that a contracting entity, within the meaning of the Utilities Directive, is required to apply the procedure laid down in that directive only for the award of contracts which relate to activities carried out by that entity in one or more of the sectors listed in Articles 3 to 7 [now Article 8 to 14] of the Utilities Directive.6 Thus all other contracts awarded by such an entity in connection with the exercise of other activities are covered by the procedures laid down in the Public Sector Directive.7 With regard to the assessment of mixed contracts, reference is made to Article 6 of the Utilities Directive. 4 The second exemption refers to public contracts and design contests excluded from the scope of the Utilities Directive by referring to certain provisions. According to those rules, the following contracts are exempted also from the application of the Public Sector Directive (2014/24): 3

2 That reference has to be extended to all the amendments to that directive, especially the latest made by Directive 2008/6/EC of the European Parliament and of the Council of 20 February 2008 amending Directive 97/67/EC with regard to the full accomplishment of the internal market of Community postal services, OJ L 52, 27.2.2008, p. 3. 3 Presidency’s compromise text from end of November 2012, Doc. 16725/1/12 REV 1. 4 T7-0025/2014, EP-PE_TC1-COD(2011)0438. 5 Article 1(2) of Directive 2014/25/EU. 6 Case C-393/06, Ing. Aigner, para. 33; Case C-324/98, Telaustria, para. 35. 7 Case C-393/06, Ing. Aigner, ECLI:EU:C:2008:213, para. 59.

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– contracts awarded for purposes of resale or lease to third parties (Article 18); – contracts awarded by certain contracting entities for the purchase of water and for the supply of energy or of fuels for the production of energy (Article 23); – activities directly exposed to competition (Article 34). Although Article 34 does not correspond to its preceding rule, Article 30 of the previous Utilities Directive (2004/17), as the provisions previously laid down in paragraphs 4 to 6 of Article 30 are included in Article 35, that circumstance has no negative effect because those provisions set out the procedure for establishing whether Article 34 is applicable. The third exemption applies only to contracting authorities which provide postal ser- 5 vices and sets out four alternatives, each referring to another activity. Point (a) refers to added value services linked to and provided entirely by electronic means thereby explicitly including the secure transmission of coded documents by electronic means, address management services and transmission of registered electronic mail. Point (b) excludes certain financial services. On the one hand, services which fall under CPV codes 66100000-1 to 66720000-3, i.e. banking and investment services, insurance and pension services, treasury services, reinsurance services are exempted. On the other hand, that rule refers to point (d) of Article 21 of the Utilities Directive (2014/25), i.e. ‘financial services in connection with the issue, sale, purchase or transfer of securities or other financial instruments within the meaning of Directive 2004/39/EC of the European Parliament and of the Council’8 and ‘operations conducted with the European Financial Stability Facility and the European Stability Mechanism’. In addition, point (b) explicitly mentions ‘postal money orders and postal giro transfers’. Point (c) simply exempts philatelic services Point (d) covers logistics services, defining them as services combining physical delivery and/or warehousing with other non-postal functions.

Article 8 Specific exclusions in the field of electronic communications This Directive shall not apply to public contracts and design contests for the principal purpose of permitting the contracting authorities to provide or exploit public communications networks or to provide to the public one or more electronic communications services. For the purposes of this Article, ‘public communications network’ and ‘electronic communications service’ shall have the same meaning as in Directive 2002/21/EC of the European Parliament and of the Council. Literature: Sue Arrowsmith, Law on Public Procurement, 3rd ed., 6-138 et seq.; Christopher Bovis, EU Public Procurement Law, 2nd ed.; Alexander Egger, Europäisches Vergaberecht, para. 796; Marcel Sousse in Jurisclasseur Europe, Fasc 1052, n°45; Peter-Armin Trepte, Public Procurement in the EU, 2 nd ed.

A specific rule is devoted to the field of electronic communications. That economic 1 sector should be exempted due to the fact that those activities are exerted in a competitive market. Without that exclusion they would fall under the more restrictive regime of the Public Sector Directive even if they were exempted from the Utilities Directive. 1 8 The reference to that Directive could be interpreted as reference to Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU, OJ L 173, 12.6.2014, p. 349.

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Article 8 serves that purpose by providing an exclusion of procurements for certain purposes. Like in Article 7, the legislator integrated the two parallel provisions for public contracts, previously set out in Article 13, and for design contests, in former Article 68 point (b) of the previous Public Sector Directive (2004/18). And Article 8 subparagraph 2 replaces the previous Article 15(15) which contained several legal definitions. The final version can be traced back to a Presidency’s compromise submitted during Council debates2 and to EP’s opinion on 1st reading.3

8.1. Scope rationae personae: Contracting authorities exempted 2

As far as the entities falling under Article 8 are concerned, that rule simply mentions ‘contracting authorities’ without laying down further criteria. Therefore, one can conclude from the wording as well as from the legislator’s intention that the exclusion is of general application to all entities covered by the Public Sector Directive. Thus, the contracting authority’s activity stricto sensu is of no importance. That aspect must be distinguished from the activity understood as purpose of the procurement (see below).

8.2. Scope rationae materiae: Excluded procurements 3

The exclusion covers not only public contracts but also design contests. In a drafting technique typical for utilities rather than for the Public Sector Directive, Article 8 makes the applicability of the exclusion dependent on the fact that the procurement is made for certain purposes. It has to be pointed out that the contract or the contest shall have a certain principal purpose. That criterion should be interpreted as requiring a minimum degree of linkage whereby the purpose is not a mere subjective concept as the purpose also has to be objectively arguable. Certainly, a mere accessory purpose is not sufficient. The purpose of the procurement has to aim at permitting the contracting authorities to exert certain activities whereby Article 8 lays down two alternatives. It is submitted that permitting is not a very strict condition covering also contribution to exert the activities listed. The first alternative concerns the purpose of providing or exploiting ‘public communications networks’. Whereas providing a network means rather putting a network at the disposal of the public, exploiting focuses at operating activities. In contrast to the previous Public Sector Directive, the exclusion comprises not only telecommunications networks but communications networks. By replacing the reference to telecommunications, the scope has been broadened considerably. The intention was to cover also television, broadcasting and cable television networks. In addition, the legal definition is no longer set out in the Directive itself, as in the previous Article 15(15), but via a reference to Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services.4 According to its Article 2 (d) public communications network mean ‘an electronic communications network used wholly or mainly for the provision of electronic communications services available to the public which support the transfer of information between network termination points’. 1 Arrowsmith, Law on Public Procurement, p. 6-139, deplores the fact that other activities subject to competition are still not exempted. 2 Presidency’s compromise text from end of November 2012, Doc. 16725/1/12 REV 1. 3 T7-0025/2014, EP-PE_TC1-COD(2011)0438.

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The second alternative refers to the provision of ‘electronic communications services’. Such a service is defined in Article 2 (c) of Directive 2002/21 as amended as ‘a service normally provided for remuneration which consists wholly or mainly in the conveyance of signals on electronic communications networks, including telecommunications services and transmission services in networks used for broadcasting, but excludes services providing, or exercising editorial control over, content transmitted using electronic communications networks and services; it does not include information society services, as defined in Article 1 of Directive 98/34/EC, which do not consist wholly or mainly in the conveyance of signals on electronic communications networks’. The reference to Directive 98/34/EC must be read as reference to the amended version.5

Article 9 Public contracts awarded and design contests organised pursuant to international rules 1. This Directive shall not apply to public contracts and design contests which the contracting authority is obliged to award or organise in accordance with procurement procedures different from those laid down in this Directive established by any of the following: (a) a legal instrument creating international law obligations, such as an international agreement, concluded in conformity with the Treaties, between a Member State and one or more third countries or subdivisions thereof and covering works, supplies or services intended for the joint implementation or exploitation of a project by their signatories; (b) an international organisation. The Member States shall communicate all legal instruments referred to in point (a) of the first subparagraph of this paragraph to the Commission, which may consult the Advisory Committee on Public Procurement referred to in Article 89. 2. This Directive shall not apply to public contracts and design contests which the contracting authority awards or organises in accordance with procurement rules provided by an international organisation or international financing institution, where the public contracts and design contests concerned are fully financed by that organisation or institution; in the case of public contracts and design contests co-financed for the most part by an international organisation or international financing institution the parties shall agree on applicable procurement procedures. 3. Article 17 shall apply to contracts and design contests involving defence or security aspects which are awarded or organised pursuant to international rules. Paragraphs 1 and 2 of this Article shall not apply to those contracts and design contests.

4 OJ L 108, 24/04/2002, p. 33, as amended by Directive 2009/140/EC of the European Parliament and of the Council of 25 November 2009 amending Directives 2002/21/EC on a common regulatory framework for electronic communications networks and services, 2002/19/EC on access to, and interconnection of, electronic communications networks and associated facilities, and 2002/20/EC on the authorisation of electronic communications networks and services, OJ L 337, 18/12/2009, p. 37. 5 Regulation (EU) No 1025/2012 of the European Parliament and of the Council of 25 October 2012 on European standardisation, amending Council Directives 89/686/EEC and 93/15/EEC and Directives 94/9/EC, 94/25/EC, 95/16/EC, 97/23/EC, 98/34/EC, 2004/22/EC, 2007/23/EC, 2009/23/EC and 2009/105/EC of the European Parliament and of the Council and repealing Council Decision 87/95/EEC and Decision No 1673/2006/EC of the European Parliament and of the Council, OJ L 316, 14.11.2012, p. 12.

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Literature: Sue Arrowsmith, Law on Public Procurement, 3rd ed., 6-152 et seq.; Christopher Bovis, EU Public Procurement Law, 2nd ed.; Alexander Egger, Europäisches Vergaberecht, para. 804 et seq.; Marcel Sousse in Jurisclasseur Europe, Fasc 1052, n°47; Peter-Armin Trepte, Public Procurement in the EU, 2 nd ed., 4.128 et seq.

Article 9 merges the parallel provisions for public contracts, previously set out in Article 15, and for design contests, in previous Article 68 point (b) of the previous Public Sector Directive (2004/18). It sets out rules for three categories of public contracts awarded and design contests having an international law aspect. The exclusions laid down therein concern contracts and contests awarded or organised by a contracting authority whereas contracts and contests awarded or organised by international organisations themselves do not fall under the Directive1 due to the fact that they are not contracting authorities within the meaning of Article 2 and, therefore, according to Article 1 their contracts or contests are no subject-matter of the Directive. In addition, the legislator had the intention to clarify to what extent this Directive should be applied to procurement governed by specific international rules.2 2 The following three categories of procurements are to be distinguished: 1

– according to compulsory international law or to rules of international organisations; – according to rules of an international organisation or an international financing institution which finances the procurement; – pursuant to international rules and involving defence or security aspects.

9.1. Procurement according to international law or to rules of international organisations 3

The first paragraph of Article 9 provides for a specific exclusion for certain procurements according to international law or to rules of international organisations. In contrast to paragraph 2 the first paragraph only applies to cases where there is an obligation to follow those international rules. The requirement ‘procurement procedures different from those laid down in this Directive’ seems to be self-evident.3 In contrast to the previous regime and the initial proposal submitted by the Commission, an international agreement or arrangement relating to the stationing of troops no longer falls under the international law exclusion but under the specific regime with regard to defence or security issues, i.e. Article 17. 9.1.1. Rules established by a legal instrument creating international law obligations

4

The new regime concerning procurements by contracting authorities according to international law is drafted in a way that differs from the previous Public Sector Directive. Whereas, previous Article 15 as well as the Commission’s initial proposal provided explicitly for certain instruments, Article 9 mentions only one legal form.

See Recital 22. Cf. Commission Non-Paper (Council Document 9315/12, p. 28); Recital 22. 3 Unclear Arrowsmith, Law on Public Procurement, p. 6-154, who excludes agreements which refer to national procurement law. It is submitted that also such agreements are covered because those rules could be different from the directives, which could legally be the case in some circumstances. If the national rules are not different, the directive applies anyhow. 1

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The old regime enumerated the following three categories: – international agreements – international agreements relating to the stationing of troops and concerning the undertakings of a Member State or a third country; – particular procedures of an international organisation. Article 9 simplifies the concept and refers only to a ‘legal instrument creating interna- 5 tional law obligations’. In that respect, that category of acts has a broader meaning than agreements covering also unilateral decisions adopted by international bodies. The phrase ‘such as an international agreement’ has to be interpreted as giving an illustrative example. It is not necessary that the agreement is concluded between a Member State and one or more third countries. In contrast to the previous regime, agreements concluded with subdivisions of third countries are also covered by the exclusion. Therefore, agreements with a (autonomous) region or a federated state equally fall under the exemption. It is submitted that subdivisions of Member States are also possible parties to such agreements as it is up to the Member States to define their status under Public International Law; they are included in the notion Member State which, in Union law, usually has a very broad meaning. Another question relates to the assessment of agreements concluded by several Member States. Although the provision speaks of ‘a Member State’ only, that wording should be interpreted in the context of the following phrase referring to third countries thereby contrasting the (at least two) parties to the agreement, i.e., in case of a bilateral treaty, a Member State on one side and a third country on the other side. Thus, it could be construed as ‘by at least one Member’ laying down a minimum requirement. However, the wording concerning third countries explicitly distinguishes between two alternatives, namely ‘one or more’ countries. Therefore, the rule is far from being clear. Whereas agreement concluded exclusively between Member States do not fall under the exclusion, agreements to which apart from, at least, one third country several Member States are parties should be covered as the rationale is to exempt agreements with some international background, i.e. involving third countries, and not to exclude agreements exceeding the minimum.4 The legal instrument has to fulfil several criteria. First, the new regime covers only 6 legally binding acts and does not include non-binding arrangements.5 Second, the instrument has to be ‘in conformity with the Treaties’, thereby expressing primacy of Union law over treaties.6 That condition has to be construed in a broad sense meaning ‘being in conformity with Union law’. Although that clause should not be construed as conformity with the procurement directive, thereby undermining the exemption, at least procurement standards deriving from primary law serve as guideline for assessing the conformity, in particular the principle of discrimination and the fundamental freedoms. The third condition refers to the objective of the instrument. It shall be ‘intended for the joint implementation or exploitation of a project by their signatories’. In contrast to the previous regime Article 9 (1) is much clearer as it no longer distinguishes between

4 Contra Arrowsmith, Law on Public Procurement, p. 6-155 who excludes the application of transparency requirements arguing that exemptions to transparency rules under the directive also apply to procurements under primary law. This being correct, there are procurements falling under primary law where an exemption to transparency provided for in the directive, e.g. on the ground of urgency, is not applicable. 5 See Arrowsmith, Law on Public Procurement, p. 6-154. 6 See the specific regime in Article 351 TFEU for treaties concluded before 1 January 1958 or before accession.

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works, supplies and services but subjects all types of procurement to the same rule, i.e. the joint implementation or exploitation of a project.7 In practice, contracting parties which intend to construct cross-border infrastructure, e.g. in the field of energy or transport, could benefit from that rule. 9.1.2. Rules established by international organisations 7

The second alternative of paragraph 1 concerns procurement according to rules established by international organisations. In that context, the notion ‘international organisations’ refers not only to organisations of which states are members but to all entities qualifying as such under International Public Law. According to prevailing doctrine, international organisations involving only Member States8 – and also EEA countries – do not fall under the exclusion because such a vehicle could serve to circumvent the application of EU procurement rules. In practice, procurement not by international organisations but according to the regime established by the UN, EUROCONTROL, EUMETSAT, the European Space Agency,9 the European Patent Organisation are of some importance. EBRD and the World Bank10 which finance projects and/or provide grants and credits to various countries for the procurement of works, goods and services subject the procurement in the context of those projects generally award contracts according to the banks´ own procurement guidelines. In cases where the conditions of paragraph 2 are fulfilled that specific regime applies. 9.1.3. Procedural obligation

Subparagraph 2 of Article 9(1) lays down a procedural obligation which has to be complied with by the Member States and not by an individual contracting authority. That duty consists in an obligation to notify certain documents. As far as the scope is concerned, only legal instruments referred to in point (a) of the first subparagraph of paragraph 1 shall be communicated to the Commission. The wording as well as systematic considerations and the notification not being listed among the conditions of applicability lead to the conclusion that the legal force of legal instruments does not depend on the fact of being communicated to the Commission. That rule aims at contributing to improving the way the Commission exercises its surveillance activities as gardienne des Traités. Specific additional procedural provisions are not laid down. In particular, the regime lacks precise rules concerning the date or time limit. Therefore, a communication of legal instruments even ex post, i.e. after awarding a contract, must be seen as a lawful procurement. 9 The only explicit procedural rule refers to steps which may be taken by the Commission. That institution may consult the Advisory Committee on Public Procurement referred to in Article 89, which is entitled ‘Committee Procedure’. That article mentions that committee and refers to its founding legal act, namely Council Decision 71/306/ EEC.11 In addition, Article 89 qualifies that committee as a committee within the meaning of Regulation (EU) No 182/2011.12 8

With regard to the previous regime see Arrowsmith, Law on Public Procurement, p. 6-153. See Arrowsmith, Law on Public Procurement, p. 6-159 with further references. 9 Its status as organisation involving only Member States and EEA countries is doubtful. 10 Cf. Trepte, Public procurement in the EU: a practitioner’s guide, p. 244. 11 OJ L 185, 16.8.1971, p.15, as amended by Council Decision of 21 December 1976 amending Decision 71/306/EEC setting up an Advisory Committee for Public Contracts, OJ L 13, 15.1.1977, p. 15. 7

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It follows from Article 89 that the Commission is not obliged to take that measure but is only entitled to do so (see the word ‘may’). Besides, the competence of that committee is limited to giving advice (see the word ‘consult’).

9.2. Procurement financed by an international organisation or international financing institution Paragraph 2 of Article 9 sets out the rules for procurements which are financed by an 10 international organisation or international financing institution. The first condition to be fulfilled in order to benefit from that exclusion refers to the procedural aspect: The public contracts or the design contest has to be awarded or organised in accordance with procurement rules provided by an international organisation or international financing institution. The difference compared to paragraph 1 lies in the fact that the contracting authority is not obliged to award the contract or to organise the contest in accordance with international procurement procedures. The second condition requires a certain financial contribution to the contract or contest distinguishing between two alternatives. The first group of cases concerns procurements fully financed by that organisation or institution. It is submitted that the financing condition is also fulfilled in case there is an agreement with several organisations and/or institutions and there is, in sum, 100 % coverage. The second alternative refers to contracts and design contests co-financed for the 11 most part by an international organisation or an international financing institution. In that case, an additional requirement is laid down, namely that ‘the parties shall agree on applicable procurement procedures’. That criterion has to be interpreted as meaning ‘the parties have agreed on a procurement procedure’. Such an agreement does not necessarily have to be concluded for each procurement, a general treaty or contract being sufficient. A contrario, it follows from those rules that in case of a minority financing the exclusion is not applicable. In contrast, if several organisations and institutions co-finance the procurement whereby their contributions exceed together the threshold, the exclusion applies.

9.3. Procurement involving defence or security aspects Article 9(3) provides rules for procurement involving defence or security aspects 12 which are awarded or organised pursuant to international rules. As those procurements fulfil the international as well as the defence/security condition, their legal assessment could have been doubtful. A prominent case of application is NATO.13 In the second sentence, the legislator subjected those procurements to the regime of Article 17 by explicitly excluding the rules provided for in Article 9(1) and (2). Thereby, the relationship between Article 9 and Article 17 is clarified. It is submitted that the latter provision would have been applicable even without the legally binding rule in Article 9(3) simply due to its character as lex specialis. Article 17, which is entitled ‘Public contracts and design contests involving defence or 13 security aspects which are awarded or organised pursuant to international rules’ lays 12 Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers, OJ L 55, 28.2.2011, p. 13. 13 Cf. Written Question E-3105/95, OJ 1996 C 161/6 and OJ 1998 C 45/1.

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down specific rules for procurements involving defence and security aspects which, in addition, have an international aspect. It is interesting to note that Article 17(1) provides for the categories of international law as laid down in the preceding rule of Article 9.

Article 10 Specific exclusions for service contracts This Directive shall not apply to public service contracts for: (a) the acquisition or rental, by whatever financial means, of land, existing buildings or other immovable property or concerning rights thereon; (b) the acquisition, development, production or co-production of programme material intended for audiovisual media services or radio media services, that are awarded by audiovisual or radio media service providers, or contracts for broadcasting time or programme provision that are awarded to audiovisual or radio media service providers. For the purposes of this point, ‘audiovisual media services’ and ‘media service providers’ shall, respectively, have the same meaning as pursuant to points (a) and (d) of Article 1(1) of Directive 2010/13/EU of the European Parliament and of the Council. ‘Programme’ shall have the same meaning as pursuant to point (b) of Article 1(1) of that Directive, but shall also include radio programmes and radio programme materials. Furthermore, for the purposes of this provision, ‘programme material’ shall have the same meaning as ‘programme’; (c) arbitration and conciliation services; (d) any of the following legal services: (i) legal representation of a client by a lawyer within the meaning of Article 1 of Council Directive 77/249/EEC in: – an arbitration or conciliation held in a Member State, a third country or before an international arbitration or conciliation instance; or – judicial proceedings before the courts, tribunals or public authorities of a Member State or a third country or before international courts, tribunals or institutions; (ii) legal advice given in preparation of any of the proceedings referred to in point (i) of this point or where there is a tangible indication and high probability that the matter to which the advice relates will become the subject of such proceedings, provided that the advice is given by a lawyer within the meaning of Article 1 of Directive 77/249/EEC; (iii) document certification and authentication services which must be provided by notaries; (iv) legal services provided by trustees or appointed guardians or other legal services the providers of which are designated by a court or tribunal in the Member State concerned or are designated by law to carry out specific tasks under the supervision of such tribunals or courts; (v) other legal services which in the Member State concerned are connected, even occasionally, with the exercise of official authority; (e) financial services in connection with the issue, sale, purchase or transfer of securities or other financial instruments within the meaning of Directive 2004/39/EC of the European Parliament and of the Council, central bank services and opera-

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tions conducted with the European Financial Stability Facility and the European Stability Mechanism; (f) loans, whether or not in connection with the issue, sale, purchase or transfer of securities or other financial instruments; (g) employment contracts; (h) civil defence, civil protection, and danger prevention services that are provided by non-profit organisations or associations, and which are covered by CPV codes 75250000-3, 75251000-0, 75251100-1, 75251110-4, 75251120-7, 75252000-7, 75222000-8, 98113100-9 and 85143000-3 except patient transport ambulance services; (i) public passenger transport services by rail or metro; (j) political campaign services covered by CPV codes 79341400-0, 92111230-3 and 92111240-6, when awarded by a political party in the context of an election campaign. Literature: Sue Arrowsmith, Law on Public Procurement, 3rd ed., 6-46 et seq. and 6-160; Christopher Bovis, EU Public Procurement Law, 2nd ed.; Alexander Egger, Europäisches Vergaberecht, para. 728 et seq.; Marcel Sousse in Jurisclasseur Europe, Fasc 1052, n°48; Peter-Armin Trepte, Public Procurement in the EU, 2nd ed., 4.130 and 4.139 et seq.

Article 10 provides for exclusions for specific types of service contracts and design 1 contests. On the one hand, the rule maintains some of the exemptions1 previously laid down in Article 16 of the previous Public Sector Directive (2004/18) which goes back to Article 1(a) of Directive 92/50/EEC, rephrasing some of them, on the other hand, it adds new grounds for exclusion. The new regime follows the same drafting, enumerating in a long list exhaustively all the grounds for exclusion.

10.1. Acquisition or rental of immovable property or rights thereon The first exemption, laid down in Article 10 (a), concerns immovable property and 2 rights thereon. Such contracts are excluded due to the fact that there is hardly any crossborder competition or interest.2 The broad wording referring to acquisition and rental ‘by whatever financial means’ indicates that the legislator intended to exempt each type of right, be it for an indefinite time or on a temporary basis. To ascertain uniform application throughout the Union, the notions ‘acquisition’ and ‘rental’ are to be interpreted on an autonomous Union basis. It has been pointed out that those contracts or operations are not services within the meaning of the Directive.3 As far as the object of the right is concerned, Article 10 (a) mentions ‘land’, ‘existing 3 buildings or other immovable property or concerning rights thereon. The main field of application and practical concern relates to the developed and undeveloped property. ‘Other immovable property’ could cover objects or rights having the status of real estate without being so, such as some objects related to ships. The exclusion on immovable property in the new Directive no longer contains the rule according to which ‘financial service contracts concluded at the same time as, be-

Research and development services now fall under a specific provision, namely Article 14. See COM (90) 372 final; Egger, Europäisches Vergaberecht, para. 730; Trepte, Public Procurement in the EU, para. 4.130. 3 Egger, Europäisches Vergaberecht, para. 730; Trepte, Public Procurement in the EU, para. 4.130. 1

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fore or after, the contract of acquisition or rental, in whatever form, shall be subject to this Directive’. The main legal problems arise with regard to buildings because the Directive explicitly applies also to ‘the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority exercising a decisive influence on the type or design of the work’. Those procurements fall under the definition of ‘public works contracts’ (Article 1(6)). 4 In practice, the legal assessment will depend on the degree to which the contracting authority influences the specifications,4 i.e. must have taken measures to define the type of the work or, at the very least, has had a decisive influence on its design,5 or whether the building can be regarded as existing. In case it does not fall under the works definition, the applicability of the ground for exclusion for immovable properties has to be assessed. Whether the exemption also covers non-existing buildings is widely discussed on the basis of national decisions.6 In that context, the ECJ states in its recent case-law that ‘the decisive element for the purposes of the classification of the contract concerned is the main object of that contract, not the amount paid to the contractor or the arrangements for payment’. 7

10.2. Acquisition, development, production or co-production of programme material 5

The Public Sector Directive provides for an exemption in the field of media, but not limited to broadcasting as in previous Public Sector Directive (2004/18) Article 16 point (b). The rationale for excluding public contracts for certain audiovisual and radio media services by media providers is to ‘allow aspects of cultural or social significance to be taken into account’.8 Thus, contracts on goods do not fall under the exclusion, in particular the supply of technical equipment necessary for the production, co-production and broadcasting of such programmes.9 The rule in force distinguishes two alternative cases. The first exclusion refers to the acquisition, development, production or co-production of programme material intended for audiovisual media services or radio media services. According to the recitals, the rule exempts, e.g., preparatory services, such as those relating to scripts or artistic performances necessary for the production of the programme. It should also be clarified that the exclusion should apply equally to broadcast media services and on-demand services (non-linear services).10 The first alternative laid down in Article 10(b), covers only contracts which serve a specific purpose, i.e. that the object of the contract is intended for audiovisual media services or radio media services. In addition, there is a specific condition the contracting authority has to meet, namely that the contract is awarded by audiovisual or radio media service providers. This is a considerable difference to previous legislation, see Article 16 (b) in the previous Public Sector Directive (2004/18). 4 Trepte, Public Procurement in the EU, para. 4.135; see also Arrowsmith, Law on Public Procurement, p. 6-160. 5 Case C-451/08, Helmut Müller [2010] ECR I-2673, para. 67. 6 See Aicher in Müller-Wrede (ed), Kompendium des Vergaberechts, 2 nd ed., p. 348 et seq. 7 Case C-213/13, Impresa Pizzarotti [2014] ECR I-2067, para. 50. 8 Recital 23. 9 Recital 23. 10 Recital 23.

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With regard to the meaning of the terms, ’audiovisual media services’ and ‘media ser- 6 vice providers’ Article 10 point (b) refers again to Article 1(1) Directive 2010/13/EU. 11 According to its point (a) ‘audiovisual media services’ means either ‘a service as defined by Articles 56 and 57 of the Treaty on the Functioning of the European Union which is under the editorial responsibility of a media service provider and the principal purpose of which is the provision of programmes, in order to inform, entertain or educate, to the general public by electronic communications networks within the meaning of point (a) of Article 2 of Directive 2002/21/EC. Such an audiovisual media service is either a television broadcast as defined in point (e) of this paragraph or an on-demand audiovisual media service as defined in point (g) of this paragraph’ or audiovisual commercial communication. Pursuant to point (d) og the same provision, ‘media service providers’ means ‘the natural or legal person who has editorial responsibility for the choice of the audiovisual content of the audiovisual media service and determines the manner in which it is organised’. With regard to the legal definition of the term ‘programme material’, there is a refer- 7 ence to Article 1(1) point (b) according to which that term means ‘a set of moving images with or without sound constituting an individual item within a schedule or a catalogue established by a media service provider and the form and content of which are comparable to the form and content of television broadcasting. Examples of programmes include feature-length films, sports events, situation comedies, documentaries, children’s programmes and original drama’. In addition, ‘programme’ shall also include radio programmes and radio programme materials. Audio-visual productions for information, training or advertising purposes are excluded insofar as they are related to broadcasting activities of broadcasting organisations which are public authorities. The exemption is necessary so that national broadcasters can remain free to procure programme material from whom they wish and following the procedures of their choosing.12 The second alternative covers similar procurements, namely contracts having as their 8 subject ‘broadcasting time’ or, in addition to the previous exemption under Directive 2004/18, also ‘programme provision’. As the need to obtain broadcasting may have implications in regard to public security or health protection matters, the provision of broadcasting time is also excluded from the scope of the Public Sector Directive. Urgent information on e.g. civil emergencies, transmissible diseases or traffic conditions may need to be broadcasted widely and as quickly as possible.13 This exclusion ground is also subject to the fulfilment of a second criterion. In contrast to the first alternative, this exemption is not limited to a specific category of contracting authorities but to a determined group of contracting parties, i.e. it refers to the bidder-side. The rule is only applicable to contracts which are awarded to ‘audiovisual or radio media service providers’ (see above).

10.3. Arbitration and conciliation services As in the preceding directive and Directive 92/50/EEC, also the Public Sector Direc- 9 tive excludes form its scope arbitration and conciliation services. That rule counts among those provisions which remained unchanged for decades. OJ L 95, 15.4.2010, p. 1. Trepte, Public Procurement in the EU, para. 4.140. 13 Trepte, Public Procurement in the EU, para. 4.141.

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The rationale for exempting that kind of services lies in the fact that such economic activities are provided by bodies or individuals which are agreed on, or selected, in a manner which cannot be governed by procurement rules.14 It is a key element in arbitration that the parties to a dispute would want to select arbitrators and conciliators themselves based on their competence, reputation and experience. The inclusion of contracts for arbitration and conciliation services in the Public Sector Directive would therefore be counterproductive. Competitive bidding for such services would interfere with the principle of joint selection of arbitrators by the parties.15 The exclusion covers also ‘similar forms of alternative dispute resolution’ and independent from ‘their denomination under national law’16 and, it is submitted, whatever their denomination under international law is.

10.4. Legal services 10

Article 10 (d) provides for one of the rare new grounds for exclusion exempting five categories of legal services. That exemption is motivated by the fact that those ‘legal services are usually provided by bodies or individuals designated or selected in a manner which cannot be governed by procurement rules, such as for instance the designation of State Attorneys in certain Member States.’17 A contrario, legal services which do not fall under the exemption of point (d) are to be qualified as social and other specific services within the meaning of Article 74 if they are listed in Annex XIV. There are enumerated services referring to certain CPV codes, viz. 79100000-5 to 79140000-7 18 and 75231100-5,19 insofar as not excluded in 10(d). The legal services listed in Annex XIV are subject to Articles 75 and 76 – the socalled light regime. That regime succeeds the rules applicable to non-priority services which were abolished by the Public Sector Directive. Under the preceding regime, legal services within the meaning of Category No 21 CPV were listed in the annex for non-priority services, namely CPV categories No 74110000-3 to 74114000-1. Point (i) of Article10 (d) provides for an exclusion of two types of legal representation of a client by a lawyer defining that service by referring to Article 1 of Council Directive 77/249/EEC20 which mentions in its paragraph 1 the services and which lists for each Member State of the professions covered enumerating the title of the person (paragraph 2). Nonetheless, the exclusion is limited to the services explicitly set out in the first and second indent of point (i), i.e. arbitration or conciliation held in a Member State, a third country or before an international arbitration or conciliation instance, and judicial proRecital 24. Trepte, Public Procurement in the EU, para. 4.142. 16 Recital 24. 17 Recital 25. 18 79100000-5 Legal services; 79110000-8 Legal advisory and representation services; 79111000-5 Legal advisory services; 79112000-2 Legal representation services; 79112100-3 Stakeholders representation services; 79120000-1 Patent and copyright consultancy services; 79121000-8 Copyright consultancy services; 79121100-9 Software copyright consultancy services; 79130000-4 Legal documentation and certification services; 79131000-1 Documentation services; 79132000-8 Certification services; 79132100-9 Electronic signature certification services; 79140000-7 Legal advisory and information services. 19 Law-courts-related administrative services. 20 As amended by Council Directive 2013/25/EU of 13 May 2013 adapting certain directives in the field of right of establishment and freedom to provide services, by reason of the accession of the Republic of Croatia, OJ L 158, 10.6.2013, p. 368. 14

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ceedings before the courts, tribunals or public authorities of a Member State or a third country or before international courts, tribunals or institutions. The second sub-category of exemptions, laid down in point (ii), extends the first subcategory to the pre-litigation phase including potential court cases, namely by including ‘legal advice given in preparation of any of the proceedings referred to in point (i) of this point or where there is a tangible indication and high probability that the matter to which the advice relates will become the subject of such proceedings, provided that the advice is given by a lawyer within the meaning of Article 1 of Directive 77/249/EEC’. The third sub-category, set out in point (iii), covers activities usually reserved for notaries, i.e. ‘document certification and authentication services which must be provided by notaries’. As it is clear from the wording only activities for which there is a legal monopoly are excluded from the Directive. According to the forth sub-category of point (iv), legal services provided by certain persons are exempted. The exclusion enumerates ‘trustees’, ‘appointed guardians’ and providers of ‘which are designated by a court or tribunal in the Member State concerned or are designated by law to carry out specific tasks under the supervision of such tribunals or courts’. The term ‘court’ should be interpreted as having the meaning of tribunal in the sense of Art 6 ECHR or Article 47 Charter of Fundamental Rights. By that exemption, the legislator intended to exclude the service provided by certain experts under the condition that they provide legal service and not mere technical support or serve as court or forensic experts or interpreters/translators. In contrast, it is submitted that trustees who under competition rules are appointed in order to control structural or behavioural measures are excluded. The fifth exclusion refers to ‘other legal services which in the Member State concerned are connected, even occasionally, with the exercise of official authority’. That exemption corresponds to a derogation provided for under primary law, namely Article 51 TFEU which reads as follows: ‘The provisions of this Chapter shall not apply, so far as any given Member State is concerned, to activities which in that State are connected, even occasionally, with the exercise of official authority’. Even though Article 51 also covers other types of services than legal services the provision is illustrative in regard to the scope of the term “exercise of official authority”. As a contracting authority could invoke primary law anyhow, that exemption seems to be inserted for precautionary reasons.

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10.5. Financial services Point (e) of Article 10 is devoted to certain financial services and corresponds largely 15 to the preceding derogation laid down in previous Public Sector Directive Article 16 point (d); a similar ground for exclusion is laid down in point (f). The exemption is based on the fact that these services are generally strictly regulated by national monetary policies and are reserved to a small number of qualified and registered undertakings.21 According to the rule set out in point (e), services in connection with certain opera- 16 tions are covered, namely ‘the issue, sale, purchase or transfer’. Point (e) explicitly enumerates, first, securities and other financial instruments. In contrast to the preceding Article 16 point (d) which mentioned, apart from central bank services, financial instruments in the form of ‘transactions by the contracting authorities to raise money or capital’, the new exemption refers to a specific legal act, namely Directive 2004/39/EC, to define financial instruments which fall under the derogation. 21

Trepte, Public Procurement in the EU, para. 4.143.

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As that directive was repealed during the period for implementing the procurement rules, the question arises whether the reference should be read as referring to the succeeding directive, i.e. to Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU.22 The solution is to be found, first, in Article 90 of Directive 2014/25 setting the date for transposition. That rule is to be read in connection with Article 94 of Directive 2014/65, according to which Directive 2004/39/EC is repealed only with effect from 3 January 2017, which is after the transposition period of the procurement directive. Until that date, the old references are still valid; from that date onwards, Article 94 applies whereby ‘references to terms defined in, or Articles of, Directive 2004/39/EC or Directive 93/22/EEC shall be construed as references to the equivalent term defined in, or Article of, this Directive’. Section C of Annex I of those directives list the financial instruments falling under its respective regime, i.a. transferable securities, money-market instruments and certain derivative contracts. Whereas the old exclusion applied in general to contracts which constitute transactions concerning government bonds as well as activities related to public debt management and contracts awarded to financial intermediaries to arrange such transactions, 23 the new regime does not encompass all credit services but is limited to derivatives. That restriction was motivated by the wish to induce competition in times of strained public budgets.24 17 As far as central banks services are concerned, only services reserved for such institutions are exempted, their commercial services falling under the Directive. 25 Not included by the exemption are: guarantees, factoring, management of state aids, services connected with privatisation and consulting services with regard to financial services are not excluded either.26 It is interesting to note that the legislator did not describe the services by referring to the CPV code as it did under the old regime with regard to priority services in Annex II A. Furthermore, the rule exempts also other operations. Following developments on the market and keeping the exclusion up-date for Member States’ daily practice, the new rule also excludes ‘operations conducted with the European Financial Stability Facility’ as well as operations of the ‘European Stability Mechanism’; that latter case, not included in the initial proposal submitted by the Commission, was added by the legislator. Although the exclusion applies in case the service is ‘in connection with’, not all preparing and accompanying services benefit from the exemption.27 It flows already from the general principle according to which derogations are to be interpreted restrictively that there should be a close link.

10.6. Loans 18

A new exclusion, at least from a drafting perspective, is provided for in point (f). That exemption applies to loans previously included in the exemption concerning financial services.28 OJ L 173, 12.6.2014, p. 349. Trepte, Public Procurement in the EU, para. 4.143. 24 See Commission Non-paper on Cluster 10, Council document 9315/12, p. 31. 25 Cf. Arrowsmith, Law on Public Procurement, p. 6-51. 26 Egger, Europäisches Vergaberecht, para. 735. 27 Egger, Europäisches Vergaberecht para. 732 with further references. 28 Arrowsmith, Law on Public Procurement, p. 6-50. 22

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As the provision on financial services was modified, the legislator saw the necessity to insert that new rule on loans, at least, for clarification purposes.29 Point (f) is drafted in a rather broad manner, not making the exclusion dependent on a further criterion. On the contrary, the following phrase states: ‘whether or not in connection with the issue, sale, purchase or transfer of securities or other financial instruments’.

10.7. Employment contracts Point (g) of Article 10 excludes ‘employment contracts’ thereby simply copying previ- 19 ous legislation, i.e. the previous Public Sector Directive (2004/18) Article 16(e) which corresponds literally to Article 1(a)(viii) of Directive 1992/50/EEC. In spite of fundamental freedoms of the EU-Treaties, the employment market mainly remains a localised one where local conditions of employment, tax as well as social regimes play an important role.30 As the Directive is addressed to cross-border trade and the freedom of individuals to work cannot, usually, be regarded as an activity of economic operators in the sense of the EU procurement law, the Directive is therefore not applicable to employment contracts.31 The notion of “employment” is to be interpreted autonomously in the light of primary 20 law, in particular the fundamental freedom of workers enshrined in Article 45 TFEU and related case-law32 characterising those activities as being carried out under the direction of another person in return for remuneration. Therefore, the exclusion is not applicable to (group) insurance contracts implementing a salary conversion measure.33 On the contrary, labour recruitment and provision of personnel are not caught by the exemption and are, therefore, subject to the regime.34 For other labour related services, it is important to assess whether they are caught by services listed in Annex XIV and, consequently, fall under the regime of Article 74 et seq., e.g. supply services of domestic help, nursing or medical personnel; manpower services for households; agency or clerical staff services for households.

10.8. Civil defence and protection and danger prevention Another new exception for services is laid down in point (h) of Article 10. According 21 to the legislator’s intention, the Directive should not apply to ‘certain emergency services where they are performed by non-profit organisations or associations, since the particular nature of those organisations would be difficult to preserve if the service providers had to be chosen in accordance with the procedures set out in this Directive.’35 History shows that the exclusion was not included in the Commission’s initial proposal but its final version can be traced back to a Presidency’s compromise submitted during Council debates at a late stage36 and to EP’s opinion on 1st reading.37

Recital 26. Trepte, Public Procurement in the EU, para. 4.144. 31 Cf. Aicher in Müller-Wrede (Ed.), Kompendium des Vergaberechts, 2 nd ed., p. 343; Trepte, Public Procurement in the EU, para. 4.144. 32 See e.g. Case 66/85, Lawrie-Blum [1986] ECR I-2121. 33 Case C-271/08, Commission v Germany [2010] ECR I-7091, para. 68 et seq. 34 Egger, Europäisches Vergaberecht, para. 729 with further references. 35 Recital 28.8. 36 Presidency’s compromise text from July 2013, Doc. 11745/13. 37 T7-0025/2014, EP-PE_TC1-COD(2011)0438. 29

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The exclusion is applicable only if two conditions are met: There must be a service explicitly listed and it has to be provided by a certain category of entities. First, point (h) by mentioning ‘civil defence, civil protection, and danger prevention services’ without laying down further details would create legal uncertainties and provoke diverging jurisprudence all over the Union with a risk of extending the exclusion beyond what is strictly necessary.38 Therefore, the legislator completed that phrase included in the report of the responsible EP’s Committee39 by adding a legal specification. That definition is, as in some cases, drafted as a list comprising references to specific CPV codes. That codes concern the following services: fire-brigade and rescue services (75250000-3), fire-brigade services (75251000-0), fire-fighting services (75251100-1), fire-prevention services (75251110-4), forest-fire-fighting services (75251120-7), rescue services (75252000-7), civil defence services (75222000-8), nuclear safety services (98113100-9) and ambulance services (85143000-3) with the explicit exempted of ‘patient transport ambulance services’, a sector well known from ECJ’s case-law. 40 That restriction is clarified by the legislator in the recitals according to which ‘CPV Group 601 ‘Land Transport Services’ does not cover ambulance services to be found in CPV class 8514. In addition, services which are covered by CPV code 85143000-3, consisting exclusively of patient transport ambulance services should be subject to the special regime set out for social and other specific services (the ‘light regime’).41 In that context, it is worth mentioning services listed in Annex XIV which fall under the light regime of Article 74 et seq., esp. prison related services, public security and rescue services, certain health, social and related services and compulsory social security services. That exclusion from the scope of application has to be distinguished from the exclusion of certain entities from participation in procurement procedures provided for by national law.42 To be exempted, procurements have to fulfil a second criterion related to the provider of the service which was introduced in the legislative procedure at a late stage.43 Point (h) only exempts services provided by ‘non-profit organisations or associations’. Although there is no definition in the Directive itself, member states and contracting entities are not totally free in interpreting and applying that criterion. Those notions are to be construed, first, pursuant to the principle of autonomous interpretation in the light of Union law and, second, in the light of higher ranking Union law, i.e. Primary law. As the Directive is mainly based on provisions of the freedom of establishment, viz. Article 53 (1) TFEU as well as on the free movement of services, viz. Article 62 TFEU, that part of the Treaty is the first source of interpretation. The point of departure is Article 54 TFEU which lays down a definition of companies and firms excluding thereby explicitly entities which are non-profit making. Even though that provision contains no definition of ‘non-profit making’, at least, the case law concerning (economic) activities under Article 49 TFEU gives some guidance to the meaning of profit-making. Contrary Recital 28. See Report of IMCO on the proposal for a directive of the European Parliament and of the Council on public procurement, A7-0007/2013, Amendment 67. 40 See, e.g., cases C-274/09, Privater Rettungsdienst und Krankentransport Stadler [2011] ECR I1335, C-160/08, Commission v Germany [2010] ECR I-3713, C-532/03, Commission v Ireland [2007] ECR I-11353, C-475/99, Ambulanz Glöckner [2001] ECR I-8089. 41 Recital 28. 42 See e.g. Case C-568/13, Data Medical Service, ECLI:EU:C:2014:2466. 43 It was not provided for in the report of the responsible EP’s Committee. See Report of IMCO on the proposal for a directive of the European Parliament and of the Council on public procurement, A7-0007/2013, Amendment 67. 38

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to the wording of the English text of Article 54, the actual pursuit of an economic activity is sufficient, the intention to make profit being irrelevant.44 Therefore, the case law on the non-applicability of fundamental freedoms to nonprofit organisations seems to be the most relevant source of interpretation. 45 Departing from that, the criterion ‘non-profit’ would have to be interpreted as ‘not being involved in the economic life’, i.e. wider than ‘charities’ within the meaning of another act of secondary legislation concerning services.46 As the Directive is applicable only to the acquisition of works, supplies or services from economic operators,47 which are by definition48 offering a work/works, supplies or services on the market, non-profit organisations or associations would have been exempted anyhow, i.e. also without the derogation of Article 10 (h). To avoid an interpretation which renders that derogation superfluous, the criterion ‘non-profit’ excludes even those entities which offer the services explicitly mentioned in the derogation on the market.

10.9. Public passenger transport services by rail or metro Article 10 provides for another new rule, which can be qualified as clarification. Point 23 (i) exempts public passenger transport services by rail or metro. It has to be underlined that the exclusion refers to the content of the service and not to the activity of the contracting entity in the transport sector. In that context, it should be recalled that there is specific legislation applicable to procurement concerning certain modes of transport, namely Regulation (EC) No 1370/200749 which, first, regulates its scope of application and, second, provides for a particular procurement regime. According to its Article 5 (1)the regulation applies to public service contracts as well as to service concessions for public passenger transport by rail or metro whereas service contracts and public service contracts for public passenger transport services by bus or tramway fall under the procurement directives. Moreover, the legislator recognised Member States’ competence to depart from the rules laid down in the regulation.50 The exclusion is limited to passenger transport and does not apply to goods; furthermore, air and waterway transport are equally not caught by it. Besides, rail and water transport services were subject to non-priority services of Annex II B under the old regime.

10.10. Political campaign services Another new rule providing for a real innovative exception with regard to the sub- 24 stance is laid down in point (j) of Article 10 according to which certain political cam44 Case C-221/89, Factortame II, ECLI:EU:C:1991:320, para. 20; Case C-70/95, Sodemare, ECLI:EU:C:1997:301, para. 24. 45 With regard to the old regime before the entry into force of the Directive, see Case C-113/13, Azienda sanitaria locale n. 5 “Spezzino” e.a., ECLI:EU:C:2014:2440, where the Court lays down the conditions under which Articles 49 and 56 TFEU allow direct awards. 46 Article 2 Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, OJ L 376, 27.12.2006, p. 36. 47 Article 1 (2). 48 Article 2 (10). 49 Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) No 1191/69 and 1107/70, OJ L 315, 3.12.2007, p. 1. 50 Recital 27.

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paign services are excluded. The reason is to be found in the fact that they are so ‘inextricably connected to the political views of the service provider when provided in the context of an election campaign, that the service providers are normally selected in a manner which cannot be governed by procurement rules.’51 Moreover, the Public Sector Directive recalls that ‘the statute and funding of European political parties and European political foundations are subject to rules other than those laid down in this Directive’.52 The exemption is only applicable if several conditions are met. First, only services covered by a specific CPV code are caught by the exception. The exhaustive list encompasses advertising campaign services (79341400-0), propaganda film production (92111230-3) and propaganda video-tape production (92111240-6). Second, the service has to be awarded by a political party. Although the Public Sector Directive applies only to contracting authorities, political parties in some Member States might fall within the notion of bodies governed by public law.53 25 As the wording explicitly mentions awards only and not organisations, design contests do not seem to be included. That may be explained by the fact that the exclusion was not included in the initial proposal but introduced in the legislative process at a later stage.54 In addition, design contest as defined in the Public Sector Directive55 focusses mainly on town and country planning, architecture and engineering or data processing. Third, the exemption only covers awards ‘in the context of an election campaign’. As the legislator did not set out further details, the meaning of that criterion will be determined by the jurisprudence. Until clarification by the ECJ, there is a high risk of diverging practice and case-law. It is submitted that the link should be close with regard to time, i.e. the period of award and elections, and with regard to the subject of the campaign if otherwise political parties could use that exemption to circumvent the normal procurement regime even in cases where the political campaign has only loose links with upcoming elections and serves mainly other purposes, such as promoting a certain politician or a specific political idea.

Article 11 Service contracts awarded on the basis of an exclusive right This Directive shall not apply to public service contracts awarded by a contracting authority to another contracting authority or to an association of contracting authorities on the basis of an exclusive right which they enjoy pursuant to a law, regulation or published administrative provision which is compatible with the TFEU. Literature: Sue Arrowsmith, Law on Public Procurement, 3rd ed., 6-208 et seq.; Christopher Bovis, EU Public Procurement Law, 2nd ed.; Alexander Egger, Europäisches Vergaberecht, para. 596 and 739 et seq.; Franz Jürgen Säcker/Maik Wolf, in: Europäisches und Deutsches Wettbewerbsrecht, Münchener Kommentar, vol. 3, GWB § 100; Peter-Armin Trepte, Public Procurement in the EU, 2nd ed., 4.137 et seq.

1

Article 11 corresponds to Article 18 of the previous Public Sector Directive (2004/18) which goes back to Article 6 of Directive 92/50/EEC. Although it was not part of the Commission’s initial proposal, the legislator inserted that traditional exemption in its fiRecital 29. Recital 29. 53 Recital 29. 54 Presidency’s compromise text from November 2012, Doc. 16725/12/1. 55 Article 2(1) point (21). 51

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nal version of the Directive following debates within the Council1 and the EP opinion on 1st reading.2 The practical need is expressed in Recital 30 according to which, in certain cases, a contracting authority or an association of contracting authorities may be the sole source providing a particular service. The exemption is subject to the fulfilment of several conditions, explicitly provided for in Article 11.3

11.1. The object: public service contracts The basic criterion, sometimes not respected by national legislators or administrative 2 practice, concerns the object of the exception. Article 11 as all its preceding provisions explicitly exempts only ‘public service contracts’. As there is no specific legal definition laid down in Article 11, the general definition of Article 2(1)(9) applies. Thus, works and supply contracts are not covered by that exemption and are, therefore, subject to the general regime. That result was reached by the Court interpreting the Supply Directive in the following sense: Permitted are only those exceptions to the application of Directive 93/36 which are exhaustively and expressly mentioned therein. 4 Similarly excepted from the exclusion rule of Article 11 are design contests. This flows from Article 1 (1) which mentions public contracts and design contest separately; therefore, distinguishing those two legal ways of procurement is a principle of interpreting the other provisions of the Directive. However, other exclusions, such as Article 12, remain applicable and could render invoking of Article 11 superfluous.5

11.2. The parties involved In order to benefit from the exemption of Article 11 that provision sets out another 3 criterion to be fulfilled, namely regarding the parties concluding the contract to be exempted. One party shall be a ‘contracting authority’, i.e. a legal person within the meaning of Article 2(1)(1). As far as the other party is concerned, the Directive enumerates two alternatives. Either it can be ‘another contracting authority’ or ‘an association of contracting authorities’. Although the participating members of the association are clearly defined, associations as such are not defined in the Public Sector Directive. Interestingly enough, they are mentioned in the definition of contracting authorities where it is stated that they can be regarded as such authorities if they are formed by one or more such authorities or one or more such bodies governed by public law. The term ‘association’ is not to be interpreted restrictively covering only membership 4 organisations or clubs. First, the Directive speaks about such entities in the context of non-profit organisations, as in Recital 28 or in Article 10 (h). Second, other linguistic

Presidency’s compromise text from October 2012, Doc. 14418/12. T7-0025/2014, EP-PE_TC1-COD(2011)0438. 3 See Case C-323/07, Termoraggi [2008] ECR I-57, where the Court simply enounced the conditions without interpreting them. 4 Case C-107/98, Teckal [1999] ECR I-8121, para. 43; Case C-71/92 Commission v Spain [1993] ECR I-5923, para. 10. 5 Cf. Arrowsmith, Law on Public Procurement, p. 6-211 and 6-226 et seq. who refers to the case-law without having regard to the new Article 12 which codifies much of the circumstances settled by case-law before. 1

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versions use the more generic notion, i.e. in German Zusammenschluss, Danish and Swedish, meaning rather a kind of consortium, alliance or combination. Consequently, private partners or public entities not being contracting authorities, e.g. agencies operating on a fully commercial basis and utilities,6 even if they enjoy exclusive rights, do not benefit from the exclusion. On the other hand, private participation does not necessarily rule out application of the provision and contracting authorities established in another Member State7 or falling under the EEA are also privileged partners under Article 11.

11.3. The status of the entity and the basis of its rights 5

Furthermore, the exception of Article 11 requires a specific status of the entity. That condition does not refer to the legal basis of the award itself, i.e. its legal form, but to certain legal characteristics. Therefore, granting an exclusive right within the framework of the award, let alone in the contract itself, does not comply with that criterion. Granting it on an ad-hoc basis should be sufficient if the above mentioned condition concerning the legal basis is fulfilled. First, the entity must enjoy an exclusive right i.e. a monopoly that covers the object and content of the contract awarded. The term ‘exclusive right’ does not concern the relationship to the contracting authority; exclusive rights vis-à-vis third parties are sufficient. Second, that entity must enjoy that right ‘pursuant to a law, regulation or published administrative provision’. Therefore, rights based on a contractual relationship do not suffice. There needs to be a kind of public law, mainly a unilateral entrustment by a public authority, i.e. by the state in a broad sense, e.g. regional laws (acts), decrees, statutes of municipalities, individual administrative acts, circulars or guidelines,8 and, it is submitted, the latter being legally binding. The sectors which benefit from that exemption are typically waste transporting and treatment, accounting,9 insurance of public funds.10 Third, the provisions have to be published. That condition is due to transparency and should exclude introducing monopolies at the occasion of an award or even ex post. Fourth, the exclusive right has to be in conformity with Union law. In contrast to Article 18 of previous Public Sector Directive (2004/18), which referred to the ‘Treaty’ as such, Article 11 specifically refers to the TFEU. That wording should not be interpreted as a restrictive condition which requires conformity solely with that treaty. As in other cases, that phrase is to be construed broadly covering also conformity with all other norms of Union law.11 In practice, the fundamental freedoms for services as well as competition law are affected. In particular, the general provision of Article 106 TFEU on public undertakings and undertakings to which Member States grant special or exclusive rights which itself refers to the ‘Treaties, in particular to those rules provided for in Article 18 and Articles 101 to 109’. Its paragraph 2 contains a specific rule for undertakings entrusted with the operation of services of general economic interest or having the character of a revenueproducing monopoly. In addition, there are sector specific rules, e.g. in the transport See Arrowsmith, Law on Public Procurement, p. 6-209. Arrowsmith, Law on Public Procurement, p. 6-209 and 6-210. 8 Arrowsmith, Law on Public Procurement, p. 6-209. 9 Peter Trepte, Public procurement in the EU: a practitioner’s guide, p. 248. 10 See Egger, Europäisches Vergaberecht, No 739. 11 Case C-220/06, Asociación Profesional de Empresas de Reparto y Manipulado de Correspondencia [2007] ECR I-12175, paras. 66 et seq. 6

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sector or for postal services,12 on whether or to what extent exclusive rights are permissible.

Article 12 Public contracts between entities within the public sector 1. A public contract awarded by a contracting authority to a legal person governed by private or public law shall fall outside the scope of this Directive where all of the following conditions are fulfilled: (a) the contracting authority exercises over the legal person concerned a control which is similar to that which it exercises over its own departments; (b) more than 80 % of the activities of the controlled legal person are carried out in the performance of tasks entrusted to it by the controlling contracting authority or by other legal persons controlled by that contracting authority; and (c) there is no direct private capital participation in the controlled legal person with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person. A contracting authority shall be deemed to exercise over a legal person a control similar to that which it exercises over its own departments within the meaning of point (a) of the first subparagraph where it exercises a decisive influence over both strategic objectives and significant decisions of the controlled legal person. Such control may also be exercised by another legal person, which is itself controlled in the same way by the contracting authority. 2. Paragraph 1 also applies where a controlled legal person which is a contracting authority awards a contract to its controlling contracting authority, or to another legal person controlled by the same contracting authority, provided that there is no direct private capital participation in the legal person being awarded the public contract with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person. 3. A contracting authority, which does not exercise over a legal person governed by private or public law control within the meaning of paragraph 1, may nevertheless award a public contract to that legal person without applying this Directive where all of the following conditions are fulfilled. (a) the contracting authority exercises jointly with other contracting authorities a control over that legal person which is similar to that which they exercise over their own departments; (b) more than 80 % of the activities of that legal person are carried out in the performance of tasks entrusted to it by the controlling contracting authorities or by other legal persons controlled by the same contracting authorities; and (c) there is no direct private capital participation in the controlled legal person with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity

12 See, e.g., Case C-220/06, Asociación Profesional de Empresas de Reparto y Manipulado de Correspondencia [2007] ECR I-12175.

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with the Treaties, which do not exert a decisive influence on the controlled legal person. For the purposes of point (a) of the first subparagraph, contracting authorities exercise joint control over a legal person where all of the following conditions are fulfilled: (i) the decision-making bodies of the controlled legal person are composed of representatives of all participating contracting authorities. Individual representatives may represent several or all of the participating contracting authorities; (ii) those contracting authorities are able to jointly exert decisive influence over the strategic objectives and significant decisions of the controlled legal person; and (iii) the controlled legal person does not pursue any interests which are contrary to those of the controlling contracting authorities. 4. A contract concluded exclusively between two or more contracting authorities shall fall outside the scope of this Directive where all of the following conditions are fulfilled: (a) the contract establishes or implements a cooperation between the participating contracting authorities with the aim of ensuring that public services they have to perform are provided with a view to achieving objectives they have in common; (b) the implementation of that cooperation is governed solely by considerations relating to the public interest; and (c) the participating contracting authorities perform on the open market less than 20 % of the activities concerned by the cooperation. 5. For the determination of the percentage of activities referred to in point (b) of the first subparagraph of paragraph 1, point (b) of the first subparagraph of paragraph 3 and point (c) of paragraph 4, the average total turnover, or an appropriate alternative activity-based measure such as costs incurred by the relevant legal person or contracting authority with respect to services, supplies and works for the three years preceding the contract award shall be taken into consideration. Where, because of the date on which the relevant legal person or contracting authority was created or commenced activities or because of a reorganisation of its activities, the turnover, or alternative activity based measure such as costs, are either not available for the preceding three years or no longer relevant, it shall be sufficient to show that the measurement of activity is credible, particularly by means of business projections. Literature: Marta Andrecka, ‘Institutionalised Public-Private Partnership as a Mixed Contract under the Regime of the New Directive 2014/24/EU’, 3 EPPPL 2014, 174; Ammar Al-Tabbaa, ‘The Ex Ante and Ex Post Application of the Teckal Criteria for In-house Awards’, 3 EPPPL 2016, 166; Sue Arrowsmith, Law on Public Procurement, 3rd ed., 6-161 et seq.; Ioan Baciu/Dacian C. Dragoş, ‘Horizontal In-House Transactions vs. Vertical In-House Transactions and Public-Public Cooperation’, 4 EPPPL 2015, 254; Christopher Bovis, EU Public Procurement Law, 2nd ed.; Martin Burgi/Frauke Koch, ‘In-House Procurement and Horizontal Cooperation Between Public Authorities’, 2 EPPPL 2012, 86; Martin Burgi, ‘Contracting authorities, in-house services and public authorities’, in François Lichère/Roberto Caranta/Steen Treumer (eds), Modernising Public Procurement : The New Directive, 49; Charles M. Clarke, ‘The CJEU’s evolving Interpretation of ‘In-house’ Arrangements under the EU Public Procurement Rules: A Functional or Formal Approach?’, 2 EPPPL 2015, 111; Mario Comba/Steen Treumer (eds), The In-House Providing in European Law; Alexander Egger, Europäisches Vergaberecht, para. 583 et seq.; Franz Jürgen Säcker/Maik Wolf, Europäisches und Deutsches Wettbewerbsrecht, in: Münchener Kommentar, vol. 3, GWB § 99 IV; Marcel Sousse, in Jurisclasseur Europe, Fasc 1052; Michael Steinicke, ‘The Court of Justice of the European Union, public procurement and in-house contracts – a critique of Case C-480/06, Commission v Germany’, in

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Koch et al. (eds), Europe. The New Legal realism, p. 729; Peter-Armin Trepte, Public Procurement in the EU, 2nd ed., 4.28 et seq.; Janicke Wiggen, ‘Public procurement rules and cooperation between public sector entities: the limits of the in-house doctrine under EU procurement law’, 20 PPLR 2011, 157; Janicke Wiggen, Directive 2014/24/EU: The New Provision on Co-operation in the Public Sector, 23 PPLR 2014, 83. 12.1. Vertical cooperation with controlled entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1.1. General remarks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1.2. First condition: the control criterion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1.3. Second condition: the activities criterion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1.4. Third condition: no private participation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2. Vertical cooperation with controlling entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.3. Horizontal cooperation between entities which are controlled by the same entity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4. Vertical cooperation with jointly controlled entities . . . . . . . . . . . . . . . . . . . . . . . 12.4.1. First condition: exercise of joint control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4.2. Second condition: certain activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4.3. Third condition: prohibition of private participation . . . . . . . . . . . . . . . . . . . 12.5. Horizontal cooperation to achieve common objectives . . . . . . . . . . . . . . . . . . . . 12.6. Determination of the percentage of activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.7. Final remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 5 8 10 14 18 21 23 24 27 28 29 35 37

By the new Article 12, the Union legislator expressed its intention to adopt a clear 1 regime for several factual situations with regard to so-called In-House Procurement and Public-Private Partnerships. That article should resolve eminent problems in procurement practice and make an end to constant political discussions by transposing a political compromise into legally binding norms. Above all, the rules laid down in that article should make an end to legal uncertainty stemming from the fact that many aspects concerning those partnerships have hardly been regulated by the old directives, leaving the details to the case-law of the ECJ and the national review bodies. In fact, the Classical Directive 2004/18/EC did not contain clear rules as in the Utilities Directive 2004/17/EC. But even the case-law is interpreted differently between Member States and even between contracting authorities.1 In addition, a compromise had to be found between maintaining the freedom of public authorities to perform the public service tasks, on the one hand, and avoiding a distortion of competition to the detriment of economic operators, on the other. The legislator, starting with the Commission’s proposal, did not enact rules by inventing totally new concepts; in contrast, it could build on an existing provision in the old Utilities Directive, namely its Article 23 on affiliated undertakings. Many parallels can be detected in particular when it comes to one of the criteria to be fulfilled. In essence, the new Article 12 consolidates the case-law of the ECJ by integrating 2 some criteria explicitly or by modifying them. Nonetheless, its drafting is criticised as being ‘extensive and circumstantial’ as well as using vague terms.2 The version of Article 12 finally adopted diverges in some points from the proposal submitted by the Commission. Their significance shall be discussed in the following. Article 12 addresses all ‘open questions regarding in-house scenarios’ put by the 3 Commission in its Commission Staff Working Paper concerning the application of EU public procurement law to relations between contracting authorities: Is it possible to have private capital in the controlling entity? Is a ‘bottom-up contract award’ (controlled entity awarding a contract to the parent) possible? Is it possible to have contracts beSee Recital 31. Burgi, ‘Contracting authorities, in-house services and public authorities’, in François Lichère, Roberto Caranta and Steen Treumer (eds), Modernising Public Procurement: The New Directive, 49 (53 and 65). 1

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tween ‘in-house sisters’ (i.e. contracts between two in-house entities controlled by the same parent)?3 On the basis of the new rules, all those questions can be answered in the affirmative, although the Directive lays down certain conditions. In principle, EU practice distinguishes between cooperation via separate legal entities (‘Institutionalised/Vertical cooperation’) and Non-institutionalised/Horizontal co-operation to jointly fulfil public tasks.4 Specific legal questions concern so-called Institutionalised Public-Private Partnerships (IPPP), especially with regard to founding such entities and awarding a contract to them.5 4 The situations concerned for which explicit rules are laid down in Article 12 are the following: – – – – –

Vertical cooperation with controlled entities; Vertical cooperation with controlling entities; Horizontal cooperation between entities which are controlled by the same entity; Vertical cooperation with jointly controlled entities; Horizontal cooperation to achieve common objectives.

12.1. Vertical cooperation with controlled entities 12.1.1. General remarks The exemption laid down in the first paragraph of Article 12 concerns cases of vertical cooperation with entities controlled by the contracting authority. Parts of the wording can be traced back to case-law on ‘quasi’ in-house awards delivered by the ECJ. Inhouse stricto sensu does not cause similar problems as providing services in-house does not involve another legal person, thus, lacking a necessary element of a contract. The wording, also used in paragraph 4, stating that a contract ‘shall fall outside the scope’ is unique in procurement directives6 whereas the phrase ‘falling within the scope’ is frequent. Nonetheless, that fact should not be overestimated by seeing a legal difference7 to the traditional formula, used, e.g., in Articles 7 to 9 according to which the directive ‘shall not apply’. Both rules have the effect of excluding a specific circumstance from the directive, i.e. from its scope or applicability. 6 As basic condition for the exemption to be applicable, Article 12 refers to ‘a legal person governed by private or public law’. As the Directive, basically, applies only to contracts and contracts can only be concluded between, at least, two different legal persons, that condition cannot be regarded as an additional criterion but as flowing from the legal definition of ‘public contract’ in Article 2(1)(5) mentioning as an essential element ‘contracts’ without defining them further. Nonetheless, there are cases, arriving even at the ECJ, either by an infringement procedure or by request for a preliminary ruling, where the Court had to interpret the concept of contract.8 5

SEC(2011) 1169 final, 11 et seq. Commission Staff Working Paper concerning the application of EU public procurement law to relations between contracting authorities (‘public-public cooperation’), SEC(2011) 1169 final. See also Bovis, EU Public Procurement Law, p. 466; Säcker/Wolf, Europäisches und Deutsches Wettbewerbsrecht, para. 133 et seq. 5 Recently on that issue see Marta Andrecka, ‘Institutionalised Public-Private Partnership as a Mixed Contract under the Regime of the New Directive 2014/24/EU’, 3 EPPPL 2014, 174-186. 6 It cannot be found in Directive 2004/18/EC. 7 As by Arrowsmith, Law on Public Procurement, p. 6-183, who distinguishes that rule from an ‘exemption’. 8 For further reading see Wiggen, ‘Public procurement rules and cooperation between public sector entities: the limits of the in-house doctrine under EU procurement law’, PPLR (2011) 20, 157 et seq. 3 4

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Internal arrangements within the same legal person are not covered by the Directive. But it cannot be concluded that all external forms of cooperation automatically come under the Directive. There are many forms which are not caught by it.9 Excluded from the scope of the Directive is the non-contractual attribution of tasks as well as the redistribution of competences between public authorities,10 especially in the form of unilateral (administrative) acts conferring competences to another legal person. As the legislator was aware of Member States’ problems, it took into consideration, at least, some but, as it should be pointed out, not all cases by the following recital: ‘Certain cases exist where a legal entity acts, under the relevant provisions of national law, as an instrument or technical service to determined contracting authorities, is obliged to carry out orders given to it by those contracting authorities and has no influence on the remuneration for its performance. In view of its non-contractual nature, such a purely administrative relationship should not fall within the scope of public procurement procedures.’11

As far as non-contractual relations are concerned, attention has to be drawn to the 7 fact that these situations are not exempted from Union law as such, Primary law still being applicable. 12 However, the ECJ applies the in-house exemption also to those types of co-operation.13 Nonetheless, some clarification is brought by the phrase ‘legal person governed by private or public law’, lacking in the Commission’s proposal, setting a large scope of application, covering legal entities independently from their legal basis. In fact, many persons controlled by contracting authorities are established in the form of private law companies, such as a Limited, a Gesellschaft mit beschränkter Haftung, s.à.r.l. etc. or an association governed by private law.14 In points (a) to (c) of the first sub-paragraph in the Article’s first paragraph, the legislator proscribed three conditions to be fulfilled in order to be exempted from the regime of the Directive. 12.1.2. First condition: the control criterion As first criterion, the first sub-paragraph of paragraph 1 in its point (a) lays down a 8 control criterion well known from the Teckal judgment delivered by the ECJ15 and a long series of decisions following it. The control shall be ‘similar to that which it exercises over its own departments’. Already the Commission incorporated the wording used by the ECJ in its proposal, thereby not building on the concept of the previous Utilities Directive (2004/17). Its Article 23, laying down rules on contracts awarded to affiliated undertakings and to other entities linked with the contracting entity, provided for a definition of affiliation based on company law and the notion of ‘dominant influence’. According to legal academic writing the concept of control is stricter than the criterion on dominant influence.16 9 See e.g. Case C-532/03, Commission / Ireland; Case C-220/06, Correos. Cf. Wiggen, ‘Public procurement rules and cooperation between public sector entities: the limits of the in-house doctrine under EU procurement law’, PPLR (2011) 20, 157 (160). 10 For further information on the Commission’s position see Commission Staff Working Paper concerning the application of EU public procurement law to relations between contracting authorities (‘publicpublic cooperation’), SEC(2011) 1169 final, 17 f. See, e.g. Case C-51/15, Remondis, ECLI:EU:C:2016:985. 11 Recital 34. 12 Cf. Bovis, EU Public Procurement Law, p. 477. 13 Case C-231/03, Coname; Case C-458/03, Parking Brixen; Case C-507/03, Commission v Ireland; Bovis, EU Public Procurement Law, p. 477. 14 See, e.g., Case C-574/12, Centro Hospitalar, ECLI:EU:C:2014:2004. 15 Case C‑107/98 Teckal [1999] ECR I-8121, para. 50.

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In order to limit the margin of interpretation by contracting authorities and to limit the competence of national review bodies as well as the ECJ to develop its case-law in a direction not welcomed by the legislator, the Commission included in its proposal an additional sub-criterion defining internal control by its object. Thus, it is explicitly requested that there shall be ‘a decisive influence over both strategic objectives and significant decisions of the controlled legal person’. Therefore, there is no need for the influence to cover individual procurement decisions. By laying down that criterion, the legislator merely codified some parts of the jurisprudence of the ECJ.17 9 According to settled case-law, control has to be assessed on the basis of specific facts, simply referring to company law, in particular to legislative rules on limited companies or stock companies, not being sufficient.18 Correct application always needs assessing the specific circumstances including, inter alia, the statute of the legal person and all other relevant documents.19 There is no compulsory ex post test. For applying the control test, future developments have to be taken into consideration only where it can be deduced from the facts that there is an intention to circumvent the rules.20 As point (a) does not specify further sub-conditions, indirect control is sufficient, arguing lege non distinguente and, thus, following the case-law before the Directive.21 Nonetheless, some uncertainty remains, as it is unclear what is meant by ‘decisive influence’ and ‘significant decisions’, consequently taking into account that national review bodies and the ECJ will further develop their respective case-law. According to the jurisprudence, account has to be taken of legislative provisions, construed in a broad sense, including administrative norms, as well as the relevant circumstances, i.a. the statute of the entity concerned.22 Furthermore, the second sub-paragraph, i.e. the rule defining control, contains a sentence entailing an additional advantage for contracting entities which did not appear in the Commission’s proposal. By including control by a ‘legal person which is itself controlled in the same way by the contracting authority’, control is extended to so-called indirect control or contracts concluded with legal persons controlled indirectly. That clarification covers relations to grandchildren and so forth. 12.1.3. Second condition: the activities criterion 10

Based on the idea of the controlled legal person’s economic dependence, the second condition refers to the activities carried out by that entity, thereby adopting a criterion already laid down in Article 23 of the previous Utilities Directive (2004/17). Admittedly, also the ECJ developed such a criterion in its case-law concerning in-house awards. Traditionally, the decisive elements to assess the activities have been quantitative and qualitative elements,23 such as competition aspects24 or factors like strategic services, plan-

Sousse para. 53; Opinion of AG Stix-Hackl in Case C-26/03, Stadt Halle, para. 49. Case C-458/03, Parking Brixen, para. 65; Case C-324/07, Coditel Brabant, para. 28; Case C-573/07, Sea, para. 65. 18 Case C-458/03, Parking Brixen, para. 70; Case C-340/04, Carbotermo, para. 37; see also Bovis, EU Public Procurement Law, p. 469. 19 See, e.g., Case C-573/07, Sea. 20 See Al-Tabbaa, ‘The Ex Ante and Ex Post Application of the Teckal Criteria for In-house Awards’, 3 EPPPL 2016, 166 (177 et seq). 21 Case C-340/04, Carbotermo, para. 39. 22 See, e.g., Case C-573/07, Sea, paras. 65 et seq. 23 Case C-340/04, Carbotermo, para. 64, Case C-553/15, Undis Servizi, ECLI:EU:C:2016:935, para. 32. 24 Egger, Kompendium, p. 279. 16

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ning etc.25 It is questionable whether that approach can be upheld, because the new rules could be construed as requiring a test purely based on a quantitative evaluation.26 The explicit and exclusive reference to a quantitative condition, thereby leading to an argument a contrario, brings about a modification in comparison to previous case-law.27 As far as the beneficiary is concerned, point (b) in a slightly obscure manner mentions activities ‘carried out in the performance of tasks entrusted to it by the controlling contracting authority or by other legal persons controlled by that contracting authority’. Therefore, only activities carried out for those entities can be taken into account as relevant activities for the calculation. That wording makes clear that activities are taken into account regardless of the identity of the beneficiary (whether it be the contracting authority itself or the user of the services), of the entity who pays the contractor (whether it be the controlling authority or third-party users of the services) or of the territory on which those services are provided.28 In that context, it is worth mentioning a recent judgment in which the ECR stated that ‘any activity of the contractor which is devoted to persons other than those which control it, namely persons without any relationship of control in regard to that entity, including public authorities, must be regarded as being carried out for the benefit of a third party.’29 Therefore an ‘activity carried out for the benefit of the non-shareholder local authorities’, i.e. a non-controlling entity, has to be regarded as ‘an activity carried out for third parties’.30 It could be argued that the wording, in particular the use of ‘benefit’ or ‘devoted’, was not carefully drafted (neither in the working language of the ECJ, French, nor in the authentic language of the case, Italian). One could argue that services delivered to persons other than controlling entities should be covered referring to the context of the case. Obviously, the ECJ would have included services delivered to other persons if that activity is imposed by a controlling entity which was not the case in the situation of the main proceedings.31 By including ‘legal persons controlled by that contracting authority’, the legislator 11 recognises also activities carried out, at least, for ‘sisters’. As exceptions must be interpreted restrictively, it is questionable whether activities carried out for ‘grandparents’ or ‘cousins’ are included as they are only indirectly controlling or controlled.32 The rules for determining the percentage are laid down in paragraph 5, in particular for the basis of 100 % (see section 12.5. below). With regard to quantitative aspects, Article 12 provides for a clear rule, requiring 12 ‘more than 80 % of the activities’. By fixing a threshold expressed in a percentage, the legislator followed the principle already explicitly laid down in the previous Utilities Directive (2004/17) and did not follow the case-law according to which the contracting company should carry out the essential part of its activities.33 Its Article 23(3) has also set that limit. It is worth pointing at the initial proposal submitted by the Commission, 25 Bovis, ‘Public Service Partnerships as Instruments of Public Sector Management in the EU’, EPPPL 2011, 201 (224). 26 See Clarke, ‘The CJEU’s evolving Interpretation of ‘In-house’ Arrangements under the EU Public Procurement Rules: A Functional or Formal Approach?’, 2 EPPPL 2015, 111 (122). 27 Cf. Arrowsmith, Law on Public Procurement, p. 6-187, according to whom ‘it appears to provide for a quantitative test and rejects the uncertainty of a qualitative element’. 28 Commission Staff Working Paper concerning the application of EU public procurement law to relations between contracting authorities (‘public-public cooperation’), SEC(2011) 1169 final, 11. 29 Case C-553/15, Undis Servizi, ECLI:EU:C:2016:935, para. 34. 30 Case C-553/15, Undis Servizi, ECLI:EU:C:2016:935, para. 37. 31 Case C-553/15, Undis Servizi, ECLI:EU:C:2016:935, para. 37. 32 Not discussed by Wiggen, ‘Directive 2014/24/EU: The New Provision on Co-operation in the Public Sector’, 23 PPLR 2014, 83 (86). 33 Case C-107/98, Teckal [1999] ECR-I-8121 para. 50.

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which, in contrast, contained a stricter rule requiring ‘at least 90 % of the activities’. In view of the case-law, according to which 90 % are acceptable, 34 the threshold fixed in Article 12 seems generous. Some see the risk that public authorities could be tempted ‘to erect barriers against competition’ if they respect the limit of 20%. 35 As there is no further restriction, in particular with regard to the relevant economic sector of the activities, all entrusted activities can be taken into consideration. 36 Similarly, for the purpose of determining whether the contractor carries out the essential part of its activity for the shareholder local authorities which jointly exercise over it control similar to that which they exercise over their own departments, account must be taken of all the circumstances of the case, which may include the activity carried out by that contractor for those local authorities before such joint control took effect. 37 13 As far as the decisive moment is concerned, the criterion has not to be fulfilled during the term of the awarded contract.38 Finally, the territorial limitation of activities, as indicated in some Court judgments,39 should not be a sub-condition. Although in the case-law some indications for a geographic limitation may be found,40 a thorough analysis demonstrates that they refer to the control criterion. In addition, under the new regime one could argue that the legislator would otherwise have provided it either in point (c) or in paragraph 5. 12.1.4. Third condition: no private participation The third condition refers to the prohibition of private capital participation in the controlled legal person. Recital 32 explains that ‘participation in the controlling contracting authority or in the controlling contracting authorities […] does not preclude the award of public contracts […] without applying the procedures provided for by this Directive’. Historically, that criterion is linked with the condition concerning control but elevated to a separate criterion.41 The legislator’s motivation for explicitly introducing that criterion can be explained by competition reasons as awarding a public contract without a competitive procedure would provide the private economic operator with a capital participation in the controlled legal person an undue advantage over its competitors.42 Whereas the Commission’s proposal set out an exclusion of all cases of private participation (‘no private participation in the controlled legal person’), the final version of the Directive is drafted in a different way laying down some additional sub-conditions limiting the exclusionary effect of private participation. 15 First, the condition is explicitly limited to direct private capital participation. The wording of that criterion is somehow misleading as Recital 32 underlines that participation in the controlling contracting authority or in the controlling contracting authorities is not covered. Usually, direct participation is understood as the opposite of indirect par14

See Case C-295/05, Tragsa [2007] ECR I-2999, para. 62 et seq. E.g. Clarke, ‘The CJEU’s evolving Interpretation of ‘In-house’ Arrangements under the EU Public Procurement Rules: A Functional or Formal Approach?’, 2 EPPPL 2015, 111 (123). 36 Prudent Arrowsmith, Law on Public Procurement, p. 6-187 (‘seems to indicate that it is all the activities’). 37 Case C-553/15, Undis Servizi, ECLI:EU:C:2016:935, para. 42. 38 Cf. Al-Tabbaa, ‘The Ex Ante and Ex Post Application of the Teckal Criteria for In-house Awards’, 3 EPPPL 2016, 166 (173 et seq.). 39 Cf. Case C-340/04, Carbotermo, para.65. 40 See, e.g., Case C-573/03, Sea, para. 73 et seq.; Case C-458/03, Parking Brixen, para. 67. 41 Burgi, ‘Contracting authorities, in-house services and public authorities’, in François Lichère, Roberto Caranta and Steen Treumer (eds.), Modernising Public Procurement: The New Directive, 49 (58). 42 Recital 32. 34

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ticipation, the object of participation being the same. Therefore, it could be advocated that Recital 32 aims only at one aspect of participation maintaining the traditional legal difference between direct and indirect participation in the sense that holding shares via an intermediary legal person does not prevent the application of the exemption. Second, an exemption is provided for other forms of participations, viz. non-control- 16 ling and non-blocking forms. That rule should help solving problems of interpretation in doctrine.43 What is meant by those two forms of participation depends on national (company) law, in spite of the principle of autonomous interpretation, and the specific rules of the statutes of the legal person. As in other fields of law, such as Merger Control, focusing on the numerical aspect of participation, i.e. the shares held by private parties, is only of illustrative value, the effective control or blocking power being decisive. That counter-exception, i.e. the exemption from the third criterion, depends on the fulfilment of certain conditions. On the one hand, the participation must be required under national legislative provisions which themselves have to be in conformity with the Treaties. That restriction is motivated by ‘particular characteristics of public bodies with compulsory membership, such as organisations responsible for the management or exercise of certain public services’.44 Therefore, that condition comprises only obligations and not cases of mere admissibility. Moreover, it is required that the rules are adopted by the legislator, thus, excluding administrative provisions. As the term national, as understood in the context of Union law, refers to Member States law, it covers also provisions adopted by regional parliaments. As far as the conformity with the Treaties is concerned, that concept includes all Union law provisions not being limited to Primary law, such as the fundamental freedoms. On the other hand, forms of private capital participation shall not exert a decisive influence on the controlled legal person. In comparison with the case-law on private participation, according to which that criterion is to be interpreted restrictively, Article 12 is much more generous allowing, inter alia, private minority shareholders45 and private social solidarity institutions carrying out non-profit activities as contractors.46 With regard to the relevant time, the initial proposal submitted by the Commission 17 provided a specific rule whereby the absence of private participation referred to shall be verified at the time of the award of the contract or of the conclusion of the agreement. In addition, the exclusion should cease to apply from the moment any private participation takes place with the effect that on-going contracts need to be opened to competition through regular procurement procedures. As the legislator did not approve that clause which would provide further precision, questions concerning future developments and purposeful evasion are still open and left to jurisprudence.47 Under the case-law, it has been unclear how the prohibition of private participation should be applied in practice. The Court defined that as a principle it 43 See, e.g., Arrowsmith, Law on Public Procurement, p. 6-181, who excludes loan capital and other types of participation. 44 Recital 32. 45 Case C-26/03, Stadt Halle, para. 49. 46 See Case C-574/12, Centro Hospitalar de Setúbal and SUCH. 47 Cf. Burgi, ‘Contracting authorities, in-house services and public authorities’, in François Lichère/ Roberto Caranta/Steen Treumer (eds), Modernising Public Procurement: The New Directive, 49 (58).

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is the date on which the contract is awarded except where there are special circumstances to take into consideration or events occurring after that date. 48 In some cases the ECJ had to deal with the mere possibility of opening the entity to private parties49 whereas in others there was an intention to open it,50 an obligation to do so51 or the fact of opening it.52 In essence, the time of the award is decisive,53 except there are indications that the authority has intention to circumvent the rules. 54

12.2. Vertical cooperation with controlling entities The first alternative regulated in the second paragraph of Article 12 also concerns the cooperation between a controlled entity and its controlling entity, i.e. a vertical relationship, but also situations of a so-called ‘bottom-up contract award’ or ‘reverse in-house’, namely awarding a contract to the controlling legal person. By extending the exemption of paragraph 1 to vertical cooperation with controlling entities, the legislator clearly and intentionally left settled case-law and went beyond it. Obviously, procurement practice and frequent cases emanating from the Member States already convinced the Commission to include such an exemption in its proposal, however, providing for a stricter requirement concerning private participation. 19 To benefit from the exemption, the legal person being awarded the public contract has to fulfil another condition, viz. ‘that there is no direct private capital participation’ whereby certain forms of participation are recognised, i.e. do not prevent the application of the exemption. In particular, the legislator exempted non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person. That condition should be construed in the same manner as the parallel provision in Article 12(1) (1) (c). 20 In legal academic writing there is discussion whether the criterion regarding the activities is to be respected also in paragraph 2 cases.55 The starting point for interpretation is that paragraph 2 explicitly refers to paragraph 1 which could be read as referring to all the conditions laid down in that provision. However, paragraph 2 is providing a specific condition regarding private participation. Therefore, paragraph 2 has to be construed in a way not to render that specific condition superfluous. The most defendable result of interpretation is the following: The reference to paragraph 1 should be read as reference to the conditions laid down in paragraph 1 only insofar as paragraph 2 does not lay down specific criteria, derogating those provided for in paragraph 1. As paragraph 2 does not contain specific rules with regard to activities, the criterion regarding activities in paragraph 1 is also applicable in paragraph 2 cases. 18

Case C-573/07, Sea, para. 48. Case C-231/03, Coname, para. 26; Contra Bovis, Law on Public Procurement, p. 468. 50 Case C-410/04, ANAV, para. 27 et seq. 51 Case C-458/03, Parking Brixen, para. 67. 52 Case C-410/04, ANAV, para. 29 et seq. 53 Commission Staff Working Paper concerning the application of EU public procurement law to relations between contracting authorities (‘public-public cooperation’), SEC(2011) 1169 final, 8. 54 See Al-Tabbaa, ‘The Ex Ante and Ex Post Application of the Teckal Criteria for In-house Awards’, 3 EPPPL 2016, 166 (169, 177 et seq.). 55 See Arrowsmith, Law on Public Procurement, p. 6-188 referring to Wiggen who denies its applicability. 48

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12.3. Horizontal cooperation between entities which are controlled by the same entity The second alternative provided for in Article 12 paragraph 2 regulates awards to an- 21 other legal person controlled by the same contracting authority. The relevant recital reads as follows: ‘It should also be clarified that contracting authorities such as bodies governed by public law, that may have private capital participation, should be in a position to avail themselves of the exemption for horizontal cooperation. Consequently, where all other conditions in relation to horizontal cooperation are met, the horizontal cooperation exemption should extend to such contracting authorities where the contract is concluded exclusively between contracting authorities.’ 56 That rule makes, at least a partial, end to a long discussion in legal academic writing as well as before national review bodies and the ECJ as it exempts also contracts with legal persons being ‘daughters’ of the same ‘parents’, i.e. sisters. Nonetheless, some uncertainties remain with regard to other circumstances such as awards to cousins or farer related entities. Their inclusion could be argued by invoking the lack of precision, namely the requirement that those entities should be under ‘direct’ control and in view of paragraph 1 which includes also indirect relations.57 However, it would not be astonishing if the Commission advocates a stricter approach, basing its reasoning on the principle of restrictive interpretation of exemptions. The obscure language of the exemption calls for further clarification by the ECJ as referring to reasoning developed under the old regime should be with the necessary prudence.58 In parallel, horizontal cooperation is not exempted in case there is ‘direct private cap- 22 ital participation in the legal person being awarded the public contract with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person’.

12.4. Vertical cooperation with jointly controlled entities Another type of vertical cooperation is governed by paragraph 3, namely the joint in- 23 house exemption.59 Without fulfilling the strict control criterion within the meaning of paragraph 1, there must, however, be a joint control over the cooperating partner. The introductory sentence of the first sub-paragraph lays down the principle that three conditions have to be fulfilled cumulatively. Those criteria are provided for in points (a) to (c).

Recital 32. That second argument is raised by Wiggen, ‘Directive 2014/24/EU: The New Provision on Co-operation in the Public Sector’, 23 PPLR 2014, 83 (87). 58 Contra Baciu/Dragoş, ‘Horizontal In-House Transactions vs. Vertical In-House Transactions and Public-Public Cooperation’, 4 EPPPL 2015, 254 (271 et seq.), advocating a more general approach with regard to conditions for horizontal in-house cooperation, in particular by referring to criteria used by AG Mengozzi’s Opinion in Case C-15/13. 59 That separate and detailed provision for joint in-house procurement is criticised by Burgi, ‘Contracting authorities, in-house services and public authorities’, in François Lichère, Roberto Caranta and Steen Treumer (eds), Modernising Public Procurement: The New Directive, 49 (52). 56

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12.4.1. First condition: exercise of joint control 24

The first condition is set out in point (a) according to which ‘the contracting authority exercises jointly with other contracting authorities a control over that legal person which is similar to that which they exercise over their own departments’. It follows from that rule that all participating entities have to be contracting authorities, thus excluding the participation of private entities. At first sight, combining joint control with the Teckal formula of a control ‘similar to that which they exercise over their own departments’ seems, at first sight, contradictory as a joint control is something different than a control which is exercised solely by a single contracting authority. The condition should be understood as combining two elements: There has to be a control ‘similar to that which they exercise over their own departments’ but is sufficient that the control is exercised jointly, i.e. the necessary level of control is achieved only together. However, without extensive academic reasoning, already in the jurisprudence cases can be found in which joint control was accepted, e.g. in Coditel Brabant,60 where the Court ruled that it must ‘be recognized that, where a number of public authorities own a concessionaire to which they entrust the performance of one of their public service tasks, the control which those public authorities exercise over that entity may be exercised jointly.’ Obviously, the legislator had the intention to maintain that level of control, on the one side, and, open the path to entities only jointly reaching that level, on the other. Thereby, it followed the path indicated by the Court e.g. in Econord, where it ruled that ‘… it is certainly not essential that each of those authorities should in itself have an individual power of control over that entity, nevertheless, if the very concept of joint control is not to be rendered meaningless, the control exercised over that entity cannot be based solely on the controlling power of the public authority with a majority holding in the capital of the entity concerned.’ 61

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To make that criterion clearer for application in practice, the second sub-paragraph provides for a legal definition of ‘joint control over a legal person’. The underlying reason is the risk of circumventing the application of the rules of EU law explicitly pronounced by the Court in Econord and to avoid ‘a purely formal affiliation to such an entity’ without effective control,62 thereby evoking one of its preferred principles of interpretation, i.e. effectiveness. Again, the legislator has laid down three criteria which shall be fulfilled cumulatively: The first criterion, sub-point (i), refers to the composition of ‘decision-making bodies’ of the controlled legal person. That legal term should be interpreted as covering all management bodies or, even individual persons, e.g. sole managing directors of limited companies. Those organs shall be composed of ‘representatives of all participating contracting authorities’. A contrario, a management representing only one participating entity does not fulfil the condition. In addition to the proposal, the final version provides for the following: ‘Individual representatives may represent several or all of the participating contracting authorities.’ Thereby, the legislator enlarged the scope63 and, it is submitted, also covered the case of a monocratic structure where there is only one representative at all.

Case C-324/07, Coditel Brabant, para. 50. Case C-181/11, Econord, para. 30. 62 Case C-181/11, Econord, paras. 31 and 32. 63 Reducing practical problems and diluting the whole provision, as presumes Wiggen, ‘Directive 2014/24/EU: The New Provision on Co-operation in the Public Sector’, 23 PPLR 2014, 83 (89). 60

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The second criterion, sub-point (ii), is modelled on one of the aspects related to control, in paragraph 1 second sub-paragraph, according to which the ‘decisive influence’ has to comprise ‘the strategic objectives and significant decisions’. Certainly, that influence can be exerted jointly. Interesting enough, the mere ability to exert such an influence suffices. Pursuant to the third criterion, sub-point (iii), ‘the controlled legal person does not pursue any interests which are contrary to those of the controlling contracting authorities’. There was a slight amendment in comparison to the initial proposal which required that the interests are not ‘distinct’ thereby laying down a stricter condition more difficult to fulfil. In legal academic writing, it is argued that the criterion concerning the pursuit of interests could be regarded as a statement and elaboration of the condition developed in case-law under the previous legislation focussing at the absence of market orientation. 64 According to another opinion, ‘the criterion of market orientation was used only in the context of the individual cases’ and not seen as ‘a general standard’ and its revocation in the final version ‘is to be welcomed’.65 Another condition, initially proposed by the Commission prohibited ‘any gains other 26 than the reimbursement of actual costs from the public contracts with the contracting authorities’, Article 11 (3)(d). That restriction was dropped by the legislator. 12.4.2. Second condition: certain activities The second condition to be fulfilled, point (b), takes up the activity criterion as laid 27 down in the first paragraph point (b) although drafted in a slightly different way. That diverging wording is due to the entity carrying out the activities, namely a jointly controlled legal person. For other aspects, including the legal history, see the comment in 12.1.2. 12.4.3. Third condition: prohibition of private participation The third condition, set out in point (c), refers to private participation prohibiting 28 ‘direct private capital participation’. That requirement is reproduced from the first paragraph point (c). Thereby, the legislator intended to maintain a parallelism between the cooperation with solely controlled and the cooperation with jointly controlled entities. As the corresponding criterion in the first paragraph, the legislator watered down the more restrictive approach pursued by the Commission in its initial proposal. Therefore, there are good grounds for assuming that the new rules are more favourable for ‘mixedcapital’ entities.66 For further reading see the comment in 12.1.3.

12.5. Horizontal cooperation to achieve common objectives Paragraph 4 covers some cases of a so-called non-institutional or horizontal coopera- 29 tion. In practice, there can be several forms of cooperation between contracting authorities which are not controlled by one of the participating parties and, therefore, not fulfilling the control criterion stricto sensu, the legislator introduced new rules, thus, proArrowsmith, Law on Public Procurement, p. 6.174 and 6-186. Burgi, ‘Contracting authorities, in-house services and public authorities’, in François Lichère, Roberto Caranta and Steen Treumer (eds), Modernising Public Procurement: The New Directive, 49 (56 et seq.). 66 See Clarke, ‘The CJEU’s evolving Interpretation of ‘In-house’ Arrangements under the EU Public Procurement Rules: A Functional or Formal Approach?’, 2 EPPPL 2015, 111 (124), who explicitly detects a conflict with the Court’s case law. Methodologically correct, that conflict should rather be regarded as modification in relation to the old regime, i.e. the case law. 64

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viding more clarity on that issue. That rule follows the principle according to which contracting authorities should be free to choose the legal form of their cooperation. 67 Paragraph 4 is another example of allowing cooperation between contracting authorities that may have private capital participation. Another type of cooperation between contracting authorities is exempted by Article 1 (6) concerning the transfer of powers and responsibilities for the performance of public tasks where no remuneration for contractual performance is provided for. Certainly, there have been cases where the jurisprudence exempted co-operations of entities being independent of each other or – rather – interpreted the conditions for application in the directives restrictively and the exemptions broadly. The leading case in that context is Stadtreinigung Hamburg68 on a contract concluded between the City of Hamburg (Cleansing Department) and four neighbouring districts (Landkreise) for reciprocal treatment of waste, i.e. between contracting authorities independent from each other. The Court based its judgment on many facts characterising the specific circumstances, on one side, and referred to some principles, on the other, without distinguishing clearly between both aspects:69 – The cooperation has the aim of ensuring that a public task that they all have to perform is carried out; – The contract was concluded solely by public authorities, without the participation of any private party; – Community law does not require public authorities to use any particular legal form in order to carry out jointly their public service tasks; – according to that criterion non-institutional cooperation should be treated in the same way as institutional cooperation; – such cooperation between public authorities does not undermine the principal objective of the Community rules on public procurement, that is, the free movement of services and the opening-up of undistorted competition in all the Member States; – the implementation of that cooperation is governed solely by considerations and requirements relating to the pursuit of objectives in the public interest and the principle of equal treatment of the persons concerned; rules on public procurement were not circumvented. 30

A simpler regime for cooperation among public entities was elaborated in Ordine degli Ingegneri della Provincia di Lecce and Others:70 – the purpose is to ensure that a public task that those entities all have to perform is carried out – the contract is governed solely by considerations and requirements relating to the pursuit of objectives in the public interest or not placing a private provider of services in a position of advantage vis-à-vis his competitors. The legislator did not copy all those elements into the new provision but found a rule slightly clearer and shorter. This is to be welcomed as there have also been cases where the ECJ denied the exemption to be applied relying on a strict interpretation of the control criteria, e.g. in Piepenbrock71 and in Datenlotsen Informationssysteme, i.e. only Recital 33. Case C-480/06, Commission v Germany, ECLI:EU:C:2009:357. 69 Para. 44 and para. 47 et seq. See Bovis, Law on Public Procurement, p. 472, who distinguishes merely three conditions. 70 Case C-159/11, Ordine degli Ingegneri della Provincia di Lecce and Others, para. 40. 71 See also Case C-386/11, Piepenbrock, para. 35. 67

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months after the adoption of the Public Sector Directive. Therein, the Court simply ruled that “In the action in the main proceedings, it is common ground that there is no relationship of control between the University, as the contracting authority, and HIS, the contractor. The University holds no share in the capital of that entity and has no legal representative in its management bodies. Accordingly, the reason which justifies recognition of the exception for in-house awards, that is to say, the existence a specific internal link between the contracting authority and the contractor, is absent in a situation such as that in the main proceedings. Therefore, such a situation cannot be covered by that exception otherwise the limits of its application, which have been clearly defined by the case-law of the Court, would be extended in such a way as to reduce significantly the scope of the principle set out in paragraph 24 above.”72

The first condition is laid down in the initial sentence viz. the words that the ‘contract 31 concluded exclusively between two or more contracting authorities’. Thereby, the legislator intended to exclude private entities as parties of the cooperation respecting the political principle according to which no private service provider is placed in a position of advantage vis-à-vis its competitors.73 Nonetheless, it has to be clarified that not all participating authorities have to assume the performance of main contractual obligations, as long as there are commitments to contribute towards the cooperative performance of the public service in question. Moreover, the services provided by the participating authorities need not necessarily be identical; they might also be complementary.74 The second condition, in point (a), retains the element developed by the ECJ that the contract aims at establishing or implementing a cooperation without further specifying the form of cooperation. This is confirmed by Recital 33 whereby they are not obliged ‘to use any particular legal form’; however, ‘the cooperation should be based on a cooperative concept’. In contrast to the initial Commission’s proposal, there is not requested a ‘genuine’ cooperation expressing a ‘reciprocal cooperation’.75 Nonetheless, cooperation is (still) more than an ‘ordinary’ contract.76 The third condition, in point (a), refers to another aspect of the contract: It should ensure the performance of certain public services. The phrase ‘services they have to perform’ is somehow misleading. On the one hand, it could be interpreted in the sense of an additional sub-condition requiring that only services each participating contracting authority is obliged to perform could be the object of cooperation. On the other hand, the wording could be understood as reference to the cooperation having regard to services which have to be performed according to the cooperation. In the light of the preamble, the balance tilts in favour of the second alternative which mentions explicitly ‘mandatory or voluntary tasks of local or regional authorities or services conferred upon specific bodies by public law’.77 Besides, the formula ‘a public task that they all have to perform’ is used by the Court to make the exemption dependent on a common and compulsory

Case C-15/13, Datenlotsen Informationssysteme. Recital 33. 74 Recital 33. Cf. Clarke, ‘The CJEU’s evolving Interpretation of ‘In-house’ Arrangements under the EU Public Procurement Rules: A Functional or Formal Approach?’, 2 EPPPL 2015, 111 (124). 75 Burgi, ‘Contracting authorities, in-house services and public authorities’, in François Lichère/Roberto Caranta/Steen Treumer (eds), Modernising Public Procurement: The New Directive, 49 (62). 76 Wiggen, ‘Directive 2014/24/EU: The New Provision on Co-operation in the Public Sector’, 23 PPLR 2014, 83 (90). 77 Recital 33. 72

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task.78 That phrase could also be interpreted as referring to the task under the cooperation and not to the competence of the participating entities.79 Those services have to be provided ‘with a view to achieving objectives they have in common’. In that context, it is interesting to note that there is no further rule on those objectives or their common nature, neither to their content, nor to their source. Therefore, it could be argued that participating entities are free to determine ad hoc that they have an objective in common. For that position Stadtreinigung Hamburg could be invoked. However, a restriction is to be found in point (b). 32 In point (b), a forth condition is provided viz. that ‘the implementation of that cooperation is governed solely by considerations relating to the public interest’. That interest should also cover the financial transfers between the participating contracting authorities (Recital 33). Again, in contrast to the initial Commission’s proposal according to which certain financial transfers were excluded,80 the legislator abstained from establishing more detailed requirements but simply copied the phrase from Stadtreinigung Hamburg. 81 It has to be pointed out that the condition referring to the public interest must be distinguished from the requirement laid down in point (a) regarding public services as those services are to be performed whilst the interests need not be compulsory ones. 82 However, the services as well as the interest shall be related to the public sphere. In addition, there could be argued a presumption that interests linked to the performance of public services are public in nature. As there are not enumerated specific grounds, contracting entities enjoy a large margin of discretion. Thus, it is up to the jurisprudence to interpret the notion ‘public interest’. 33 An activity based criterion as a fifth condition is set out in point (c) whereby ‘the participating contracting authorities perform on the open market less than 20 % of the activities concerned by the cooperation’. That requirement is similar to the 80% clauses laid down in other provisions of Article 12 but drafted in a reversed manner, focusing on the market oriented activities and prescribing a maximum threshold. A comparison with the initial proposal submitted by the Commission shows that the threshold was raised from 10 % to 20 %, following the parallel amendment concerning the 80 % threshold which was fixed at 90 % in the proposal. The decisive reference with regard to activities is the activity on the ‘open market’. That notion is to be interpreted as free market or the market subject to competition as some linguistic versions of the Directive suggest.83

78 Case C-159/11, Ordine degli Ingegneri della Provincia di Lecce and Others, para. 37; Case C-480/06, Commission v Germany, para. 37. 79 In that direction Pedersen, ‘Azienda – the Creation of an Exemption from Public Procurement Law’, PPLR 2013 225 (230). 80 See Burgi, ‘Contracting authorities, in-house services and public authorities’, in François Lichère, Roberto Caranta and Steen Treumer (eds), Modernising Public Procurement: The New Directive, 49 (62 et seq.), defending the political position of federal states and those delegating relevant powers to municipalities also invoking legal arguments based on Member states competence to freely organise their internal structure. 81 Case C-480/06, Commission v Germany, para. 47. 82 Cf. Arrowsmith, Law on Public Procurement, p. 6-200, who focuses on other aspects, i.e. that the derogation is applicable not only to services and that the ‘cooperation does not require all participating authorities to assume the performance of main contractual obligations, as long as there are commitments to contribute towards the cooperative performance of the public service in question’ (Recital 33). 83 See the Portuguese and Romanian versions as well as the French version.

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Another sub-condition concerns the content or object of relevant activities. With re- 34 gard to that aspect, the Directive focuses on ‘activities concerned by the cooperation’ (emphasis added). Thereby, the legislator’s intention was to delimit the range of reference activities. Consequently, it is more difficult not to reach the threshold and, therefore, the exception’s scope of application becomes closer. As in many sub-conditions provided for in Article 12, and elsewhere in the Directive, an imprecise term, viz. ‘concerned’ is used. That wording can hardly be seen as a progress in drafting compared to the Commission’s proposal whereby the activities had to be ‘relevant in the context of the agreement’. Although the legislator laid down several conditions, it did not, however, adopt some conditions requested by the Commission, such as the prohibition that no financial transfers between the participating contracting authorities, other than those corresponding to the reimbursement of actual costs of the works, services or supplies, are involved. Therefore, that criterion elaborated by the Court in Stadtreinigung Hamburg84 is not to be applied anymore. With regard to private parties, cooperations with such entities are still not covered by the exemption. In contrast, presence of private capital in contracting authorities is no obstacle for applying the exemption.

12.6. Determination of the percentage of activities Paragraph 5 of Article 12 contains the basic rule concerning the determination of the 35 percentage of activities. It was not included in the Commission’s initial proposal but corresponds to an amendment made by the EP during the 1st reading.85 As several other norms in Article 12 refer to activities making a certain percentage of it a condition for the application of the respective exemption, the legislator by adopting paragraph 5 created a general provision serving as legal definition for those exemptions. Paragraph 5 has that function with regard to the following exemptions: – Vertical cooperation with controlled entities within the meaning of paragraph 1; – Vertical cooperation with jointly controlled entities within the meaning of paragraph 3; – Cooperation to achieve common objectives within the meaning of paragraph 4. All those legislative norms on cooperation lay down a condition focusing on activities of the cooperating legal person. Whereas both forms of vertical cooperation provide, in essence, for the same rule, only diverging with regard to the aspect of control, the third form of cooperation lays down a different rule. The activity criterion of point (b) of the first subparagraph of paragraph 1 and the similar rule of point (b) of the first subparagraph of paragraph 3 provide, first, for a minimum threshold and, second, fix the same percentage of the activities carried out in the performance of tasks entrusted to it, viz. 80 %,. In contrast, the rule in point (c) of paragraph 4 is drafted in the opposite way focusing on the percentage of activities performed on the open market and not on those carried out in performance of entrusted tasks. For that part, that provision lays down a maximum threshold of (less than) 20 %. The regime offers two alternatives: Either it refers to the average total turnover or to 36 an appropriate alternative activity-based measure. With regard to that second method, paragraph 5 mentions ‘costs incurred by the relevant legal person or contracting authori84 85

Case C-480/06, Commission v Germany, para. 43. TA/2014/25/P7.

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ty’. Such costs could stem from all types of economic activity, i.e. services, supplies and works. Another sub-condition lays down the time frame for turnover or costs. The reference period comprises the three years preceding the contract award. Paragraph 5 also envisages the situation where the turnover or alternative activitybased measures are either not available for the preceding three years or are no longer relevant. The second reason regarding to out-dated facts was newly introduced and has no equivalent in Article 23 (3) of the previous Utilities Directive (2004/17). In addition, only specifically reasons are recognised, namely the date on which the relevant legal person or contracting authority was created or commenced activities or because of a reorganisation of its activities. As that enumeration has to be qualified as exhaustive, other reasons cannot be invoked. Whereas the reason concerning the date of creation or of starting its activities has a predecessor in Article 23 (3), the second reason is new and, obviously, reflects concerns emerged in practice. In the cases recognised by the Directive, it shall be sufficient to show that the measurement of activity is ‘credible, particularly by means of business projections’. That rule is not new as it corresponds to the method laid down in Article 23(3)(2) of the old Utilities Directive. As it follows already from the wording, that condition is very vague and open to interpretation.

12.7. Final remarks 37

Article 12 should be welcomed as it brings some clarification to questions concerning the applicability of the Public Sector Directive or the applicability of the in-house exemption. To that respect, the legislator has contributed to legal certainty. Nonetheless, as all detailed rules, they provoke new questions, i.a. for a preliminary ruling by the ECJ. Besides, the Court is confronted with new legislative provisions and its old case-law. It will be one of its tasks to indicate which criteria developed in its jurisprudence are still valid and which are not good law anymore. We have given suggestions as to how the ECJ will interpret the new provisions. The phrase ‘a contract […] shall fall outside the scope of this Directive’ does not exclude the application of its rules on a voluntary basis. Thus, if a contracting authority so wishes, it could have published a public notice on TED or provide for other procedural steps to benefit from the advantages of a public procurement procedure. Likewise, a public authority is entitled to use its own administrative, technical, and other resources when performing public interest tasks conferred on it without being obliged to call on outside entities.86 According to settled case law, public authorities are free to decide whether or not to have recourse to the contract mechanism in the accomplishment of their public interest tasks.87 This possibility for public authorities to use their own resources can be exercised jointly with other public authorities.

Bovis, EU Public Procurement Law, p. 331. See, e.g. Cases C-553/15, Undis Servizi, ECLI:EU:C:2016:935, para. 30; C-51/15, Remondis, ECLI:EU:C:2016:985, para. 39; C-480/06, Commission v Germany, C-480/06, ECLI:EU:C:2009:357, para. 45. 86

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Section 4 Specific situations Subsection 1 Subsidised contracts and research and development services Article 13 Contracts subsidised by contracting authorities This Directive shall apply to the awarding of the following contracts: (a) works contracts which are subsidised directly by contracting authorities by more than 50 % and the estimated value of which, net of VAT, is equal to or greater than EUR 5 186 000, where those contracts involve one of the following activities: (i) civil engineering activities as listed in Annex II, (ii) building work for hospitals, facilities intended for sports, recreation and leisure, school and university buildings and buildings used for administrative purposes; (b) service contracts which are subsidised directly by contracting authorities by more than 50 % and the estimated value of which, net of VAT, is equal to or greater than EUR 207 000 and which are connected to a works contract as referred to in point (a). The contracting authorities providing the subsidies referred to in points (a) and (b) of the first subparagraph shall ensure compliance with this Directive where they do not themselves award the subsidised contract or where they award that contract for and on behalf of other entities. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 454; Poulsen/Jakobsen/ Kalsmose-Hjelmborg, EU Public Procurement Law, p. 217.

This provision is carried forward from Article 8 of the Public Sector Directive 1 2004/18/EC (the ‘2004 Procurement Directive’) in almost identical form. There are no similar provisions in the other Procurement Directives.

13.1. The duties of contracting authorities The last sentence of Article 13 of the Procurement Directive states that contracting 2 authorities must comply with the Directive or ensure compliance when they provide a direct subsidy for more than 50 % of the estimated value of a contract entered into by some other entity in connection with building and civil engineering works or service provision in connection with such works. Previously it was the Member States that had to ensure that contracting authorities complied with these obligations, but now it is the direct obligation of the contracting authorities. Article 13 covers subsidised contracts offered by entities other than the contracting 3 authority that provides the subsidy. These entities need not be contracting authorities but can be private sector construction companies. The provision applies if at least half the value of the contract is subsidised and if the contract is for particular kinds of building and civil engineering works; see below. It can be argued that the provision only covers direct subsidies so that subsidies in the form of rent relief, interest-free loans and similar benefits are not covered since these may be considered indirect subsidies. It Michael Steinicke

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could also be argued that such indirect subsidies should be treated as direct subsidies as it would otherwise be possible to circumvent the provision if a contracting authority were to provide an interest-free loan or allow rent relief and so finance a contract in this way. The same applies to make municipal services and facilities available on favourable terms and the like. According to the case law of the Court of Justice of the European Union (CJEU), both direct subsidies and other advantages given to a project will be covered by Article 14. In Case C-115/12 P France v Commission, the CJEU had to rule on a case from the General Court (‘the Court’) in which France claimed that the Commission had not been justified in withdrawing a subsidy to a French region (Martinique) on the ground that the region had not complied with a condition for a subsidy requiring that the EU’s procurement rules should be complied with (see Article 2 of Directive 93/37/EEC concerning the coordination of procedures for the award of public works contracts). A works project had been initiated to renovate a holiday complex, and according to the Commission these works received public subsidies of more than 50 % of the cost. Among other things the renovation included sports facilities and according Article 14 of the Directive it should have been put out to tender. This had not happened, so the Commission decided to withdraw its subsidy. The Court ruled that the Commission’s view that there had been a breach of the provision was justified, and the CJEU upheld this ruling. The case involved the granting of a tax relief, and the question was whether the tax relief in question could be considered to be a direct subsidy. Both the Court and the CJEU held that Article 14 would be deprived of its effect if a ‘subsidy’ within the meaning of Article 14 were not include tax reductions which, like positive benefits, enable the costs of financing a contract to be reduced.1 The CJEU also argued that if a ‘direct subsidy’ were to be interpreted very narrowly, this would allow the circumvention of the provision. What was decisive for the finding that the tax relief was a direct subsidy in the case was that ‘the tax reductions were directly connected with the works contract at issue, that they were not intended to reduce certain general burdens on the persons concerned and that they were granted by the French Republic to the project of renovation and extension of the Les Boucaniers complex specifically for the carrying out of those works.’2 4 The subsidies that give rise to obligations under Article 13 are subsidies provided for a contract. Subsidies given to an undertaking in general will not be covered by the provision. Where an undertaking or a consortium is formed for the sole purpose of tendering for and, if successful, carrying out a specific building and civil engineering works, there will be an overlap between the two kinds of subsidies. In this case Article 13 will presumably be applicable. If, despite assurances to the contrary, a purchasing entity (i.e. the private undertaking) does not comply with the provisions of the Public Sector Directive, it will presumably be possible to impose sanctions on that entity in accordance with the Directive. The responsibility for this will lie with the contracting authority that has not ensured compliance. It will be in the interests of the contracting authority to lay down clear guidelines in the contract on breaches of its conditions, as well as laying down specific sanctions for such breaches. 5 For both sub-paragraphs (a) and (b) the obligation is linked to specific kinds of building and civil engineering works. The definition is in two parts, and the first part more specifically concerns whether the building and civil engineering works are covered by Annex II of the Directive. These are works listed in Division 45 of the Statistical classifi1 2

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cation of economic activities in the European Community (NACE). This includes site preparation, the construction of buildings or parts thereof, civil engineering works, building installation, other building completion and the hiring out of construction or demolition equipment with operators. The second part of the definition covers tasks that arise in connection with building and civil engineering works for hospitals, facilities intended for sports, recreation and leisure, school and university buildings and buildings used for administrative purposes. In Case C-115/12 P France v Commission, the CJEU found that the renovation of a holiday complex included facilities intended for sports, recreation and leisure, so the construction was covered by the provision. The fact that the construction costs relating to the specific installations referred to in the provision (for example, the renovation of a hotel building) were substantially less than 50 % of the construction costs did not alter the fact that the specific installations were an integral part of the total complex and were thus covered by Article 14.3 Since the obligation to comply with the Directive only applies to building and civil engineering works and services, it will be relevant to distinguish between goods and these categories of services and to distinguish between building and civil engineering works and services. The distinction between goods and such services is relevant because purchases of goods are not covered by the obligation. The distinction between building and civil engineering works and services is required because the threshold values and the scope for exceptions differ between the two categories, and because the provision on services does not cover services for which no more than 50 % of the costs are covered by a subsidy even if the services are linked to a building and civil engineering works contract to which a subsidy is given for such a proportion. The NACE listing is exhaustive whereas the listing of building and civil engineering works is generic since a restrictive interpretation of these categories would impede the purpose of the Directive, which is to increase the transparency of public purchasing. Thus a care home for old people and a residence for physically disabled people should be treated in the same way as a hospital if their main purpose is to provide medical or surgical care for old or disabled persons. Contracts will only be covered by the provision if the contracting authority has itself entered into the contract. This means that the obligations only arise if the threshold values are exceeded and if the exceptions in the Directive do not apply. Conversely, it does not mean that the provision only affects contracts which a contracting authority would itself have entered into. The CJEU has rejected the argument that it is a condition for the application of the Article that it should be linked to the ‘traditional needs of the public authorities’.4 Thus the provision does not give rise to any obligation under the Treaty on the Functioning of the European Union (TFEU) for an undertaking receiving a subsidy, other than the obligations that follow from the principles of free movement. In principle private undertakings are not covered by the principles of free movement or the general prohibition of discrimination on the grounds of nationality in Article 18 TFEU.

3 4

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Article 14 Research and development services This Directive shall only apply to public service contracts for research and development services which are covered by CPV codes 73000000-2 to 73120000-9, 73300000-5, 73420000-2 and 73430000-5 provided that both of the following conditions are fulfilled: (a) the benefits accrue exclusively to the contracting authority for its use in the conduct of its own affairs, and (b) the service provided is wholly remunerated by the contracting authority. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 421; Fabrizio Clermont/ Francesco Fionda, ‘A Modern Approach for Procuring Research and Innovation: The Pre-Contractual Public Procurement’, in: EPPPLR 2016, pp. 88-96; Michael Steinicke, ‘The Public Procurement Rules and Innovation’, in: Ølykke/Risvig/Tvarnø (eds), EU Procurement Directives – modernization, growth & innovation p. 267.

The provision in Article 14 is carried forward from Article 16(f), of the Public Sector Directive 2004/18/EC with a few amendments. There are corresponding provisions in Article 32 of Directive 2014/25/EU (the ‘Utilities Directive’), and Article 13(j) of Directive 2009/81/EC (the ‘Defence and Security Directive’), and Article 25 of Directive 2014/23/EU (the ‘Concessions Directive’). The provision in Article 14 is in that part of the Directive that deals with exceptions to the obligation to follow a procurement procedure. On a first reading of the provision it would appear to lay down a duty to apply procurement rules. In contrast to most exceptions, where a number of conditions must be fulfilled in order for an exception to apply, the opposite is the case with Article 14. Only if both conditions are fulfilled is there an obligation hold a procurement procedure. If one of the conditions is not fulfilled, there will be no such obligation. Recital 35 of the Directive contains comments on exceptions for research and development. The recital clearly draws on experience with the provisions. First, it emphasises that there should be cooperation between the public and private sectors to encourage innovation, stating that: ‘The co-financing of research and development (R&D) programmes by industry sources should be encouraged.’ This statement should be seen in the context of the explanation that follows: ‘It should consequently be clarified that this Directive applies only where there is no such co-financing and where the outcome of the R&D activities go to the contracting authority concerned. This should not exclude the possibility that the service provider, having carried out those activities, could publish an account thereof as long as the contracting authority retains the exclusive right to use the outcome of the R&D in the conduct of its own affairs. However fictitious sharing of the results of the R&D or purely symbolic participation in the remuneration of the service provider should not prevent the application of this Directive.’ This recital expresses that an assessment of whether the conditions are fulfilled should include a review of whether there is reality behind the cooperation. 2 There are a number of exceptions for research and development contracts, but the natures of these exceptions vary according to the different kinds of public contracts. While certain service contracts for research and development are wholly exempt from the requirements of the Directive under Article 14, there is an obligation to follow the usual procurement procedures in the case of contracts to purchase products for the purpose of research and development, though with some relaxation of the requirement; see Article 1

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32(3)(a). In all cases the right to apply the exceptions is subject to a number of conditions. There are considerable differences between the current Directive and the former 2004 Directive with regard to the framework for innovation. First, in contrast to the current provision there was an obligation to put contracts for innovation services out to tender; see the former Annex IIA, category 8. The distinction between A services and B services has now been done away with and replaced to varying extents by general services, which are subject to full obligations to comply with procurement procedures, and social and other specific services, which are subject to a ‘light regime’. Under the new arrangement, all innovation services that are not covered by Article 14 must comply with procurement procedures. The result is much the same as under the previous regime, but it is now based on a different model. Another change is the introduction of innovation partnerships which supplement the rules in Article 14 with an extended procedure with additional possibilities for including development aspects in subsequent contracts; see further the commentary on Article 31. According to Article 14, contracts for services relating to research and development are not covered by the Directive. However, this does not apply to services where the benefits of the research and development accrue exclusively to the contracting authority for its own use, and if the services are wholly paid for by the contracting authority. When deciding on the application of Article 14, it is important to bear in mind that it concerns exceptions for public service contracts and this necessarily requires there to be a public service contract as defined in Article 2(1)(9). The difficulty in distinguishing between a subsidy given to a specific undertaking and payment for contractual services is not specific to research and development activities, but it is important to such activities where a public subsidy is provided without involving contracts for pecuniary interest. What must be decisive for the distinction is whether the contracting authority makes a financial contribution for which the recipient is not required to deliver a specific consideration, or whether the recipient of the payment provides a specific service in which the contracting authority has a financial interest.1 However, this distinction will still give rise to doubt in specific cases. The exception in Article 14 should presumably be seen as a development of the view that public support for research and development in the public interest is not subject to the procedural rules of the Directive, even though research and development work may be carried out on the basis of a service contract. The contracts for research and development services that are not exempted from the procurement requirements are contracts where the result of the research and development accrue exclusively to the contracting authority for its use in the conduct of its own affairs, and where no other than the contracting authority in question have given financial support for the activities. These criteria ensure that only contracts for research and development in the public interest are covered by the exception. If the results of a research and development contract benefit others than the contracting authority or if the results benefit the contracting authority as well as others, for example if the authority makes the results available 1 See Case C-380/98 University of Cambridge, paras. 21-26, which, however, concerned the interpretation of the condition of public financing in the definition of a ‘body governed by public law’. What is of particular relevance in relation to research and development is that, among other things, the CJEU stated that payments in the form of awards or grants for the support of research work may be regarded as financing by a contracting authority. However, even though the recipient of such financing need not be the university itself, but a member of it in his capacity as a provider of services, this will constitute financing that goes to the institution as a whole in the context of its research work; para. 22. On the distinction between subsidies and contractual payments for research and development, see also the Commission’s commentary on the original proposal for the former Directive in COM(90) 372 final, point 27.

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through publication, the public interest requirement must be seen as having been fulfilled. However, there may also be a public interest purpose where the result of the research and development accrue exclusively to the contracting authority for its own use, but where the public interest is expressed by the fact that the research and development services are financed by others than the contracting authority. Thus, contracts that are not covered by the exception are characterised by only concerning research and development services whose results exclusively benefit the contracting authority and which are not of public benefit by any other means that justify others participating in the financing of the services. While Article 14 makes a general reference to the contracting authority, it cannot be assumed that the fact that several contracting authorities are parties to a contract is sufficient to establish that there is external financing. Both in relation to the beneficiary of the research results and in relation to who pays for the research activities there is presumably a requirement that others than the contracting authority are parties to the contract. 7 Another matter is how a qualitative distinction should be made between research and development services and other service contracts that that are similar to and to some extent include the same tasks as are undertaken in research and development. Article 14 solves this problem by referring directly to a number of Common Procurement Vocabulary (CPV) codes from 73000000-2 Research and development services and related consultancy services to 73120000-9 Experimental development services (this range also includes 73100000-3 Research and experimental development services, 73110000-6 Research services, 73111000-3 Research laboratory services and 73112000-0 Marine research services). The Article also refers to CPV codes 73300000-5 Design and execution of research and development, 73420000-2 Pre-feasibility study and technological demonstration and 73430000-5 Test and evaluation.

Subsection 2 Procurement involving defence or security aspects Article 15 Defence and security 1. This Directive shall apply to the awarding of public contracts and to design contests organised in the fields of defence and security, with the exception of the following contracts: (a) contracts falling within the scope of Directive 2009/81/EC; (b) contracts to which Directive 2009/81/EC does not apply pursuant to Articles 8, 12 and 13 thereof. 2. This Directive shall not apply to public contracts and design contests not otherwise exempted under paragraph 1, to the extent that the protection of the essential security interests of a Member State cannot be guaranteed by less intrusive measures, for instance by imposing requirements aimed at protecting the confidential nature of information which the contracting authority makes available in a contract award procedure as provided for in this Directive. Furthermore, and in conformity with point (a) of Article 346(1) TFEU, this Directive shall not apply to public contracts and design contests not otherwise exempted under paragraph 1 of this Article to the extent that the application of this Directive would oblige a Member State to supply information the disclosure of which it considers contrary to the essential interests of its security. 282

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3. Where the procurement and performance of the public contract or design contest are declared to be secret or must be accompanied by special security measures in accordance with the laws, regulations or administrative provisions in force in a Member State, this Directive shall not apply provided that the Member State has determined that the essential interests concerned cannot be guaranteed by less intrusive measures, such as those referred to in the first subparagraph of paragraph 2. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 484 et seq.; Martin Trybus, Buying Defence and Security in Europe, p. 305 et seq.

This provision has been carried through from the previous Public Sector Directive 1 Articles 10 and 14. Directive 2004/18 Article 10 covered the directives application on public contracts entered into by contracting authorities in the defence sector and is in a modified form continued in Article 15 (1) and (2)(2). Directive 2004/18 Article 14 covers secret contracts and contracts requiring specific security measures and this provision is continued in Article 15(3). The rules have been adjusted according to the introduction of Defence and Security Directive 2009/81. For more on Directive 2009/81/EC, see part IV in this commentary. There are similar provisions in the Utilities Directive Article 24 and in the Concessions Directive Article 10, paras. 4-7. The provision in Article 15 in the Public Sector Directive is an exception. In accor- 2 dance with this it is the contracting authority that holds the burden of proof. Furthermore, according to case law an exception must be interpreted narrowly. In this context is might be argued whether the conditions normally applicable to exceptions necessarily shall be applied since this for these contract means that another set of rules (Directive 2009/81) will apply. However, the application of this exception can lead to a “true” exception due to the use of TFEU Article 346 (which might exclude a contract from the scope of the TFEU and thereby from the general principles and the free movement rules). For more on the Defence and Security Directive and on TFEU Article 346, see Part 3 IV of this commentary.

15.1. Directive 2009/81 As it was the case in Directive 2004/18 the Public Sector Directive is applicable to 4 purchasing within the defence sector in regard to ordinary procurement, excluded is only certain specific contracts covering certain military or security equipment or services. Hence, the purchase of office supply will be subject to the Public Sector Directive. Previously, the exception from the Public Sector Directive was only applicable to contracts covered by TFEU Article 346 but with the adoption of the new Defence and Security Directive 2009/81 purchases covered by the scope of that specific directive is also exempt from the Public Sector Directive (the Defence and Security Directive Article 71 led to amendments inctroducing such exception into Directive 2004/18). The reference to Directive 2009/81 and contracts falling within the scope of the De- 5 fence and Security Directive will cover all contracts subject to that directive’s Article 2 where it is stated that the directive covers following contracts: (a) the supply of military equipment, including any parts, components and/or subassemblies thereof; (b) the supply of sensitive equipment, including any parts, components and/or subassemblies thereof;

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(c) works, supplies and services directly related to the equipment referred to in points (a) and (b) for any and all elements of its life cycle; (d) works and services for specifically military purposes or sensitive works and sensitive services. For more on the precise implications of the coverage of the Defence and Security Directive 2009/81, see the commentary on Article 2 in Part IV of this book. 6 The reference in Article 15(1) to Articles 8, 12 and 13 in Directive 2009/81 covers rules on financial thresholds (Article 8), contracts awarded pursuant to international rules (Article 12), and specific exclusions (Article 13). The importance of the reference must be that contracts that are within the substantial scope of the Defence and Security Directive but are covered by one of the mentioned exceptions will not be subject to the Public Sector Directive by default.

15.2. TFEU Article 346 According to the previous exclusion there was a very explicit and comprehensive reference to the scope of Article 346 TFEU. This has not been continued in the current Article 15, where there is a more limited reference to TFEU Article 346, but there is a full reference to Article 346 TFEU in Article 1 of the Public Sector Directive. Therefore there is no doubt that the provision has full force in regard to this directive. 8 Article 15, para. 2 contains two different possibilities for excluding the application of the Public Sector Directive. First, where essential security interests of a Member State cannot be guaranteed by less intrusive measures, and second, where the application of the Public Sector Directive would oblige a Member State to supply information the disclosure of which it considers contrary to the essential interest of its security. The term essential interest of security is recognized from Article 346 TFEU. For more on this concept, see the commentary on the Defence and Security Directive in Part IV. In Article 15, para. 2 there is no reference to the application of Article 346 and no reference to contracts covered by Article 346. Instead the wording is that an exemption could be “in conformity” with point (a) of Article 346. This limited reference to Article 346 TFEU could be related to the reference to Article 346 in Article 1 of the Public Sector Directive. If read in this context Article 15, para. 2 could be interpreted as covering basically situations that are related to the scope of application of Article 346, but not as such within the scope of the said provision. 9 In Article 15, para. 2 there is an indication of the procedural priority since the two potential exemptions will be applied when the contract is “not otherwise exempted under paragraph 1”. There is a certain logic to this priority since exemption through para. 1 leads to the application of the Defence and Security Directive and thereby to the use of a competitive procedure (not Article 15, para. 1(b)) in contrast to Article 15, para. 2. 7

15.3. Secret or accompanied by special security measures 10

This part of Article 15 applies where the procurement and performance of the contract or design contest either are declared secret or must be accompanied by special security measures in accordance with the laws, regulations or administrative provisions in a Member State. It is new that this part covers the performance and the procurement before the exemption can be applied. It is not just assessments from the contracting authority that can lead to application of this provision, it requires something more. The reference to regulatory instruments could as an example require that certain security procedures established by intelligence agencies in a Member States are required by law.

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Measures less intrusive than not applying the Public Sector Directive could be the contracting authority imposing requirements aimed at protecting the confidential nature of information which the contracting authority makes available in a contract award procedure as provided for in the Public Sector Directive, see the reference to Article 15, para. 2.

Article 16 Mixed procurement involving defence or security aspects 1. In the case of mixed contracts which have as their subject-matter procurement covered by this Directive as well as procurement covered by Article 346 TFEU or Directive 2009/81/EC, this Article shall apply. 2. Where the different parts of a given public contract are objectively separable, contracting authorities may choose to award separate contracts for the separate parts or to award a single contract. Where contracting authorities choose to award separate contracts for separate parts, the decision of which legal regime applies to any one of such separate contracts shall be taken on the basis of the characteristics of the separate part concerned. Where contracting authorities choose to award a single contract, the following criteria shall apply to determine the applicable legal regime: (a) where part of a given contract is covered by Article 346 TFEU, the contract may be awarded without applying this Directive, provided that the award of a single contract is justified for objective reasons; (b) where part of a given contract is covered by Directive 2009/81/EC, the contract may be awarded in accordance with that Directive, provided that the award of a single contract is justified for objective reasons. This point shall be without prejudice to the thresholds and exclusions for which that Directive provides. The decision to award a single contract shall not, however, be taken for the purpose of excluding contracts from the application of either this Directive or Directive 2009/81/EC. 3. Point (a) of the third subparagraph of paragraph 2 shall apply to mixed contracts to which both point (a) and point (b) of that subparagraph could otherwise apply. 4. Where the different parts of a given contract are objectively not separable, the contract may be awarded without applying this Directive where it includes elements to which Article 346 TFEU applies; otherwise it may be awarded in accordance with Directive 2009/81/EC. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 485 et seq.

This provision is new in the context of the procurement directives. The introduction 1 of this rule is a natural and necessary consequence of the fact that there has been introduction of specific rules on mixed contracts – a complex regime in fact. The Utilities Directive 2014/25 contains similar provisions Article 25 and 26, and in the Concessions Directive Articles 21 and 23. The framework and methodology of handling mixed contract in this provision is ob- 2 viously based on the same instruments as set forth in the other provisions covering mixed contracts, e.g. Article 3 in the Public Sector Directive.

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Article 16 generally is a manifestation of the balance between the Public Sector Directive, the Utilities Directive and the Concessions Directive on the one hand and the Defence and Security Directive on the other hand. Situations covered by the defence and security rules are prioritized since this area is of major importance to the EU and especially to the Member States. Basically, this means that all contracts including defence and security elements have a special importance in the framework of handling mixed contracts.

16.1. Mixed contracts including defence and ordinary procurement 4

Para. 1 of Article 16 states that this provision is to be applied in circumstances where a mixed contract is covered partly by the Public Sector Directive and partly by either the Defence and Security Directive or TFEU Article 346. Article 16 thereby supplements Article 3 which sets out the overall framework for handling mixed contracts. Article 16(1) does not provide a priority between Article 346 and Directive 2009/81, but this does not seem to be important since the application is decided by Article 346 based on the general relation of these two provisions.

16.2. Methods of assessing mixed contracts Article 16(2) presents the approaches that might be used when the mixed contract can be divided into several parts. The basic choice for the contracting authority is that it can choose to award the contract as one, or that it can choose to award the contract in several parts. The method of finding out which regulatory framework to use on any specific contract is similar to the ones in Article 3, para. 3. This also applies for the method when the contracting authority decides to award separate contracts according to Article 3, para. 4: if separate contracts are to be awarded then each contract shall be subject to the rules that represents the characteristics of each different contract. In regard to the assessment and content of the characteristics, see more in the commentary to Article 3, para. 4. 6 The other option found in Article 16, para. 2 – that the contracting authority chooses to award the contract as one contract despite the possibility to divide the contract into several contracts – is not similar to anything found in Article 3 in the Public Sector Directive. This part is very specific to the defence and security area and the provision basically states that the following criteria shall apply to determine the applicable legal regime: 5

(a) where part of a given contract is covered by Article 346 TFEU, the contract may be awarded without applying this Directive, provided that the award of a single contract is justified for objective reasons; (b) where part of a given contract is covered by Directive 2009/81/EC, the contract may be awarded in accordance with that Directive, provided that the award of a single contract is justified for objective reasons. This point shall be without prejudice to the thresholds and exclusions for which that Directive provides.1 7

The first of the two criteria refers to TFEU Article 346 and concludes that the Public Sector Directive will not apply if the contract is covered by the treaty provision. Further-

1 This part of the provision seems to bring it on par with Article 15, para. 1(b) which also lets situations exempted from the defence and Security Directive escape the scope of the Public Sector Directive. In Article 15, para. 1(b) there is a specific reference to the Defence and Security Directive Articles 8, 12 and 13, where Article 16, para. 2 simply makes reference to “thresholds and exclusions”.

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more, the TFEU itself will not apply since this is the primary function of Article 346 – it functions as exemption from the other of TFEU’s provisions. Due to the potential for circumventing the obligation to conduct a competitive ten- 8 dering procedure it is emphasized in Article 16, para. 2, that the decision to award a single contract shall not, however, be taken for the purpose of excluding contracts from the application of either this Directive or Directive 2009/81/EC. This has implications for Article 16, para. 2(a) since this is the only part of the provision that allows to omit a tender procedure. It is submitted that the narrow access to use the exception will make the number of situations genuinely covered by this part of Article 16, para. 2 very low.

16.3. Application of the criteria for one single contract Article 16, para. 3 is distributing the use of the two approaches in Article 16, para. 2 9 (a) and (b) stating that (a) of the third subparagraph of paragraph 2 shall apply to mixed contracts to which both point (a) and point (b) of that subparagraph could otherwise apply. This is emphasizing the level of importance between the two sets of rules on defence and security issues: the provision in TFEU Article 346 is prioritized over Directive 2009/81, primarily due to the natural legal importance of the two rules. It can be questioned whether the rules in Article 16(3) are really necessary since it might be argued that when Article 346 can be applied this overtrumps any other rule in the public procurement legal regime and thereby this provision can always be prioritized by the contracting authority, with or without Article 16(3).

16.4. Objectively not separable contracts The last part of Article 16 explains the method by which a mixed contract which can 10 not objectively be separated can be categorized. This situation is normally solved by focusing on which main purpose the contract has: if the contract has an overall purpose that covers contracting works then the tendering procedure will have to follow the legal regime of construction contracts. This approach has not been followed in Article 16 which corresponds fully with the special circumstances that are found when a contract contains defence or security aspects. Instead, the provision in Article 16, para 4 states that if a contract is objectively not 11 separable the contract can be awarded without following the Public Sector Directive “where it includes elements to which Article 346 applies”. In situations where Article 346 does not apply the award shall be in accordance with Defence and Security Directive 2009/81. It is sufficient that “elements” covered by Article 346 is included in the contract. There is no further qualification of this as to how large a part of the contract must be subject to Article 346 before this condition is fulfilled. The natural reason is that if the contract is not separable then certain elements of the contract which is subject to Article 346 this will be connected in some way to the other elements of the contract which could justify that even small elements could lead to exception from any tendering procedure.

Article 17 Public contracts and design contests involving defence or security aspects which are awarded or organised pursuant to international rules 1. This Directive shall not apply to public contracts and design contests involving defence or security aspects which the contracting authority is obliged to award or Michael Steinicke

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organise in accordance with procurement procedures different from those laid down in this Directive established by any of the following: (a) an international agreement or arrangement, concluded in conformity with the Treaties, between a Member State and one or more third countries or subdivisions thereof and covering works, supplies or services intended for the joint implementation or exploitation of a project by their signatories; (b) an international agreement or arrangement relating to the stationing of troops and concerning the undertakings of a Member State or a third country; (c) an international organisation. All agreements or arrangements referred to in point (a) of the first subparagraph of this paragraph shall be communicated to the Commission, which may consult the Advisory Committee on Public Procurement referred to in Article 89. 2. This Directive shall not apply to public contracts and design contests involving defence or security aspects which the contracting authority awards in accordance with procurement rules provided by an international organisation or international financing institution, where the public contracts and design contests concerned are fully financed by this organisation or institution. In the case of public contracts and design contests co-financed for the most part by an international organisation or international financing institution the parties shall agree on applicable procurement procedures. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 492 et seq.; Poulsen/Jakobsen/Kalsmose-Hjelmborg, EU Public Procurement Law, p. 251.

This provision is carried forward from Article 15 of Directive 2004/18/EC (the ‘2004 Public Sector Directive’). The wording has been changed, but the new wording cannot be said to result in substantive changes. The provision is largely the same as Article 9(1), first paragraph, of Directive 2014/24/EU which also carries forward the former Article 15 of Directive 2004/18/EC. The difference between the two provisions is that Article 17 concerns international agreements etc. relating to such agreements as contain provisions on defence and security. There are corresponding provisions in Article 27 of Directive 2014/25/EU (the ‘Utilities Directive’) and Article 12 of Directive 2009/81/EC (the ‘Defence and Security Directive’). For more on the general application of Article, see the commentary on it. 2 The relationship between Article 9 and Article 17 is set out in Article 9(3). According to Article 9(3), Article 17 applies to contracts and design contests involving defence or security aspects which are awarded or organised pursuant to international rules. Article 9(1) and (2) does not apply to such contracts and design contests. 3 The provision in Article 17 is an exception, which means that its scope must be interpreted narrowly and the contracting authority bears the burden of showing that the conditions for its application exist. The Article also provides that the three exceptions apply if a contracting authority is obliged to award or organise a contract in accordance with procurement procedures which differ from those laid down in the Directive. 1

17.1. Contracts covered by other procurement procedures 4

Pursuant to Article 17(1), last sentence, all agreements or arrangements entered into in accordance with international agreements must be communicated to the Commission, which may consult the Advisory Committee on Public Procurement. The Advisory Committee on Public Procurement is appointed pursuant to Decision 71/306/EEC setting up an Advisory Committee for Public Works Contracts, as amended 288

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by Decision 77/63/EEC. The Committee is composed of representatives of the Member States belonging to the authorities of those States. Each Member State appoints one member and one alternate to the Committee. The Committee is chaired by an official of the Commission. The Chairman may be assisted by Commission officials. Secretariat services are provided by the Commission. The Committee is convened by its Chairman either on his own initiative or at the request of one of its members. See the commentary on Article 89 on the cooperation between the Committee and the Commission. 17.1.1. Agreements for the implementation or exploitation of a project Article 17(1)(a) applies where there are signatory states, meaning that the parties to 5 such an agreement must be states. This signatory state status means that the procurement procedures that must be followed differ from those laid down in the Directive. The requirement must be for such agreements to follow a specific set of rules which differ from the rules of the Procurement Directives. According to Article 17, a contracting authority must use other procurement rules. On the other hand, where the international agreement merely states that there must be some form or other of procurement procedure, but leaves it to the signatory states to decide on the rules, it must be assumed that EU Member States should fulfil the obligations of the Directives. Where the ‘other’ rules are either non-obligatory or compatible with the EU rules, it must be assumed that the EU rules should be followed as far as possible. It is not a requirement that the works or project should be carried on outside the geographical boundaries of the EU in order to be exempt from the Procurement Directives, merely that it must be a joint project to some extent. It must be assumed that even though such contracts are excluded from the Directives, they will still be subject to the rules of the Treaty on the Functioning of the European Union (TFEU). On the obligations in this connection see section 0.3.2.4. 17.1.2. Agreements on the stationing of troops The exception in Article 17(1)(b) requires that, for the stationing of troops, different 6 procedures should be adopted for the award of contracts than those in the Procurement Directives. Where, under a provision, it is a condition that an agreement or arrangement should concern the undertakings of a Member State or a third country, this must mean the contract must be awarded in accordance with the provision. The stationing of troops referred to will typically take place under the regime of the UN or NATO. As with the provisions in Article 17(1)(a), it must be assumed that such contracts will still be subject to the rules of the TFEU. 17.1.3. In accordance with the special procedures of an international organisation Article 17(1)(c) covers agreements entered into under the regime of the World Bank 7 or the UN, for example. The exception covers situations where the Member States are covered by such international agreements.1 These must be organisations of which the Member States or groups of Member States are members.

1 Agreements entered into by international organisations that are situated in the area of a Member State are not covered by the Procurement Directives as such international organisations are not considered contracting authorities for the purposes of the Directives.

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17.2. International agreements on defence procurement 8

As something new, Article 17(2) lays down that the Directive does not apply to public contracts and design contests involving defence or security aspects which a contracting authority awards in accordance with procurement rules laid down by an international organisation or international financing institution and where the public contract or design contest is fully financed by the international organisation or international financing institution. Where there is co-financing between a contracting authority and an international organisation or international financing institution, the parties must agree on the procurement procedures. This provision is identical to Article 9(2); for further on this see the commentary on Article 9(2).

Chapter II General rules Article 18 Principles for the conclusion of contracts 1. Contracting authorities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner. The design of the procurement shall not be made with the intention of excluding it from the scope of this Directive or of artificially narrowing competition. Competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators. 2. Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X.1 18.1 The principle of equal treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.1.1. The background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.1.2. The application of the principle of equal treatment in the different areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.2. The ban on negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.3. The subject-matter of the negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.3.1. Price negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.3.1.1. Negotiations of elements related to the price . . . . . . . . . . . . . . . . . . . . . . . 18.4. Fundamental aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.4.1. The scope of the concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.4.2. Case law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.4.3. Non-fundamental aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5. Reservations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5.1. What is a reservation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5.2. Between clarification and reservations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 14 16 18 24 25 27 33 34 38 39 41 42 46

1 .Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 613, p. 724 and p. 816 et seq., Peter Braun, ‘A Matter of Principle(s) – The Treatment of Contracts Falling Outside the Scope of the European Public Procurement Directives’, in: Public Procurement Law Review, 2000, p. 39; Simon Evers Hjemborg, Peter Stig Jakobsen and Sune Troels Poulsen, EU Public Procurement Law, p. 42; Takis Tridimas, The General Principles and EC Law, Ellis (red.), The Principle of Proportionality in the Laws of Europe; Stephen Weatherill and Paul Beaumont, EU Law; Christopher Bovis, The Law of EU Public Procurement Law, Chap. 5; Poulsen, Jakobsen and Kalsmose-Hjelmborg, EU Public Procurement Law, p. 50.

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TITLE I SCOPE, DEFINITIONS AND GENERAL PRINCIPLES 18.5.3. Types of reservations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5.4. Reservations making the offer non-compliant . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5.5. The subject matter of the reservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5.6. Contracting authority’s preliminary statements on reservations . . . . . . . . 18.5.7. Unclear reservations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5.8. Correction of the price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5.8.1. Which reservations may be priced? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5.8.2. Correcting the price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5.9. The contracting authority’s right to exclude tenders with reservations . . 18.5.10. Negotiations on reservations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.6. Cancellation of the tender procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.6.1. The background to the possibility of cancelling the procedure . . . . . . . . . . 18.6.2. When the principles are not enough . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.6.3. Case law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.6.4. Cancellation – option or obligation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.7. Equal treatment and other issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.7.1. Equal treatment and award of contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.7.2. Equal treatment and change of preselected entities . . . . . . . . . . . . . . . . . . . . . 18.7.2.1. Conditions on quantitative selection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.7.2.2. Obtaining competitive advantages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.7.3. Equal treatment and information, specifying the contract . . . . . . . . . . . . . . 18.8. Transparency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.8.1. The concept of transparency in general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.8.2. Case law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.8.2.1. Transparency of evaluation models. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.8.2.2. Transparency regarding criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.8.2.3. Description of the subject-matter of the procurement. . . . . . . . . . . . . . . 18.8.2.4. The contracting authority’s own stipulations. . . . . . . . . . . . . . . . . . . . . . . . 18.9. Proportionality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.10. Narrowing competition – the competition principle . . . . . . . . . . . . . . . . . . . . . . 18.11. Measures concerning environmental, social and labour issues. . . . . . . . . . . . 18.11.1. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.11.2. Article 18, para. 2 in context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48 51 52 59 63 64 66 70 73 81 86 86 90 98 110 111 112 114 117 120 121 123 124 133 134 145 150 153 155 164 174 174 191

The general principles of procurement law make up a key element of the public pro- 1 curement regime, both in the directives and outside the scope of these. The provision was previously found in the Public Sector Directive (2004/18) Article 2 and the Utilities Directive (2004/17). The current provision is found in all the directives: Public Sector Directive Article 18, Utilities Directive Article 36, Defence and Security Directive Article 4 and Concessions Directive Article 3. The provision contains an obligation to comply with the principle of equal treatment, the principle of transparency and, as something new, now also the principle of proportionality. The last-mentioned principle has not been incorporated into the Defence and Security Directive because its formulation is in accordance with the previous generation of public procurement directives. However, this cannot be expected to have any major significance as the principle of proportionality is part of the general EU principles which form the basis of the public procurement rules. These principles, however, are not the only ones that will apply in connection with the conclusion of public contracts; for example, the general principle of mutual recognition should also be applied. This also appears from the preamble to the Public Sector Directive recital 1. As it concerns the general principles of EU law, it is in reality of little practical impor- 2 tance whether they are explicitly mentioned in the text of the directive, they will in all circumstances cover the field of the public procurement directives.2 Equal treatment and non-discrimination are essential principles within many different areas of EU law, in2

About these principles, see the book’s introductory chapter, section 0.3.2.4.

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cluding most areas relating to the internal market. Although the principle of transparency has not been expressly mentioned in public procurement directives before 2004, the principle has been an integral part of the public procurement law, see, inter alia, the case law of the CJEU. Section 18.8. below reviews the principle of transparency in detail. Article 18 establishes that a contracting authority is under an obligation to comply with the principle of equal treatment and the principle of non-discrimination in connection with public procurement, and in reality it also requires compliance with the principles of transparency and proportionality. These are general principles and are of great importance in connection with public procurement. A general principle of EU law can be defined as a general proposition of law of some importance from which concrete rules derive and so that “a principle states a reason which gives arguments in one direction but does not necessitate a particular result.” 3 Thus, a principle is often less firm than concrete rules. A more detailed analysis of the general principles, which are predominant in EU law, shows that there are several different types of such principles and that these vary widely in objectives and content. Therefore, in this context it is not appropriate to try to provide a general definition of general principles apart from what can be deduced from the above. The content of the individual principles will, of course, be included in the presentation of the different sections which follows below. Article 18 refers to the principle of equal treatment which must be observed in connection with public procurement within the scope of the directives. The principle is both related to public procurement law and the general EU law. The principles of non-discrimination, of ,proportionality and of mutual recognition are general principles of EU law which also apply in tender procedures where the principle of equal treatment and the principle of transparency are general principles expressed in specific terms with regard to the application in connection with the invitation to tender. This does not mean that those principles solely apply to public procurement, or that the principles are not present elsewhere within the EU law,4 but merely that the principles have found a particular form within public procurement law. In addition to the principles mentioned here, there are a number of other principles which also must be assumed to apply. See for example the principle of loyalty referred to in Article 4, para. 3 of the EU Treaty and the subsidiary principle referred to in Article 5, para. 3. The general principles are significant at several levels in relation to public procurement. First of all, they (especially the principle of equal treatment and the principle of transparency) constitute the basis for the provisions which already exist in the Directive. Secondly, the more practical function of the principles is to provide a supplement to the more detailed rules of the directives. This will, of course, primarily be in areas where the directives have not regulated a particular situation in detail, but has left it for the contracting authority to lay down the conditions for certain parts of the tendering process. One example is the use of the negotiated procedure and the competitive dialogue where the procedure for conducting the negotiation has not been sufficiently described. To some extent the Public Sector Directive stipulates (see Article 29, para. 2-5) how this procedure must be handled, but leaves it for the contracting authority to establish the additional rules in compliance with the general principles. Thirdly, the principles are significant in connection with public procurement which falls outside the scope of the application of the directives, including procurement below Takis Tridimas, The General Principles of EC Law, p. 1. For example, the principle of equal treatment is found within the part of EU law which relates to working conditions for men and women. 3

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the economic thresholds. The wording of Article 18 does not expressly state whether the principle of equal treatment shall also apply below the thresholds values. The question is of great practical importance as the freedom of the contracting authority to act becomes quite limited as a consequence of the application of this principle. The Court of Justice has established that certain principles apply below the thresholds.5 As regards the principle of mutual recognition, the non-discrimination principle and the principle of proportionality, the reason is that, as mentioned above, general principles of EU law are concerned. These principles generally apply to all situations which are subject to the law of the Union. The principle of transparency shall also apply in connection with tenders outside the scope of application of the directive, see case law.6 For more information about the application of the principles outside the scope of the TFEU, see section 0.3.2.4. Not only has the provision in Article 18 been adjusted by expressly including the 8 principle of proportionality. The scope of the provision has also been changed by including express provisions in the new directive which specifically regulate conditions that previously, mainly or exclusively, were regulated by the principle of equal treatment. This is for example the case as far as Article 24 (conflicts of interest), Articles 40/41 (technical dialogue) and Article 56, para. 3 are concerned (the possibility for the client to gather, inter alia, additional information). By and large the content of these provisions are consistent with the way the former Public Sector Directive handled those situations based on the principles of equal treatment and transparency. For more information about these provisions, see the commentary to these provisions. In addition, especially the principle of equal treatment has been specifically referred 9 to in several provisions of the Public Sector Directive, see e.g. Article 29, para. 5 (negotiated procedure). These cases do not, however, cause any legal change in the application of the principle as the principle of equal treatment also previously had to include all situations occurring in the tender procedure. The reason for explicitly referring to the principle in some of the provisions is therefore only to signal that in those situations relating to the specific provision there may be a special need to be aware of the principle of equal treatment.

18.1 The principle of equal treatment The principle of equal treatment partly derives from the TEUF and the general prohi- 10 bition of discrimination which is present therein,7 and partly by the purposes behind the public procurement directives, and was first proclaimed in C-243/89, the Commission vs. Denmark (Storebaelt case – see below). The secondary EU legislation is based on the TFEU provisions. The same also applies 11 to the public procurement directives and the principles related to these rules. The correlation with the TFEU is nowhere clearer in the public procurement rules than with regard to the principle of equal treatment. There it stated that the obligation to comply with the principle of equal treatment shall be determined by the following wording: “Contracting authorities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner.” 5 See C-59/00, Vestergaard, in which the Court of Justice stated that the fact that the Union legislator finds that procurement of a smaller value are not to be included in the scope of the public procurement directives does not imply that such contracts are excluded from the scope of Union law. Thus, the contracting authority must comply with rules of the TFEU also in connection with procurement below the thresholds, see paragraphs 19 and 20 of the judgement. 6 See the cases C-275/98, Unitron and C-324/98, Telaustria. 7 See, for example, the cases 124/76 and 20/77, Moulins a Huileries de Pont-à-Mousson.

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Basically, the provision concerning the principle of equal treatment has many similarities with Article 18 of the TFEU which prohibits discrimination on grounds of nationality the only difference being that the principle of equal treatment is not limited to only include discrimination on grounds of nationality, but, on the contrary, any discrimination in connection with a tendering procedure. The provision has been implemented in the different public procurement directives at a different pace, but already with the introduction of the directives from 2004 the principles became an express element of the regulation. The most important change from the first versions of the provision is the introduction of more principles in the provision – first, the principle of transparency, and then the principle of proportionality. 13 Conceptually, equal treatment means that the tenderers must be treated equally. This also means that no discrimination is allowed.8 In principle there is no framework of what makes the basis for the evaluation of whether tenderers are discriminated. Therefore, it is assumed that any discrimination of tenderers during the tendering procedure will result in a potential conflict with the principle of equal treatment. Basically, the concept “equal treatment” is just a positive manifestation of the prohibition of discrimination so that conceptually there is no real difference in treating tenderers equally and not discriminating tenderers. As mentioned above, it may be assumed that the principle of equal treatment will be used in most situations rather than the principle of non-discrimination. This condition is not changed by the fact that the principle of non-discrimination has been expressly included in the text of the directive as the principles in reality cover the same area but with an extensive practice regarding the understanding and application of the principle of equal treatment. 12

18.1.1. The background 14

The first time the principle of equal treatment was mentioned as an independent principle in connection with a tender was in Case 243/89, the Commission v Denmark (Storebaelt case). The case started on 9 October 1987 as A/S Storebæltsforbindelsen by restricted procedure offered the building of the West Bridge over the Great Belt (Storebælt – connecting the Danish islands of Zealand and Funen). Five international consortia were invited to submit tenders. The tendering specifications for the contract required the use to the greatest possible extent of Danish materials, consumer goods and labour. The basis for the tenders were three different bridge projects; a concrete bridge, a steel bridge and a composite bridge. An alternative invitation to submit a tender was possible based on the assumption that the contractor would provide the detailed design of the project which it would submit to the contracting authority for approval and that it would assume full responsibility for the project and for its execution, cf. Article 3(3) of the tender documents. One of the tenderers was European Storebælt Group, which, among other things, had submitted an alternative tender which presupposed that the constructor took over the risk for the project and the risk of quantity. In the case the Commission mentioned that the principle of equal treatment was part of the rules which Denmark was supposed to have violated. The Danish government argued that this principle was not covered by the Directive and therefore constituted a new legal basis. The Court held that the principle of equal treatment was based on the purpose of the Public Works Directive, and this was not a new legal basis. 8 According to the traditional definition of discrimination, discrimination exits when similar situations are treated differently, and different situations are treated equally.

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Based on the Storebaelt case it can be concluded that the primary function of the principle of equal treatment is to make sure that the competitive situation between the tenderers is maintained.9 The principle of equal treatment is a very important instrument when it comes to en- 15 suring competition in connection with the invitation to tender of public contracts, and the principle can be applied to violations which occur during the entire tendering procedure. A violation may take many forms, but among the most frequent ones are disqualification, negotiation, acceptance of non-compliant bids, discriminatory selection and award criteria, etc.10 In order to avoid the risk of discrimination to the greatest extent possible, a number of rules are laid down in the Public Sector Directive as to how the public sector should approach the tender. Despite the intensive regulation of the tendering procedure in the directives, there are still areas, in particular some of the abovementioned, where there are no comprehensive guidelines. For example, the public procurement rules have not laid down general rules on the extent to which communication can be accepted between the contracting authority and the tenderer in connection with the tender. Based on the wording of the principle of equal treatment, indicators on the extent to which communication can be allowed can, however, be deduced, but the general provisions of the Directives neither provide the contracting authority, the tenderer, or the law enforcement authorities with much help. For many public procurement law issues, the exact substantive scope of the principle of equal treatment needs to be established. 18.1.2. The application of the principle of equal treatment in the different areas The principle of equal treatment is partly used in connection with the interpretation 16 of the directives when completing and supplementing specific provisions of the directives, and partly in the cases where there are no other (concrete) rules in the directives – filling the legal void. Examples of these issues are negotiations, reservations, disqualification and annulment. The principle is also used in other cases, for example in connection with the award of the contract, adherence to deadlines and in connection with insufficient information. The following particularly focuses on the access to negotiation, reservations and can- 17 cellation. Furthermore, a review of some of the other areas where the principle of equal treatment plays a significant role within the framework of the Public Sector Directive will be made.

18.2. The ban on negotiations The issue regarding negotiation and the principle of equal treatment is partly reflect- 18 ed in relation to the ban on negotiations laid down in connection with open procedure and restricted procedure and partly reflected in connection with the use of negotiated procedure, competitive dialogue and innovation partnerships. The negotiated procedure is regulated in Articles 29 and 32 of the Public Sector Directive where the competitive dialogue is found in Article 30 and innovation partnerships in Article 31 (see the comment on these provisions). The following focuses on the ban on negotiations.

C-243/89, Commission v Denmark, paragraph 33. With the new Directive some of these issues are covered by provisions which expressly include exactly these aspects, for example Article 40/41 on technical dialogue and Article 56(3) on the possibility of gathering additional information from the tenderers. 9

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From a linguistic perspective negotiations could be described as an attempt to achieve a joint agreement or decision, as a discussion or debate or as a detailed discussion with the purpose of reaching a settlement or agreement or by any other similar description. According to the definitions, negotiation is apparently a simple concept. For the definitions to be used in connection with public procurement law analysis of negotiation the definitions need to be modified. First of all, the definitions emphasise that communication must be mutual which will not always be the case with invitation to tender – at least not if mutual means that communication actually is taking place regarding the tender. In connection with tenders negotiation has an extended meaning. In general there is focus on the effect inter partes when it concerns negotiation. Of course, the relationship between the parties’ negotiations in connection with tenders is also important, but only when illegal elements are negotiated, e.g. price etc. However, the interesting aspect of negotiations in connection with tenders is the relationship with third parties, which is normally only of minor importance when there are negotiations outside the scope of the tender situation. 19 No rules in the directives determine that negotiation relating to tenders is not permitted. Likewise, there are no rules which argue in favour of such a ban on negotiations.11 The reason for the ban on negotiations must be that it is difficult to control that the competitive conditions are complied with if the procedure is not transparent, which is often the case if negotiations are allowed. The risk of misuse of the contracting authority's power of discretion in connection with negotiations probably also plays a role as a basis for the ban. 20 As mentioned above the ban on negotiations is derived from the principle of equal treatment, but the principle of equal treatment does not state any decisive guidelines for discussions in connection with open or restricted procedures. The lack of clarity about the scope of the ban has probably been a decisive factor leading the Council and the Commission to formulate the ban on negotiations in a detailed joint declaration. The declaration states that when the contracting authority is using either the open or the restricted procedure ”all negotiations with candidates or tenderers on fundamental aspects of contracts, variations in which are likely to distort competition, and in particular on prices, shall be ruled out.”12 The declaration continues to establish that only clarifications may take place and only in the case where such do not lead to discrimination. 21 This type of declaration can be categorised as soft law, and the specific legal value of the declaration is thus not clear. Article 288 of the TFEU states the guiding principle as to the extent to which the rules of law within the EU legal system are given binding effect. The provision states regulations, directives, decisions, opinions and recommendations. Among these the first three have binding effect under certain conditions. The procurement rules are available in directives which, as to their final effect are binding for any Member State which they are directed to. In contrast, it is quite clear that the joint declaration is of uncertain legal value within EU. However, it is indicated that at least it is not possible to disregard the joint declaration and soft law in general. In the Storebaelt case the Court could consider which value to ascribe to the joint declaration. Paragraph 75 of the report for the hearing in the Storebaelt case states that the Danish government refers to the Antonissen case13 and points out “that the significance 11 Kai Krüger indicates in Public Procurement: Global Revolution, p. 186 that either there is a risk that the contracting authority takes advantage of his autonomy to award contracts, or that the risk of discovering and controlling the behaviour of the contracting authority which conflicts with the directives is deteriorated where there is an option to negotiate. 12 Official journal 1994 L 111/114. The declaration is related to Article 7, para. 4 of the previous Public Works Directive and Article 20 of the original Utilities Directive.

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of a declaration in the Council minutes depends on the content of the declaration and of whether the declaration finds some reflection in the actual provision which the statement relates to.” According to the Danish government the joint declaration does not comply with these requirements. In addition, the government argues “... that it is difficult to believe that the Council and the Commission with a legal validity can make authentic interpretations to a Directive, which the European Parliament has participated in the adoption of, when the European Parliament has not had the opportunity to take a position on the content of the declaration.” In his proposal for a decision, Advocate-General Tesauro indicates that he does not think that it is a declaration without legal effect, but he does not give an explanation for his view. Concerning the reference by the Danish government to the Antonissen case, the Advocate-General states that the declaration merely is in the nature of a specification of the principle of equal treatment regarding the problem of negotiations. The judgment does not consider the opinion of Advocate-General Tesauro or the arguments by the Danish government. The use by the Advocate-General of the joint declaration clearly speaks in favour of a compulsory consideration covering soft-law. However, it must be noted that the Court has not explicitly decided on the use of the joint declaration. Even though the common declaration is at best uncertain the basic elements of the 22 declaration does seem to have some merit. That being so it would seem obvious that price should be of special importance in regard to such negotiations and that the issue of price may be expected to define a line of significance separating issues that cannot be discussed from issues that can be discussed. Subsequent case law provides a more certain legal foundation for the ban on negotia- 23 tions. In C-599/10, Slovensko the Court stated that the restricted public procurement procedure means that, “once the tenderers have been selected and once their respective tenders have been submitted, in principle those tenders can no longer be amended either at the request of the contracting authority or at the request of the tenderers. The principle of equal treatment of tenderers and the obligation of transparency resulting there from preclude, in that procedure, any negotiation between the contracting authority and one or other of the tenderers.”14 Even though this seems to tighten the possibility of conducting negotiations within the scope of restricted procedures this must be seen in conjunction with the case law on reservations, uncertainties, correction of errors and the introduction of Article 56, para. 3. This means that there will probably still be some scope for discussion or clarification. It is submitted that importance must be given to the subject of the negotiations. There seems to be no explicit level mentioned in recent case law and the focus will therefore be on the concept of fundamental aspects which is partly mentioned in common declaration as well as in the Storebaelt case where the line seems to be drawn at fundamental aspects.

18.3. The subject-matter of the negotiation As appears from the joint declaration that the subject-matter of the negotiation is im- 24 portant as to whether the negotiation is considered illegal. The following discusses the subject-matter of the negotiations.

13 14

Case C-292/89, Antonissen. C-599/10, Slovensko, para. 36.

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18.3.1. Price negotiations As appears from the joint declaration that, as a general rule, price negotiation is of special significance. Conceptually, it is difficult to draw a line between price negotiations and negotiations on other fundamental elements as negotiations on other elements than price may also influence the price and, likewise, price negotiations may also influence other elements of the tender. Consequently, the following discussion of price negotiations will also to some extent include negotiations on elements other than the price. 26 It must be assumed that the reason why the Commission and the Council emphasise price negotiations rather than other negotiations is attributable to the fact that price in many competitive processes is the most important criterion when awarding an order and that the price normally cannot be deprived of any importance. The significance of the award criterion ‘lowest price’ is obvious, but also in connection with the “best pricequality ratio” the price is often very important, directly or indirectly, as the winning tender must be the most economically advantageous tender, see Article 67 of the Public Sector Directive. 25

18.3.1.1. Negotiations of elements related to the price As mentioned, price negotiations include negotiations of price alone as well as negotiations of elements which are related to the price. It must be assumed that negotiations of non-fundamental aspects are included by the ban to the extent that the negotiated outcome causes price changes. The ban applies to all price changes regardless of whether it is changes of the total price or only changes in the price of a part of the contract. 28 Negotiations on price have different meanings depending on whether the award is carried out according to the criterion lowest price, cost-effectiveness or the best price quality ratio. Price negotiations have the greatest direct effect in connection with competitive processes according to the criterion of the lowest tender. Any price changes of this criterion affect the competitive situation which is not necessarily the case in connection with the criterion best price-quality ratio. At the same time the price-related impact is easier to understand in relation to the award criterion of the lowest price as the price here is the only competitive parameter. 29 Price changes in the form of discounts are allowed in cases where they already are entered in the original procurement documents in a clear and unambiguous manner. This would, however, not be in accordance with the public procurement rules if they have been entered as a change in relation to the original tender. In the case where a discount is allowed in the original tender, but where the discount only applies if a condition is met after expiry of the deadline for the submission of tenders, the legality of the settlement probably depends on the clarity of the condition, i.e. when and how the condition is met. If this is not clear, the tender will have to be rejected. One example could be that a tender is divided into two parts, and that tenders may be submitted for each of the two parts or for both in one tender. Here, a tenderer shall indicate the prices for the individual sub-tenders in the tender and at the same time indicate that if the contracting authority chooses the tender for both sub-tenders, there will be a discount of 3% of the tender amount for the two sub-tenders. This situation should be distinguished from the situation where the contracting authority suggests a reduction of the assignment and where different sub-prices are offered by the tenderers. 30 In the event of a change from unit price to a fixed price, there will, even though there may not be any major changes in the actual price at the starting point, still be a change of risk, which will typically influence the price. In the first situation the contracting authority bears the risk whereas the tenderer bears the risk in the second situation. 27

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In the Storebaelt case the Court held that negotiations had been conducted on the basis of a non-compliant tender. The reason for the non-compliant tender was the tenderer’s reservation in relation to the distribution of risk, and the reservation’s impact on the price. In the case the Commission argued that15 a consortium submitting an alternative tender must vouch for the project's technical quality by submitting a firm bid with a fixed price which both includes the project risks and volume-related risks. The Commission furthermore emphasised that the price of the tenderer's project was not firm and thus it was necessary to conduct significant price negotiations. This necessitated an increase of the contract price of DKK 50 million. Price changes which make the tender more attractive to the contracting authority are subject to the negotiation ban. What about the situations where the price changes make the tender less attractive seen from the contracting authority's point of view? It can be difficult to find good reasons for the degradation of a tender making it not lawful although it involves an upward change of the price. However, it is in conflict with the public procurement rules if the price change in the upward direction affects competition for the other tenderers. In the event where, e.g., the contracting authority has established a points based system for the assessment of the relationship between the tenders and a price change disturbs the order between two or more tenderers, the change is not allowed. Such a system was established in case C-87/94, Commission v Belgium (Walloon buses). This point-system was based on the award of bonuses to all tenderers on the basis of the most promising or cheapest tenderer's tender. When a tenderer changed his tender, and it affected the competitive situation, the change conflicted with the public procurement rules. It has been stated that it is possible to place the elements (price v non-price elements) 31 on an equal footing, which is significant in connection with the award criterion best price-quality ratio, with the price when assessing the scope of the joint declaration. This does probably not mean that the special opportunities which exist for conducting negotiations legally in certain situations also covers price negotiations. It must be assumed that the only opportunities which exist for change of prices are the ones outlined in the following section. Provided that mistakes have been made in the indication of the price, it is, to a certain 32 extent, possible to correct these. In order to make a correction, it is a condition that the mistakes must be obvious. What is required for a mistake to be obvious has not been specified in detail in practice.16 In case C-87/94, Commission v Belgium (Walloon buses), 17 a tenderer submitted, after the expiry of the deadline for the submission of tenders, three corrections to a tender already submitted. These corrections referred to fuel consumption, intervals for replacement of the engine and the gearbox as well as information about the technical quality of the tendered equipment. Regarding the last element the tenderer had stated that the dayto-day use of the buses would provide the contracting authority with the opportunity for significant savings.18 The tenderer made two lists of elements for savings, one was named “elements calculated in figures” and the other was referred to as “elements, not calculated in figures”. The first list specified a number of amounts which represented the economic advantage of these elements. The elements on the second list were not calcuParagraph 56 of the report for the hearing. See C-336/12, Manova, paragraph 32, C-599/10, Slovensko, paragraph 40 and T-19/95, Adia. See also the Public Sector Directive Article 56, para. 3. 17 The case related to the procurement of buses according to the Utilities Directive. 18 C-87/94, Commission v Belgium, paragraph 75. 15 16

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lated in figures but nevertheless contributed to the savings. The Commission argued that as the contracting authority had taken these saving elements into account, the contracting authority had violated the principle of equal treatment. The Court found that Belgium had disregarded its obligations under the Directive by taking these elements into account as the elements were used to offset the financial differences between the tenders which were ranked as no. 1 and no. 2.

18.4. Fundamental aspects 33

The concept fundamental aspect is central both in relation to negotiation and to tender reservations. Regarding both aspects the legality depends on whether the subjectmatter of the reservation/the negotiation is of fundamental importance to the offer. There is some correlation between the legal position on reservation and on negotiation, respectively; and in this context it is not surprising that there is rarely an express distinction between the use of fundamental aspects in the two situations, even though the following will show, that the concept of fundamental aspects is not an expression of a congruent application in the two situations. 18.4.1. The scope of the concept

It is difficult to define what provides an element of fundamental importance in connection with a tender procedure, but a starting point could be that the element in question cannot be omitted from the contract without the contract being changed significantly or made impossible. 35 It is a fundamental aspect in cases where the contracting authority has attributed significant importance to a particular element. However, the contracting authority does not very often specify what is of great importance. Thus, it must be based on a specific assessment according to the current conditions of the tender whether it is a fundamental aspect. What may appear as a subordinate element in one tender may be of decisive importance in another tender. Thus one has to look at the overall product or service which are put up for tender. Although assessments of importance may be different as to their nature, there are, however elements which are important in basically all tenders. A clear example of this is the price. In general, it must, however, be subject to a specific assessment whether or not a fundamental aspect is involved. 36 It may be argued that issues important to the financial assessment of the tenders are fundamental as they will be relevant to the competition between the tenderers. 19 The decisive factor will be whether the element is important for the competitive assessment of the tenders and thus is important in the competitive situation. The assessment does not require a pricing of the individual elements, just that they are taken into consideration as part of the competitive assessment. The term fundamental aspects will probably cover more than the elements which are important at the time of the awarding and possibly also more than just elements which have an impact on the financial assessment. Formal issues might play a role but will normally not be a fundamental aspect.20 34

19 Sue Arrowsmith makes a distinction between substantive and formal elements, see The Law of Public and Utilities Procurement, p. 728. Arrowsmith submits the suggestion that an element “should be considered fundamental if the tenderer gains any advantage from not complying …, or if the contracting authority is prejudiced by non-compliance.” 20 Arrowsmith provides the example that if a tender is in a different language from that stipulated the tenderer may gain time and cost benefits over those who comply, see The Law of Public and Utilities Procurement, p. 728.

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There is a distinction between award criteria and contractual terms. The question is 37 whether this division is important in terms of negotiations. The award criteria form the basis for the competitive comparison between the tenders, and this competitive situation can be changed if these terms and conditions are not maintained. On this basis contractual terms may be fundamental aspects. Even though the competition is not based on contractual terms an amendment of these still has a competitive significance as performance of the contract is subject to the fulfilment of the terms and conditions. In the event that an individual tenderer fails to comply with a specific contractual term, this tenderer will obtain a competitive advantage if the contractual term is burdensome for the tenderers. This will, of course, conflict with the principle of equal treatment. Contractual terms and award criteria should therefore be subject to the same assessment when deciding whether they have fundamental importance. 18.4.2. Case law Apart from the Storebaelt case the Court has treated a case where the concept of basic 38 element played a central role although the Court did not expressly determine the concept. In case C 87/94, the Commission v Belgium (Walloon buses), a tenderer, the EMI, sent 3 corrections to the submitted tender. These corrections referred to fuel consumption, the refuelling interval of the motors as well as comments on the technical quality. The Court held that these changes were in conflict with public procurement law. Regarding the fuel consumption a tenderer had specified a fuel consumption of 54 l/100 km. in the tender, but pointed out that it was possible to achieve a reduction of the fuel consumption by 5-8%. In the corrections of 3 August and 24 August, the tenderer indicated a correction of 8% and 17.5%, respectively. As it was clearly a correction, the question was whether the correction included a basic element. The Court did not consider this but as it must be assumed that the fuel consumption partly affected the ranking between the tenders and partly had a significant financial impact on the following bus services, it must have been a fundamental aspect. In the tender documents the contracting authority stated that the tenderer must fill in a number of boxes at a specific appendix. This appendix contained a box about the expected number of replacements of the motor and the gearbox, respectively. The contracting authority had filled in the box, and therefore it was not the intention that the tenderer should complete it. In connection with the tender, the tenderer had not stated that he disagreed with the numbers of replacement given by the contracting authority. In the tenderer's correction of 24 August, the tenderer wrote that the frequency stated by the contracting authority did not correspond to the statistic reality, after which the tenderer corrected the figures. Neither in this case does the Court consider whether it is a fundamental aspect. In connection with a procurement of buses and other motor vehicles, all aspects of the engine must be fundamental. Particularly as the element has a significant economic impact for the purchase. 18.4.3. Non-fundamental aspects As a general rule, the joint declaration only includes negotiations of fundamental as- 39 pects. It has not been clarified whether negotiations regarding non-fundamental aspects may be allowed. Generally, the distinction in the joint declaration between fundamental and non-fundamental aspects must be significant as otherwise there would be no rational explanation for dividing the concepts. It must be assumed that according to the joint declaration negotiation may be permitted as long as the subject of the negotiation is not

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a fundamental aspect and provided that completion of the negotiations does not otherwise conflict with the principle of equal treatment. However, until now there is no case law in support of this theory. For further information on the comparison between nonfundamental aspects in negotiation and situations related to reservations, see below in the next section. 40 It is shown above how difficult it is to establish guidelines of the fundamental importance for a tender of an element of the tender. As it is not possible to define fundamental aspects, it will thus not be clear how to define non-fundamental aspects. With reference to the previous section it may be possible to identify elements of a tender that have no bearing on the competitive situation.

18.5. Reservations 41

The following reviews the legal position with regard to reservations in relation to EU procurement. Since the directives do not contain provisions regarding reservations, this section is based on case law regarding the equal treatment principle. 18.5.1. What is a reservation?

Although reservations are a regular occurrence in procurement, the procurement directives do not contain a general regulation concerning reservations. A more detailed definition of the concept must therefore be based on the case law of the Court of Justice of the European Union as well as on literature. Although the Court’s case law offer no definition, the Storebælt judgement described an offer with reservations as an offer that did not comply with the procurement provisions. The same is true of C-599/10, Slovensko, in which the Court points out that there is no provision “which expressly sets out the procedure to be followed in the event that the contracting authority finds, in a restricted public procurement procedure, that the tender submitted by a tenderer is imprecise or does not meet the technical requirements of the tender specifications”. 21 Hence, the basis is that non-compliance between an offer and the procurement provisions constitutes a reservation. Neither the Court nor the directives use the term “reservation”. Sometimes a tender containing a reservation is described simply as a “non-compliant tender”. 43 One of the completely fundamental conditions concerning the handling of reservations is that the risk of reservations (and other deviations from the procurement documents) is the tenderer’s risk.22 44 A related but very specific issue is how flawed or inadequate procurement material affects the assessment of a tender’s compliance. The starting point must be that a procurement must contain an accurate description of what is being procured. If the procurement material is grossly flawed it must be assumed that it will take many flaws in a tender in order for a tender to be justifiably considered as non-compliant.23 Another question is, by extension, how a contracting authority should handle this situation overall. If the contracting authority accepts that the procurement material is flawed, it accepts by extension the “corrections” in the tenders which, superficially, resemble reservations. This approach implies, however, that the tenders may contain different ways of circumventing flawed procurement provisions which can lead to discrimination. In this regard the contracting authority ought to instead ensure that the con42

C-599/10, Slovensko, para. 35. See accordingly C-599/10, Slovensko, para. 38. 23 There are examples of such cases with the Danish Complaints Board for Public Procurement, order of 23 November 1998, Marius Hansen A/S, and order of 8 August 2000, Visma. 21

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tracting authority makes the corrections in the procurement provisions so that competition is based on an equal footing. The question also arises as to who should bear the risk of the consequences of flawed 45 information in cases where flaws in the procurement material are not discovered prior to being inscribed as part of the contract. It should be considered whether the contracting authority must always bear the risk in such cases. There may be cases in which the tenderer bears the risk of the consequences of flawed information. That could be possible in cases where the assignment requires specialist expertise that the tenderer is expected to have, and when the contracting authority does not have such knowledge. In such cases, the tenderer is the only party that can be expected to identify any errors or flaws. The basis with regard to errors which are discovered only after the conclusion of the contract is that such situations must be resolved under the auspices of general contract law and the general rules regarding the interpretation of the agreement. 18.5.2. Between clarification and reservations The similarity between reservations and negotiations is that in both cases changes are 46 made to the procurement material, including the tenderer’s documents. The difference between reservations and negotiations is that reservations are made in the tender while negotiations usually take place after the submission of the tender. Pursuant to the joint declaration of the Council and the Commission, a tender may 47 be clarified and supplemented to the extent that this does not result in discrimination. The fundamental difference between clarifications/supplements and reservations is that reservations result in changes to the procurement material while clarifications/supplements only result in the specification of elements of the tender. There are two factors to be considered in relation to the handling of both ambiguities and reservations. The first is a procedural approach (when and how contact can be made with the tenderer), and the second is whether a substantive condition exists (is there a change to the conditions specified in the offer). Part of the process (the first part) is regulated in Article 56, para 3 of the Public Sector Directive, whereas the second part (the material content) is not regulated by the directive. Article 56, para. 3 comprises situations “where information or documentation to be submitted by economic operators is or appears to be incomplete or erroneous or where specific documents are missing”. Reservations cover the fact that there are materially different conditions in the tender compared to the procurement material. In relation to the formulation of Article 56, para. 3, it is therefore only erroneous tenders that might also be covered by the definition of reservations, and reservations will not typically be expressed as errors but rather as deliberate changes to the conditions stipulated in the procurement material. Thus reservations will generally not be covered by Article 56, para. 3. As mentioned, this does not mean that there may not be any overlap between the handling of situations covered by Article 56, para. 3, and the handling of reservations (cf. above). There are, however, differences in relation to the handling of reservations and they are explained in further details below. 18.5.3. Types of reservations A distinction is made between different types of reservations; namely standard reser- 48 vations, shared reservations, and individual reservations. Standard reservations cover reservations consisting of standard formulations derived 49 from professional organisations or the like. A standard reservation cannot be attributed any significance beyond a general reservation. Consequently there is no presumption that standard reservations generally relate to the fundamental elements.

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Standard reservations may, in certain industries, obtain a status whereby they are accepted as an entrenched part of contracts in that industry. This gives rise to a potential risk of discrimination in that the contracting authority simply accepts the standards in question due to their status obtained as national standard reservations and domestically accepted in the industry, while standard reservations of foreign organisations will probably be investigated more closely. Such a practice constitutes express discrimination. Although standard reservations can thus be said to play an important role in national legal systems, they cannot be attributed any special status in relation to the interpretation and application of EU procurement rules. Joint reservations are reservations made collectively by tenderers and are unrelated to standard reservations. Joint reservations will usually be reservations formulated jointly by the bidders in relation to a specific procurement and, as a consequence, they will not be of a general nature as is the case with standard reservations. Individual reservations are reservations made by a tenderer independently of the others. 18.5.4. Reservations making the offer non-compliant

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A tender that is deviating from the procurement material is non-compliant. A contracting authority is obliged not to consider a non-compliant tender, and must therefore reject it (see the pricing of reservations below). Compliance may depend on several different conditions. A reservation makes a tender non-compliant if: 1) the subject of the reservation relates to fundamental elements of the procurement; 2) the contracting authority has previously stated whether the reservation is accepted; or 3) the reservation is so ambiguous that its consequences cannot be determined with any certainty. 18.5.5. The subject matter of the reservation

The subject matter of a reservation may be a technical specification, measurement methods, delivery times, etc. If the reservation concerns conditions that are of fundamental importance to the procurement, the reservation will be significant, making the offer non-compliant. 53 In the primary case relating to reservations – C-243/89, the Storebaelt case – the Court concluded that Denmark acted contrary to the Public Works Directive by negotiating with the winning consortium on the basis of a non-compliant tender. The contracting authority, A/S Storebæltsforbindelsen, stated in the procurement provisions that alternative offers could be submitted and that the price for alternative offers presupposed that the tenderer would elaborate a detailed design for the client’s approval, and that the tenderer would bear full professional responsibility for the project and its performance. In addition, it was specified that the contractor submitting an offer containing the alternative project requiring the contractor to be responsible for the project would provide a reduced price should the client choose to take over the preparation of the project. The tenderer had made reservations about this. 54 The Court stated as a general observation that the principle of equal treatment implies that all offers must comply with the procurement provisions in order to ensure the possibility of an objective comparison of offers. However, the Court subsequently stated that the requirement of compliance with the procurement provisions would not be met if the tenderers could depart from the fundamental procurement provisions apart from cases in which the contracting authority in the procurement provisions expressly permitted tenderers to do so. Consequently there is no absolute prohibition against reservations, but there is, however, such a prohibition in cases where the reservation concerns fundamental procure52

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ment provisions. In the case in question, the Court of Justice resolved that a fundamental element was at play and that the reservation consequently made the tender non-compliant. What was decisive in this case is that reservations were made in relation to the provisions for calculating prices, taking into account that the tenderer was to undertake the detailed design, execute the project, and thus bear the associated risks. Consequently considerable emphasis is placed on the price aspect of the provision. See also section 18.4. regarding fundamental elements in relation to the above. To the extent that an offer contains several reservations, none of which is of a size that renders the offer non-compliant, they may collectively be of such significance for the offer that it is rendered non-compliant. A consequence of the principle of equal treatment must be that several offers containing reservations of similar importance shall be considered uniformly. This means that a tender containing a significant reservation cannot be rejected if another tender containing a reservation relating to another condition is accepted if both are of the same level of importance.

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18.5.6. Contracting authority’s preliminary statements on reservations This section covers two situations which are, to some extent, incompatible. The first 59 situation is based on the Storebaelt case and the remark that tenderers cannot deviate from the fundamental procurement provisions by way of a reservation apart from situations where those provisions expressly permit it. Consequently, it appears to be a fundamental provision for the tender’s compliance that reservations in the tender are permitted in the procurement provisions. The Court does not specify whether any general or specific authorisation is required; i.e. whether each element of the procurement provisions must be pre-authorised, or whether the contracting authority merely has to state (as is the case with alternative bids) that reservations are generally accepted within the context of the minimum requirements. The first is likely to be the case. The contracting authority cannot give blanket authorisation for the submission of offers with reservations. Regardless of the Court’s statements in C-243/89, the Commission versus Denmark, it is doubtful whether such a requirement can be maintained – see immediately below. The discrepancy here is the situation in which the contracting authority has positively 60 stated that reservations are not accepted. The Court clearly stated that where the contracting authority determines provisions for competition in the procurement material – e.g. that tenders containing reservations will be rejected – that this is applicable to the procurement.24 The two situations are in direct conflict. It is obvious that if the contracting authority 61 states that reservations are not accepted, tenders containing reservations should be rejected. However, it is unclear what obligations are to be derived from the Court’s declaration that the contracting authority cannot accept reservations unless the contracting authority has explicitly stated so. To the extent that there is a requirement that the contracting authority shall accept reservations in advance, it will not be necessary to state that reservations are not accepted, but simply that if the contracting authority does not specify anything, it will be unable to accept offers containing reservations. Sometimes the contracting authority will distribute tendering forms together with the procurement material to the individual tenderers. In these forms there is often a box titled “Reservations” in which the tenderer must indicate any reservations it may have. This can be interpreted as a pre-authorisation of reservations. Regardless of this there will still be in24

See, inter alia, C-42/13 Cartiera Dell 'Adda.

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stances of case law in which the contracting authority accepts reservations without having stated its position on reservations in advance. The requirement for the pre-authorisation of reservations may be assumed to apply only to reservations for fundamental elements. It must be assumed that reservations for non-fundamental elements need not necessarily be pre-authorised in order to be accepted. 62 Where a contracting authority has not explicitly stated whether reservations are permitted, but where the acceptance of a tender containing reservations would result in a violation of the principle of equal treatment, this should result in the rejection of the offer. This would be due to the nature of the reservation and not the contracting authority’s failure to state whether reservations are accepted. 18.5.7. Unclear reservations 63

The final category of situations in which a reservation can render a tender non-compliant concerns situations in which the reservation is unclear. This could be an ambiguity in formulation, or an ambiguity resulting from an inability to assess the consequences of the reservation with certainty. Based on the possibility of clarifications of tenders the first step after coming across ambiguities in a tender will be to seek clarification of the ambiguity. If this is not possible without initiating negotiations the offer must be rejected. Formulation risk is essentially borne by the tenderer25, just as formulation risk pertaining to the procurement material is borne by the contracting authority. Clarifications of ambiguous conditions shall be handled in accordance with Article 56, para. 3, of the Public Sector Directive. 18.5.8. Correction of the price

To counter situations in which reservations render a tender non-compliant, it is possible to put a price on the reservation and subsequently make the offer compliant. Compliance is achieved by adjusting the tender price by an amount that reflects the financial and competitive benefit to the tenderer of the waiving of the procurement conditions. Setting an objectively correct price may be difficult (if not impossible). It is therefore relevant to consider elements which may be of significance to pricing. 65 Ideally, the contracting authority should set a framework for the correct price, but for various reasons – e.g. the selected basis for setting the price and the fact that the contracting authority has a certain discretion in this regard – the price may be of a varying size; i.e. there may not be one correct price but rather a scope that is deemed to be acceptable with regard to the setting of a price. The contracting authority shall always endeavour to set the correct scope, but it is the tenderer’s own initiative that results in reservations and which thus puts it at odds with the procurement rules. On the basis of this, the interests of the other tenderers must, all things being equal, take precedence over the interests of the tenderer that has made reservations. It is most likely in relation to reservations that there is no obligation to prioritise the equal treatment of the tenderer in question, whereas in relation to exclusion based on technical dialogue (see Public Sector Directive Articles 40, 41 and 57), there is an obligation to ensure that a company that was used in an advisory role and which is thus subject to an equal treatment assessment (and potentially exclusion) is also provided equal treatment. The difference between the two situations is, of course, that in connection with a reservation the tenderer has broken the procurement rules by invoking a reservation and cannot therefore expect any equal treatment since it is the interests of the other 64

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“innocent” tenderers which, in this context, matter the most. In connection with the disqualification issue, the company (advisor/tenderer) has not violated the procurement rules; hence why it too can demand equal treatment. 18.5.8.1. Which reservations may be priced? It follows from the above that the contracting authority has the opportunity to consider an offer that contains a reservation regarding a non-fundamental element if the reservation can be priced with sufficient certainty. The question is whether it is possible to price ambiguous reservations, as well as reservations made in situations in which the contracting authority has positively made known whether or not reservations are accepted. As indicated above, ambiguous reservations can be split into two groups – reservations that are formulated ambiguously and reservations that have ambiguous consequences. To the extent that ambiguous reservations can be clarified so that the ambiguity is removed, it will be possible subsequently to price the reservation provided this can be done with sufficient certainty. In theory this applies both to ambiguous formulations and to ambiguous consequences although it will most likely be difficult to clarify reservations in the latter category. Pricing will not be possible in cases where a clarification does not clarify the reservation. If the contracting authority cannot determine the consequences of the reservation, the competitive and financial benefit cannot be removed with sufficient certainty. In cases where the contracting authority has not positively accepted the reservation, pricing will still be possible as there should not be a distinction between situations in which reservations are positively accepted and situations in which no advance statement has been made as to whether or not reservations are accepted. If the contracting authority has excluded reservations also pricing must be excluded.

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18.5.8.2. Correcting the price Pricing must take into account the principle of equal treatment, the principle of trans- 70 parency, and the relevant conditions of competition. The Court has not issued detailed guidelines for the basis on which pricing is to take place. It must be assumed that it will not be possible for the tenderer itself to correct the price as this will result in a high risk of violation of the principle of equal treatment. The pricing of a reservation is therefore the task of the contracting authority. It is not clear on what basis the contracting authority should make the correction. A starting point could be the use of price lists. Another could be freer discretion, possibly based on the conditions included in the tenderer’s own bid. The latter model is not advisable for several reasons. Firstly, it is doubtful whether the tenderer’s offer can, with certainty, ensure equal treatment when setting the price. Similarly, freer discretion should also be discouraged as contracting authorities seldom have the business skills to determine the true commercial value of parts of a product or task. The contracting authority may set the price itself, but it can also engage an impartial third party, preferably one which is familiar with the area of the procurement. What is important is not how the price is set but that it is set in a way that makes it 71 certain that the competitive advantages of the tenderer are removed. If the contracting authority believes that this can be done if using the contracting authority’s own prices it should be possible for these to form the basis for the assessment. Conditions that may be invoked in this context may include assessments of the type 72 of tasks involved. If this relates to a standard task which cannot be varied to any mean-

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ingful extent the use of an objective standard should be obvious. However, standardised methodology should not be used if the task is such that both the material and the work can be performed in a number of very different ways. Another issue could be the assessment of whether the reservation relates to materials, labour, contract clauses, or something else. The assessment occurs as a consequence of the fact that it must be assumed that certain elements are easier to price than others. 18.5.9. The contracting authority’s right to exclude tenders with reservations 73

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As already mentioned, the contracting authority has a right and an obligation to reject a tender if reservations render it non-compliant. This obligation exists in cases where the reservation relates to fundamental elements which implies that the reservation is significant. In the case of reservations with regard to non-fundamental elements – i.e. insignificant reservations – there is no obligation to reject the tender. However, another problem arises in these cases as it is unclear whether the contracting authority has a right to reject the tender. As a basis for this discussion it must be established that the reservation is a change with respect to the procurement material originating unilaterally from the tenderer. If the tenderer can unilaterally change the terms of the procurement, regardless of their insignificance, this will result in the procurement material serving as a basis for future negotiations regarding the conclusion of an agreement. It is untenable for other tenderers and for the contracting authority that one or more tenderers can change the conditions of competition specified by the contracting authority. The whole idea and purpose of the procurement rules are that the procurement notice and procurement material serve as the basis for the tenders. In this way, an objective basis is established for all tenderers as to the formulation of their bids. Any alteration to the procurement basis will reduce the objectivity of the procurement and although these alterations may relate to insignificant reservations, there is the potential risk of disturbing the competitive situation. Consequently, it will probably always be at the risk of the tenderer to invoke conditions other than those applicable to the procurement. It cannot be ignored, however, that on the basis of proportionality in certain situations the rejection of a tender due to a detail that is insignificant in relation to the procurement material will have a drastic effect. Since the most important thing in this context is the competitive conditions, and since reservations are at the risk of the tenderer it is only correct that the contracting authority has the right to reject tenders containing reservations. This is, however, contrary to the case law of the Danish Complaints Board for Public Procurement in the order of 26 November 2004 E. Pihl & Søn A/S which states that trivial reservations cannot be a basis for rejecting an offer. The contracting authority’s right to reject a tender due to a reservation is apparently forfeited if the tenderer’s aberration from the procurement material is a necessary consequence of ambiguous formulations or flaws in the procurement material. In other words, the right to reject tenders containing reservations is forfeited if the reservation is due to the contracting authority’s own conditions. The basis of whether a procurer has the right, but not the obligation, to consider tenders containing reservations as regards non-fundamental elements in the procurement provisions can be modified in the procurement provisions. Consequently, a procurer will be able to obligate itself in its procurement provisions to reject all offers containing reservations regardless of whether or not the reservations concern non-fundamental elements in the procurement provisions. Conversely, a procurer can obligate itself in its procurement provisions to consider all offers containing reservations that do not con-

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cern fundamental elements in the procurement provisions if the reservations can be objectively and correctly priced.26 It can be discussed whether this solution is appropriate. The basis is that the reserva- 78 tion is at the risk of the tenderer. Therefore, even minor reservations should be at the risk of the tenderer also including the risk of its tender being rejected. On the other hand there are considerations concerning reason and proportionality which come into play. These considerations point in the opposite direction considering that it may seem both unreasonable and disproportionate that the contracting authority can reject a tender submitted in connection with a procurement of an expected value of several millions of Euros etc. just because of some technical flaws in the tender or because insignificant conditions in the tender differ from the overall procurement specification. One might well see the lack of reasonability in rejecting a tender which extensive resources were spent to prepare due to small and insignificant deviations. The reason that there may be concerns in relation to this approach is not so much a lack of reasonability as the fact that this solution complicates something which is already not particularly simple. With the introduction of a triviality threshold for reservations there are now three levels according to which reservations can be categorised. Since the boundary between fundamental and non-fundamental reservations can sometimes be difficult to define this additional distinction does not make it any easier for contracting authorities to process offers containing reservations. When then may a reservation be considered to be trivial? It must be assumed that this 79 only happens when the reservation is devoid of competitive significance. It is essential that the reservation is priced in order to handle a tender containing 80 reservations. As mentioned several times previously for a tender to be able to participate in a procurement any potential competitive advantage (in the form of a reservation) must be removed from the tender. If the contracting authority is forced to allow a tender containing (trivial) reservations to be included in the procurement it goes without saying that this should, of course, happen only if the tender does not enjoy a competitive advantage in relation to the other tenders as a result of the reservations it contains. If there were pricing requirements the contracting authority could (against its will) allow this to be included in the competition, only to reject it later because it could not be priced with certainty. This, along with the fact that these are reservations without any sort of bearing on competition, suggests that there will not be a requirement for these reservations to be priced. 18.5.10. Negotiations on reservations Since reservations can render a tender non-compliant the contracting authority will 81 have an interest in requesting that reservations are removed from the tender so that the contracting authority is not obliged to reject the offer. This can happen in cases where the reservation can be priced (see above). However, to a limited extent this can also happen by way of negotiations regarding the removal of the reservation. In the Storebaelt case, the Court determined that Storebæltforbindelsen A/S negotiated against the background of a non-compliant tender which was not in accordance with the procurement rules. The Court’s wording of the judgement is ambiguous in two respects. Firstly it is unclear (based on the Court’s formulation) whether the Court considered negotiation to be allowed in general, and secondly whether this was allowed on the basis of a compliant 26 Although the Court has not expressly ruled on these situations the Danish Complaints Board for Public Procurement has, in several cases, addressed these situations. See e.g. the order of 26 November 2004, E. Pihl & Søn A/S and the order of 30 November 2004, Murermester Finn F. Hansen.

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tender. The answer to the first question should be that negotiation in connection with open and restricted procurement procedures is essentially subject to a ban on negotiations. The answer to the second question is as follows. In the Storebaelt case, the Court stated that “with respect to the assessment of whether the negotiations that A/S Storebæltforbindelsen engaged in were compatible with the principle of equal treatment of tenderers, it must be determined whether this principle prevented A/S Storebæltforbindelsen from considering ESG’s offer”. As a basis for assessing whether the negotiations were legal the Court first assessed whether the tender was compliant. The judgement shows that negotiations cannot take place on the basis of a non-compliant tender. The paragraph quoted gives the impression that there would have been a right to negotiate if the reservation had been insignificant and the offer had thus been compliant. In effect, this will involve negotiation on nonfundamental elements which, as follows from the joint declaration, cannot be excluded. One might consider whether a duty of negotiation should be established as an alternative to the contracting authority’s right to reject offers containing insignificant reservations. The contracting authority’s right to reject offers containing insignificant reservations might seem like a disproportionately drastic reaction to an insignificant deviation from the procurement material. Based on this, it could be argued that before the contracting authority rejects the offer it is obliged to attempt to negotiate the removal of the reservation. Tenderers will often have an interest in removing the reservation since the alternative is rejection of the offer. However, it probably cannot be assumed that there is such an obligation. Nor is it likely that there can be “negotiations” on the removal of a reservation by way of the contracting authority simply ignoring the reservation or stating that reservations not listed on a reservation list have no legal effect.

18.6. Cancellation of the tender procedure 18.6.1. The background to the possibility of cancelling the procedure There are no explicit rules on when and how contracting authorities can stop a procurement process once it has been set in motion – otherwise known as cancellation. As for other areas where there are no explicit provisions, the general principles recognised in EU law are applied when it comes to assessment of the possibilities for cancellation. In regard to cancellation, although it is not entirely clear what the specific legal background for cancellation is, the principle of equal treatment plays a role.27 87 Within procurement law it is possible for a contracting authority to cancel a procurement process provided that the competition has not been completed. This is possible because procurement law does not appear to contain an obligation to contract. Being subject to such an obligation would lead to entirely unreasonable outcomes for contracting authorities. Most contracting authorities would probably display a marked reluctance to put a project out to tender if they would have to be certain that absolutely every condition was clear so that nothing could go wrong (thus not giving rise to the need to cancel). The contracting authority would have to ensure that there was a firm financial basis for the contract, and that neither the procurement material nor the procurement process was flawed in any way. Moreover, in any case contracting authorities would not run the risk of having to conclude an agreement on the basis of an offer that they knew would be unable to satisfactorily fulfil the requirements set by the contracting authority. 86

27 See C-92/00, Hospital Ingenieure, C-27/98, Metalmecanicca, C-244/02, Kauppatalo Hansel Oy, and C-440/13, Croce Amica One Italia.

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Case law provides no clear answer to the question of whether there are limitations to 88 the possibility of the contracting authority cancelling a procurement. However, the Court’s case law indicates that contracting authorities are not subject to (significant) limitations in this regard – cf. case C-92/00, Hospital Ingenieure. It can be argued that the issue of the scope for cancellation should not be a condition 89 regulated under the auspices of the Public Sector Directive but that illegalities in relation to the cancellation should be dealt with (only) as part of compensation law. However, this is probably not a decisive argument as it can be difficult to find a sufficient basis of liability for paying compensation in cases where the Public Sector Directive allows the contracting authority a very wide scope for cancellation. Furthermore, it is not appropriate that there are no procurement law instruments but only civil law instruments for dealing with such a pivotal phenomenon in procurement law as cancellation. 18.6.2. When the principles are not enough It is a matter of great practical relevance whether there are limitations to the possibility of cancellation and, if so, which rules form the basis for those limitations. Below, we look at the conditions in favour of the establishment of some limitations to the scope for cancellation. Against the background of the case law of the Court of Justice the primary basis seems to be the legal principles – preferably the equality principle. The principles result in a very broad scope and it can be considered whether this basis should be supplemented. In any case, it must be considered whether or not the principle of equal treatment is the only (or even the primary) basis. A fundamental argument for there being a limitation to the contracting authority’s possibilities for cancellation is that the whole procurement law system in the form it has been constructed in the Public Sector Directive means that consideration has been given to tenderers throughout the process. Consequently, if at this point it is possible for the contracting authority to cancel a procurement without any particular reason and disregard the tenderers’ cost of participating in the procurement and their efforts in preparing their tenders go to waste, this would depart from the system described in the above and disrupt the balance of the directive. The pre-contractual loyalty that covers the parties can be cited in support of this. Similarly the Public Sector Directive can be seen to contain a safeguard against arbitrariness. Therefore it would conflict with the spirit of the directives if the contracting authority could arbitrarily cancel a procurement given that the system otherwise stresses that there must be concrete considerations underlying the decisions made in connection with procurement. A condition not mentioned in the Court’s case law but which plays a role in the procurement law systems of some Member States is objectivity. The result of this concept is that cancellation can only take place if there is an objective reason. Similarly, the proportionality principle must be considered to be of significance in the assessment of the scope for cancellation. The use of the proportionality principle can be derived from the fact that objectivity most likely correlates with the weighting of the conditions that the contracting authority is basing the cancellation on. The greater the weighting it has, the greater the likelihood of a cancellation being justified. It can be considered whether the objectivity requirement in connection with cancellation should be underpinned by the principle of equal treatment. This is because an arbitrary decision regarding the cancellation of a procurement process will typically result in major discrimination or will indicate the intentional discrimination against tenderers which will consequently become subject to the principle of equal treatment which calls for objective grounds for the discrimination to be legal. The requirement that an objecMichael Steinicke

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tive cancellation be based on the principle of equal treatment is not a convincing basis. Although it cannot be disputed that, in many cases, cancellation may be based on an arbitrary desire to discriminate against tenderers a general requirement for an objective reason cannot be assumed to be based on the principle of equal treatment. Furthermore, equal treatment cannot be assumed to be ensured through a requirement for objective cancellation. It is quite conceivable, for instance, that the contracting authority can refer to an objective reason to justify a cancellation yet actually discriminate against tenderers by denying the tenderer that would have otherwise won the competition the opportunity do so. Conversely, tenderers may be treated equally in cases where cancellation is not justified because it is based on non-objective considerations. It should be noted, however, that the principle of equal treatment would often be applicable to non-objective cancellation such as in cases where the non-objective cancellation is due to a desire to discriminate against tenderers or where a non-objective cancellation has a discriminatory effect. 96 The concept of discrimination forming the basis of the principle of equal treatment is difficult to apply in connection with cancellation. According to the EU legal definition, discrimination means that unequal conditions are treated the same, or that similar conditions are treated unequally. The unsuitability of the concept in connection with cancellation is that, in the case of cancellation, all tenderers are treated equally. Essentially, no discrimination exists. Departures from this basis are limited; namely where the effect of the cancellation is unequal, such as in a case where a tenderer could claim to have been awarded the task prior to the cancellation. 97 Notwithstanding the above conditions, the Court maintained that under EU procurement law there are no conditions that limit the scope for cancellation other than EU law principles. However, the Court accepted that Member States can, to some extent, establish rules for when cancellations can be made. In case C-440/13, Croce Amica One Italia Srl, the Court confirmed earlier conclusions, including that there need not be any special reasons for a cancellation to take place. The Court also wrote (in para. 35) that: “Accordingly, EU law does not preclude Member States from providing in their legislation for the possibility of adopting a decision to withdraw an invitation to tender. The grounds for such a decision may thus be based on reasons which reflect, inter alia, the assessment as to whether it is expedient, from the point of view of the public interest, to carry an award procedure to its conclusion, having regard, among other things, to any change that may arise in the economic context or factual circumstances, or indeed the needs of the contracting authority concerned. The grounds for such a decision may also relate to there being an insufficient degree of competition, due to the fact that, at the conclusion of the award procedure in question, only one tenderer was qualified to perform the contract.” There is thus the opportunity for Member States to supplement the common European rules with their own national rules regarding the reasons for the cancellation of a procurement. 18.6.3. Case law 98

The Court has in a few cases considered the possibilities for cancellation. In case C-27/98, Metalmeccanica, the EU Court has ruled that art. 18 of the former public works directive should be understood to mean that the contracting authority is not required to award the contract to the only bidder having submitted a compliant bid. The question was posed during an Article 234 action at the request of the Austrian Federal Procurement Office (Bundesvergabeamt). The matter was raised when the Amt der Salzburger Landesregierung für den Bundesanstalt für wirtschaftsliche Anlegenheiten rejected the 312

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only remaining offer in connection with a procurement for a public works contract – the installation of a steel guardrail on the Austrian Westautobahn A1. Four consortia had submitted offers, but after the contracting authority reviewed the offers, only one offer was found to be compliant. The contracting authority then changed its mind and decided to “withdraw” the procurement, opting for concrete barriers instead of steel barriers. Two of the companies that were included in the remaining consortium brought the case to the Bundesvergabeamt, demanding the cancellation of the contracting authority’s decision to withdraw the procurement. The Bundesvergabeamt referred to the Court for a preliminary ruling, which essentially consisted of a decision as to whether there was a contractual obligation on the part of the contracting authority in this situation as there was only one compliant offer remaining. During the proceedings, the two companies argued not only that there should be serious reasons for a contracting authority to fail to contract but also that the failure to contract should only be an exception. The Court rejected this (paras. 23 and 25) and stated further that the procurement directives are designed to ensure effective competition which is not always ensured in the case of just one tender. The Court did not rule on whether the withdrawal was objectively justified but concluded from the above arguments that the contracting authority was not obliged to contract with the only bidder that was deemed fit to participate in the procedure. In the assessment of whether a cancellation can take place, the nature of the competitive situation plays a role in view of the Metalmeccanica case. Usually when reference is made to competitive reasons this is the case when tenderers assert their rights as participants in the competition. In the case in question the competitive situation implied that reference was made to the contracting authority’s benefit from the competition which justified its cancellation. It must be expected that the tenderer’s competition requirements can also justify a cancellation. In para. 21 the Court wrote that it is “It is common ground that Directive 93/37 contains no provision expressly requiring a contracting authority which has put out an invitation to tender to award the contract to the only tenderer judged to be suitable.”. Subsequently the Court ruled that based on the procurement directives, the obligation to conclude a contract in cases where there is only one suitable company cannot be discharged. More generally the Court stated that the contracting authority’s right not to contract “is not made subject by that directive to the requirement that there must be serious or exceptional circumstances”28. The Court’s statements in the case cannot be assumed to mean that limits can never be established for a contracting authority’s right to cancel. These limits do not have to concern solely serious reasons or exceptional circumstances. Case law in which contracting authorities are required to have an objective reason for cancellation cannot be assumed to be a serious reason or an exceptional circumstance. Where the Court is reluctant to give general guidance on the possibility of cancelling a procurement, the Advocate General’s opinion in the Metalmeccanica case contains several considerations of a general nature. The Advocate General notes in the proposal that no directives offer an explicit answer to the question. The Advocate General then considers if there is a basis for concluding whether or not decisions regarding contracting authorities having the scope to withdraw their procurements are a national matter. In this context the Advocate General points to the Commission being of the opinion that Member States may establish rules to the effect that contracting authorities are free to withdraw their procurements decisions. The Advocate General rejects this on the grounds that it involves a high risk of abuse of such a power. 28

C-27/98, Metalmeccanica, paragraph 25.

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The Advocate General concluded that the case could not be found in favour of the applicant, firstly because art. 8, para. 2, of the directive (see previous Public Sector Directive art. 41, para. 1) which expressly allows the cancellation of a procurement cannot be ignored, and secondly because art. 18 of the directive must be understood to simply mean that the criteria for selecting bidders and the reasons for exclusion from a procurement process must be in accordance with the criteria laid down therein. The Advocate General adds that any other interpretation – and in particular an interpretation where after, pursuant to the provision, an obligation to contract is discharged in cases where only one offer is submitted by one company and this is found to qualify – will consist of a much stretched interpretation of the directive. After determining the basis of the scope for cancellation, the Advocate General says, however, that this scope is neither absolute nor exempt from judicial control. The Advocate General also states that the scope for cancellation in cases such as this is not an obligation but a right – cf. point 15. Advocate General Saggio goes into further detail with reference to case T-203/96 Embassy Limousines in which the Court of First Instance (now the General Court) stated that there was no obligation to contract but that the scope for cancellation was nevertheless limited in that a decision to withdraw a procurement must not merely be arbitrary. The Advocate General concurs and states that in addition to the requirement that the decision to cancel must not be arbitrary, the decision must not violate the fundamental principles of the law of the European Union – cf. point 15. The Advocate General notes that the decision in the case in question cannot be said to be arbitrary but rather that a situation in which the contracting authority cancels a procurement “on the pretext that the bid was unsuitable – although in this case the bid was, admittedly, initially noted as being abnormally low, yet still met the criteria of the adversarial examination” would be contrary to the directive. The Advocate General concludes that he finds it indisputable that the contracting authority may sometimes cancel a procurement process and refuse to award the contract for reasons relating to the public interest when only one offer is submitted or when there is only one suitable offer remaining, provided that the decision is not arbitrary, does not constitute a pretext, nor runs contrary to the provisions of the directive or other laws or principles of the European Union – cf. point 18 in the opinion. 104 A later case – C-92/00 Hospital Ingenieure Krankenhaustechnik Planungs-Gesellschaft mbH – concerned the procurement of “the implementation of project management in respect of the completion of the overall strategy for food supply” in certain institutions. After the procurement commenced, the contracting authority was made aware that the area would be decentralised, meaning that no co-ordinating body should be established, resulting in there being no need for the procurement. In light of this, the procurement was cancelled. Regarding the cancellation, the Court stated that the only provision in the former services directive which specifically related to a decision to cancel a procurement was Article 12, para. 2, which stated that the contracting authority, in deciding not to award a contract, must justify its decision to tenderers and bidders as soon as possible. In addition, the Court stated that the scope for cancellation – cf. the Metalmeccanica case – is not limited to cases where there are serious reasons or exceptional circumstances. 105 The Court stated that although Directive 92/50 contained no specific provisions regarding the substantive or formal conditions for a decision to withdraw a procurement, except that this must be justified, such a decision is still subject to the fundamental principles of the law of the European Union; namely the (now) TFEU principles regarding the freedom of establishment and the freedom to provide services. The Court further stated that the principle of equal treatment and principle of transparency must also be observed in relation to a cancellation. 103

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Unlike the situation in the Metalmeccanica case no restrictions to the possibility of cancelling a procurement are indicated other than respect for the fundamental principles. In case C-244/02, Kauppatalo Hansel Oy, the Court had to decide whether the former procurement directive should be interpreted so as to mean that a “contracting authority which has commenced a procedure for the award of a contract on the basis of the lowest price may discontinue the procedure, without awarding a contract, when it discovers after examining and comparing the tenders that, because of the content of the invitation to tender, it is not possible for it to accept the tender which is overall the most economically advantageous?”29 The Court stated that the question should be answered by the interpretation of the directive “that a contracting authority can cancel a procurement process initiated by the authority with a view to concluding a contract in which the criterion is the lowest price without awarding the contract, provided that the authority, after examining and comparing the bids, becomes aware that, as a result of errors made by the authority in the preliminary assessment it, pursuant to the procurement provisions, cannot accept the most financially advantageous bid, provided that the authority when making such a decision respects the fundamental rules of the law of the European Union regarding public contracts, such as the principle of equal treatment”. In case C-440/13, Croce Amica One Italia, the Court had to decide whether the contracting authority was obligated to contract with the only remaining tenderer participating in a procurement process. The Court merely stated that “provided the principles of transparency and equal treatment are complied with, a contracting authority cannot be required to carry to its conclusion an award procedure that has been initiated and to award the contract in question, including where there remains only one tenderer in contention.”.30 This reinforces the Court’s previous decisions. It must be assumed that with the new directive it is not only equal treatment and transparency that are essential but also proportionality. In case C-448/01, EVN AG, concerning the procurement of supply of electricity, the Court had to decide whether the provisions of EU law applicable to the procurement of public contracts require the contracting authority to withdraw the procurement if one of the established award criteria is shown to be unlawful during review proceedings in accordance with article 1 of Directive 89/665. The Court stated that the finding that a decision relating to an award criterion is unlawful does not always lead to its cancellation. However, the Court also stated that in cases where the review body cancels a decision relating to an award criterion, the contracting authority cannot validly continue the procurement process and ignore the criterion as this would be the same as changing the criteria used in the procurement in question. It must be assumed that the judgement, strictly speaking, can only be taken to mean that in some cases, there may be an obligation to cancel a procurement when a law enforcement authority rules that it will cancel the contracting authority’s decision. Furthermore there is no doubt that there will be scope for cancelling the procurement if the contracting authority discovers that it has made (serious) errors.

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18.6.4. Cancellation – option or obligation? The correct approach of contracting authorities in the event of qualified violations of 110 the procurement rules should generally be cancellation. This might, in particular, be the case with regard to violations of the principle of equal treatment and the other EU law 29 30

C-244/02, Kauppatalo Hansel Oy, para. 23. C-440/13, Croce Amica, para. 36.

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principles. The alternative to cancellation is a situation in which a procurement competition could continue irrespective of the distortion of the competition situation. This is, of course, not sustainable. In the case of minor violations with a negligible impact on competition there is probably no obligation to cancel. However, the existence of a right to cancellation can be considered in certain cases. This could be relevant in case of minor violations of the procurement rules.

18.7. Equal treatment and other issues 111

The principle of equal treatment is characterised by being applicable on just about every aspect within public procurement. Besides the important elements that have been mentioned above there are a number of other issues with potential for application of the principle of equal treatment. Some of these issues have already been subject to a case at the Court whereas some of them have not yet been brought before the Court but do have obvious potential for equal treatment breaches. The following is in no way intended to be exhaustive. 18.7.1. Equal treatment and award of contract

One of the most complex issues in a procurement procedure is the award phase. The award can be simple, particularly if the award criterion is lowest price. It is very different if the award criterion is the best ratio between price and quality. The award process is subject to explicit regulation in Article 67 but this provision does not give answers to all the problems that might arise during the award phase. The principle of equal treatment might therefore be a useful instrument to pay heed to in this context – complementing Article 67. 113 Equal treatment in regard to fixing the subcriteria and in regard to applying the criteria (deciding the competition) may also be an issue, cf. case C-513/99, Concordia, where the Court found that establishing subcriteria connected to environmental protection in a situation where the contracting authority’s own transport company was one of the few economic operators able to provide products which could fulfil the criteria did not constitute a breach of the principle of equal treatment 112

18.7.2. Equal treatment and change of preselected entities 114

There are no express provisions relating to the possibilities of changing preselected operators or entities during the tender process. The general principles thus become decisive factors, particularly the principle of equal treatment. By a judgment of 24 May 2016 C-396/14, MTHøjgaard, the Court of Justice decided a case with Danish affiliation. The Court discussed whether the prequalified entities can be changed during the tender procedure. The case was based on a tender consortium consisting of E. Pihl & Søn and Per Aarsleff. After the prequalification and just before the expiry of the deadline for submission of tenders, E. Pihl & Søn went bankrupt and the preselected consortium no longer existed. The question was then whether Per Aarsleff could continue the tendering process alone. Firstly, the Court referred to the starting point previously determined by the Advocate General, namely that a strict application of the principle of equal treatment of tenderers lead to the conclusion that only those economic operators who have been preselected can in that capacity submit tenders and be awarded contracts.31 This means that

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the pre-selected economic operators and those who submit tenders are legally and substantively the same. 32 Contrary to the opinion of the Advocate General, the Court pointed out that the requirement of legal and substantive identity may be “qualified in order to ensure, in a negotiated procedure, adequate competition”, see paragraph 41. Reference is made to Utilities Directive 2004/17, Article 54, para. 3 that related to the opportunity of the contracting entity to carry out a quantitative selection among the candidates taking account of the need to ensure adequate competition. The Court also stated that if an economic operator is to continue to participate in the 115 negotiated procedure that continued participation must take place in conditions which do not infringe the principle of equal treatment of the tenderers – somewhat superfluous, it could be stated, as the examination exactly relates to the compliance with this principle. The Court then set out the general framework for the adjustment of preselected entities during a tender procedure: there is no breach of the principle of equal treatment when 1) the economic operator who wishes to continue participation in the tender by itself meets the requirements laid down by the contracting entity, and when 2) the continuation of its participation in that procedure does not mean that the other tenderers are placed at a competitive disadvantage (paragraph 44). In that respect the Court stated that it is apparent from the Danish order for reference to the Court of Justice that if solely Per Aarsleff had made an application for an invitation to take part in the procedure Aarsleff would have been pre-qualified. The Court also left it for the referring court to determine whether Aarsleff ’s takeover of 50 employees from Pihl og Søn, including key employees for the performance of the construction project, resulted in a competitive advantage to the detriment of the other tenderers (paragraph 47). The Court did not stipulate further guidelines on how to conduct such assessment. The Court also noted, specifically, on the basis of the specific circumstances of the 116 case: “having regard to information in the file which indicates that, first, the contract constituting the Aarsleff and Pihl group was concluded on the very day when the judgment declaring E. Pihl & Søn insolvent was delivered, and, second, that group’s first tender was lodged the following day without the signature of the liquidator of E. Pihl & Søn, it must further be stated that it is for the referring court to determine that the lodging of that first tender was not vitiated by an irregularity that was such as to preclude Per Aarsleff continuing to take part, in its own name, in the negotiated procedure concerned” (paragraph 46). This part of the judgment seems difficult to place compared with the more general framework. 18.7.2.1. Conditions on quantitative selection The Public Sector Directive 2014/24 also includes rules on quantitative selection, see 117 Public Sector Directive, Article 65. The provisions are not fully identical with the previous Utilities Directive 2004/17/ Article 54 but the contents of the two provisions are, however, substantially similar. On selection of the number of companies to be preselected both provisions require that account must be taken of the establishment of a real (Public Sector Directive Article 65, para. 3) or adequate (Utilities Directive 2004/17 Article 54, para. 3) competitive situation, respectively. In the case in question the Court stated that the contracting entity considered that there would have to be at least four candidates in order to ensure such competition.

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The Court’s focus on quantitative selection seems a bit strange. It is mentioned that there needs to be enough candidates to ensure adequate competition. It is, of course, obvious where this statement stems from but at the same time the statement also gives rise to confusion. First of all Article 65, para. 2 of the Public Sector Directive states that restricted procedure requires at least 5 candidates whereas at least 3 candidates must be invited to participate in a negotiated procedure, in a competitive dialogue and in case of an innovation partnership. 118 In relation to the provision dealt with here the new rules of the Public Sector Directive include supplementary provisions, see Article 65, para. 2, last section, according to which: “The contracting authorities shall invite a number of candidates at least equal to the minimum number. However, where the number of candidates meeting the selection criteria and the minimum levels of ability as referred to in Article 58(5) is below the minimum number, the contracting authority may continue the procedure by inviting the candidates with the required capabilities.”

This provision seems to deflate the statement of the Court that the requirement of legal and substantive identity can be modified where this is necessary due to the competition. The wording of Article 65, para. 2 clearly shows that the setting-up of the competition is now less prioritised as it can be ignored when the requested number of companies are not present. 119 One of the key issues is also the significance of the fact that it concerns pre-selection or whether other factors may lead to a modification of the requirement of a legal and substantive identity between the selected entity and the tenderer. The competitive situation which is requested could very well be transferred to open procedure in a situation where an inadequate number of tenders have been received to ensure the same level of competition compared to pre-selection (i.e. typically between 3 and 5 tenders according to the new rules). The Court does not comment on this, but as previously mentioned, does only comment on the pre-selection. 18.7.2.2. Obtaining competitive advantages 120

In line with the opinion of the Advocate General the Court focuses on whether the further participation of a company results in a competitive advantage for this company compared to the other candidates in the tender. The Advocate General stated several examples of such potential advantages, including that “Aarsleff may have decided to participate in the tender on its own on the basis of information not available to the other tenderers when they decided to take part. In particular, MTHZ claimed that when Aarsleff, following Pihl’s insolvency and the consequent dissolution of the group created in order to take part in the procedure, was able to take that decision, it knew exactly how many undertakings participating in the procedure had submitted a tender and, even, that the tender submitted by the group of which Aarsleff was a member had been assessed as the second best tender” (point 81). The Advocate General also referred to Aarleff ’s take over of the contracts of fifty salaried workers from Pihl & Søn – the only condition expressly mentioned by the Court. As the above conditions seem to be relevant in relation to the assessment of whether there are competitive advantages in connection with the further participation of the adjusted economic operator, they can probably be included in the assessment of whether unfair competitive advantages can be obtained. 18.7.3. Equal treatment and information, specifying the contract

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ple of equal treatment can be applied in situations where the contracting authority has not given sufficient information to one or more tenderers. The same goes for cases where the contracting authority has given too much information to certain tenderers. It might be a breach of the principle of equal treatment if the contracting authority does not provide information to the (other) tenderers which an incumbent tenderer already was in possession of. In connection to the specification of the contract there is also a risk of breach of the 122 principle of equal treatment. The clearest risk consists of the contracting authority “shaping” the contract as to fit one specific tenderer particularly well – modeling the procurement in accordance with the economic operator’s product line.

18.8. Transparency The first explicit regulation of the principle of transparency in procurement rules 123 came in Directive 2004/18.33 Even prior to this, however, the principle of transparency was already one of the key principles of procurement law. Prior to 2004/18 it implicitly formed the basis for many of the specific provisions of the earlier procurement directives. This applies, for example, to the rules on the publication of procurement notices and to the rules on the publication of the requirements and criteria forming the basis for the competition. The role of the principle of transparency in procurement law is that of both an autonomous principle and a principle whose primary purpose is to support the application of the principle of equal treatment. The background for pursuing transparency is that it makes it possible to ensure compliance with the principle of equal treatment and the principle of non-discrimination. These principles define the substantive objectives of the procurement directives and the conditions for the establishment of a substantive competitive situation. In relation to the treaty provisions, this is expressed in case C-324/98, Telaustria. 18.8.1. The concept of transparency in general Linguistically, the term transparency relates to the fact that something can be sur- 124 veyed and seen through. Using this as a basis in a procurement context, transparency is said to exist when the procurement and its terms and processes are or may be accessible and visible to any tenderer or potential tenderer. This does not present a major problem in defining the term and the definition is subject to only limited attention in the literature. The real difficulties regarding transparency come when trying to determine the level of transparency applicable in connection with public procurement. The principle of transparency is important in two respects: 1) as a supplementing 125 principle in connection with procurement above the threshold values, and 2) as a fundamental principle for procurement below the threshold values and for other procurement that is not subject to a directive-stipulated procurement obligation in conjunction with the general treaty rules. It must be assumed that the principle of transparency does not have the same content within the area of application of the procurement directives as it does outside those areas. The scope of the principle of transparency is not further defined in the context of 126 procurement law. The principle of transparency must, however, include transparency in two different situations. Firstly, transparency regarding the procurement is required, and 33 For more on transparency, see Christopher Bovis, The Law of EU Public Procurement, p. 221, Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 622, and Poulsen, Jakobsen and KalsmoseHjelmborg, EU Public Procurement Law, p. 56.

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secondly, transparency within the procurement process is required. The former means that the procurement must be published or openness regarding the procurement must otherwise be established. The purpose of this is for all market participants to have the opportunity to compete for the task. The latter (transparency within the procurement process) means that the contracting authority is obliged to ensure openness and transparency regarding the way the procurement competition will be conducted. This implies that the contracting authority must ensure that all decisions can be checked and that the way the procedure works is clear to the tenderers. The two different aspects of the principle of transparency are addressed through a number of provisions in the procurement directives. Transparency regarding the procurement is ensured through the requirement to publish a procurement notice in the EU’s Supplement to the Official Journal, including by way of the required formalities as set out in the graphic models in the appendices to the directives. Transparency within the procurement is ensured by way of a number of provisions which, for example, set out which criteria and procedures must be used in certain situations (e.g. an abnormally low bid). The core of the principle of transparency is primarily aimed at transparency within the procurement, since transparency regarding the procurement is largely regulated by a well-defined framework that cannot be deviated from or amended on the part of the contracting authority. But procurement will typically comprise a number of cases in which a special procedure will be needed but for which the directives do not contain special provisions that ensure transparency. In these cases, the principle of transparency could be used as the legal basis for requiring the contracting authority to (re-)establish transparency in the procedure. Based on the above, it could be expected that the principle of transparency would not play a major role in connection with public procurement over the threshold values. This is because the principle of transparency, unlike the principle of equal treatment, is reflected in the procurement directives by way of a number of formal rules which as a whole can be seen as an expression of the contracting authority’s obligations with regard to ensuring transparency in connection with the procurement. As has been the case with the more comprehensive principle of equal treatment, the principle of transparency increasingly tends to be cited together with other provisions and as a supplement to these. Consequently the principle of transparency must be considered to apply not only in connection with situations where there are no explicit rules that ensure transparency but to be applied also in combination with other rules of the directive intending to ensure transparency. There are many examples of this, including case C-532/06, Lianakis, C-470/99, Universale-Bau, and C-331/04, ATI. The basis of the contracting authority’s obligation with regard to transparency consists of ensuring an appropriate degree of publicity for the benefit of any potential tenderer that enables competition in the services market and the ability to check the impartiality of the procurement process – see case C-324/98 Telaustria, para. 62. Although the principle of transparency could, as a starting point, resemble an independent element of procurement law, the Court’s case law demonstrates that the existence of the principle of transparency lies primarily in the context of the principle of equal treatment.34 The argument is that transparency is needed to ensure compliance with the principle of equal treatment. However, it can be argued that the principle of transparency should be regarded as an independent principle of procurement law. A simple example can illustrate this: where, in connection with a procurement, a contract34

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ing authority provides erroneous or inappropriate conditions which result in tenderers being unable to submit optimal offers for the task in question the procurement may proceed as all tenderers have the same information and, as a consequence, there is no violation of the principle of equal treatment. But to the extent that in such a situation a tender is rejected on the basis of conditions that were not made clear in the procurement material, this may have led to insufficient transparency for the tenderer to prepare an adequate tender or may have posed a risk that the competition is not as strong as it could have been. This cannot be taken to imply that, in many situations, there will not be a close rela- 131 tionship between the principle of equal treatment and the principle of transparency. See for example the recent case law on the possibility of obtaining additional information from tenderers or of correcting errors in offers/tenders. 35 The basic premise of whether additions or corrections can be made is whether there is a risk of discrimination. However, determining whether discrimination exists or may exist depends on whether a sufficient level of transparency can be ensured. The relationship between the principle of equality and the principle of transparency is 132 also clearly evident in connection with the contracting authority’s use of the forms of procurement known as negotiated procurement (Article 29), competitive dialogue (Article 30), and innovation partnerships (Article 31). These forms of procurement all provide scope for negotiations but set few formal limits in this respect. If no rules of play are established for negotiations, the procedure will be non-transparent as it will not be possible to see through the negotiation process or to ascertain whether the contracting authority is conducting transactions resulting in discrimination. 18.8.2. Case law From the decisions of the Court it can be seen that the principle of transparency has 133 often been applied in connection with the description of a procured contract and the establishment and application of criteria of selection and of award. Consequently, requirements have been established stipulating that the procurement material contain a clear and specific statement regarding the procurement and that models for the evaluation of tenders and tenderers’ qualifications be transparent. 18.8.2.1. Transparency of evaluation models The first category includes violations of the principle of transparency in connection 134 with evaluations carried out in connection with a procurement. Such evaluations typically take place in relation to the selection or the award. Neither the rules for the selection nor for the award stipulate in detail how the evaluation should be made. The determination of the criteria with regard to both the selection and the award is essential, and this is extensively regulated for both phases. However, no specific rules are stipulated for either the selection or the award as to how to undertake the evaluation, including whether evaluation models used should be published. In light of this, the principle of transparency plays a key role in this context and in several cases the Court has been able to decide whether there is an obligation to publish the evaluation methods. In case C-6/15, TNS Dimarso, the Court had to decide whether an obligation existed 135 to publish the evaluation model used. The case concerned a Belgian procurement in which the contracting authority stated in its procurement material that the price and quality would be weighted 50/100. No evaluation model was published in either the pro35

See cases C-336/12, Manova, C-599/10, Slovensko, C-387/14, Esaprojekt, and C-131/16, Archus.

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curement notice or the procurement material. The evaluation method was described in the evaluation report as follows: “The four tenders were evaluated and compared with each other on the basis of the criteria set out above. First, the tenders were examined and evaluated on the basis of the “quality” criterion. For this, each tender was unanimously assigned a given score (high – satisfactory – low). Then, the price criterion was applied. On the basis of those scores, a final ranking was then established.” The Court stated that the only requirements stipulated in relation to ensuring that the principle of transparency was upheld in relation to the award phase were, firstly, that the sub-criteria applied in connection with the award criterion of “most financially advantageous offer” (and now the best ratio between price and quality) should be published in advance and, secondly, that the weighting of these criteria should also be published. By way of expansion the Court pointed out that there were no rules in the then procurement directive requiring that point models or other evaluation models used in assessing the offers submitted be published in advance. The Court stated quite plainly that there was no provision stipulating “an obligation on the contracting authority to bring to the attention of potential tenderers, by publication in the contract notice or in the tender specifications, the method of evaluation applied by the contracting authority in order to effectively evaluate and assess the tenders in the light of the award criteria of the contract and of their relative weighting established in advance in the documentation relating to the contract in question.” (para. 27). The formulation “used” seems slightly vague as the said publication is referred to in the procurement notice or procurement material at which point no offers would have been received and, subsequently, no evaluation would have taken place. Nor was there anything in the Court’s earlier case law which laid down an obligation for publication. As a justification for why there was no obligation to publish, the Court stated that “an evaluation committee must be able to have some leeway in carrying out its task and, thus, it may, without amending the contract award criteria set out in the tender specifications or the contract notice, structure its own work of examining and analysing the submitted tenders.” (para. 29). Similarly the Court stressed in para. 30 that it is important that a contracting authority be able to adapt the evaluation method it will use to evaluate and classify the offers in relation to the circumstances of the specific case. The Court stated, however, that the establishment and application of the evaluation model must not lead to changes to either the sub-criteria or the relative weighting of the same. Although the Court has no problems with the evaluation model being determined after the deadline for tenders (i.e. once the contracting authority knows how many offers tenders have been received), it is still problematic that the evaluation model is not determined until after the contracting authority has opened the tenders. This is because of the obvious risk of discrimination in determining the evaluation model in a way that favours one or more of the tenderers. Consequently the Court states that, in principle, it is not possible to determine the evaluation model after the tenders are opened. However, para. 31 stresses that “in the event that the determination of that method is not possible for demonstrable reasons before the opening of the tenders, as noted by the Belgian Government, the contracting authority cannot be criticised for having established it only after that authority, or its evaluation committee, reviewed the content of the tenders.”. No further detail is provided as to the meaning of “demonstrably” and how this renders it impossible to determine the method prior to the opening of tenders. Strict requirements must be set as to when this is allowed, given that it should not even be possible. The fact that determining the evaluation model prior to opening the offers would be complicated 322

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is would appear to being insufficient reasoning for waiting to determine the model until after the tenders have been opened. In the Court’s assessment of the specific case which gave rise to the request for a preliminary ruling consideration was given both to the fact that the contracting authority in the procurement process stated only two award criteria – quality and price, each weighted “50/100” – and the fact that the evaluation committee used a scale of “high”, “sufficient”, and “low” in evaluating the offers in relation to the criterion “quality” without using a scale for the “price” award criterion (see para. 33). The indication “50/100” meant, according to the information of the referring court, that the two award criteria were of equal importance. However, the Court pointed out that the chosen approach for the evaluation appeared to potentially affect the price criterion in that it was attributed a decisive weighting in relation to tenders rated the same on the quality scale; i.e. the price was decisive for all tenders achieving the grade “high” in relation to quality. The Court then left it for the referring court to “determine whether the relative weighting of each of the award criteria published in the procurement notice was actually upheld by the contracting authority in connection with the evaluation of the tenders.” (para. 35). In case C-470/99, Universale-Bau, the Court had to decide whether there was a requirement to publish the evaluation model that would be used for the selection. In a reworded version, the Court had to decide “whether Directive 93/37 is to be interpreted as meaning that, where, in the context of a restricted procedure, the contracting authority has laid down in advance the rules as to the weighting of the criteria for selecting the candidates who will be invited to tender, it is obliged to state them in the contract notice or the tender documents”.36 The Court concluded that an interpretation according to which the evaluation model must be published if the contracting authority determines this model in advance “is the only interpretation which complies with the objective of Directive 93/37, as explained in paragraphs 88 to 92 of this judgment, since it is the only one which is apt to guarantee an appropriate level of transparency and, therefore, compliance with the principle of equal treatment in the procedures awarding contracts to which that directive applies.” (our emphasis). As can be seen, there appears to be a discrepancy between TNS Dimarso on the one hand and Universale-Bau on the other. Thus, for the selection there is an obligation to publish the evaluation model, whereas for the award there is no such obligation. The difference between the two cases may be that, in the context of the award, more is made of the fact that there must be a weighting and detailed description of the sub-criteria from the outset of the procurement. This level of transparency can be considered to be greater than what is required for the selection, which is why the Court may not have found it necessary to extend transparency to the award evaluation models. It is unlikely that this can explain the difference, in that the obligation in the Universale-Bau case pertains solely to the situation where the contracting authority determined an evaluation model in advance whereas this does not seem to have been attributed any significance in TNS Dimarso.37

C-470/99, Universale-Bau, para. 86. A third possible explanation could be that the outcome of the Universale-Bau case would have been different if the Court were considering the case today. It is uncertain whether this is the case, and until the Court rules otherwise the conclusion of the Universale-Bau case must be upheld. 36

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18.8.2.2. Transparency regarding criteria 145

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The two phases of evaluation in the procurement – selection and award – are pivotal in the competition. The basis for this competition is the criteria laid down in connection with the two phases. The procurement directive contains fairly detailed rules for how to formulate these criteria but there are still conditions which, in practice, may lead to uncertainty. In these situations, the principle of transparency may play a role. In case C-87/94, Commission v Belgium, para. 88, the Court stated that “the requirement under Article 27(2) of the Directive for the contracting entities to state 'in the contract documents or in the tender notice all the criteria they intend to apply to the award, where possible in descending order of importance' is intended precisely to inform potential tenderers of the features to be taken into account in identifying the economically most advantageous offer. All the tenderers are thus aware of the award criteria to be satisfied by their tenders and the relative importance of those criteria. Moreover, that requirement ensures the observance of the principles of equal treatment of tenderers and of transparency.” Case C-513/99, Concordia Bus Finland Oy, is an example of the Court relating to transparency conditions without focusing explicitly on the principle. In the case, a Finnish authority emphasised CO2 emissions as part of the award criteria in connection with the purchase of urban buses by using the most financially advantageous bid. In several places the Court emphasised that the principle of equal treatment should be ensured but it did not refer to the frequently mentioned connection between the principle of equal treatment and the principle of transparency. However, transparency played a significant role in the Court’s argument. The Court’s review of the conditions that contribute to setting the limits for determining the award criteria is characterised by a transparency perspective. In para. 69 the Court stated: “Consequently, in the light of all the foregoing, the answer to the second question must be that Article 36(1)(a) of Directive 92/50 is to be interpreted as meaning that where, in the context of a public contract for the provision of urban bus transport services, the contracting authority decides to award a contract to the tenderer who submits the economically most advantageous tender, it may take into consideration ecological criteria such as the level of nitrogen oxide emissions or the noise level of the buses, provided that they are linked to the subject-matter of the contract, do not confer an unrestricted freedom of choice on the authority, are expressly mentioned in the contract documents or the tender notice, and comply with all the fundamental principles of Community law, in particular the principle of non-discrimination.” (Our emphasis). The judgement means that a contracting authority, in connection with its description of the award criteria, must ensure sufficient transparency and that the conditions described have subsequently been incorporated into the new Public Sector Directive (see Article 67). In case C-532/06, Lianakis, with regard to the determining of the award criteria, the Court stated “ Article 36(2) of Directive 92/50 precludes the contracting authority in a tendering procedure from stipulating at a later date the weighting factors and sub-criteria to be applied to the award criteria referred to in the contract documents or contract notice.”.38 This means that all significant conditions in relation to the description of the award criteria must be indicated in advance.

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18.8.2.3. Description of the subject-matter of the procurement A key condition in connection with any procurement is the description of the sub- 150 ject-matter of the procurement. This is pivotal to the economic operators’ ability to ascertain whether they wish to participate in the procurement process. Transparency is, however, a broad concept which may involve different levels of detail. The Court has stated the following regarding the level of description of the task: “By wording the statements of the notice clearly, all potential tenderers who are usually well informed, experienced, and sufficiently diligent will be given an objective opportunity to form a concrete idea of the public works to be carried out and their location, and to subsequently submit their bids.”39

Although the description of the procurement’s subject-matter must be clear and spe- 151 cific, the above sets the boundaries for how detailed the description should be. The need to create a concrete idea does not mean that there should just be a description of the main features, as tenderers need a high level of detail in order to form the necessary overview of the nature of the task. The description of the procurement’s subject-matter must be geared towards generally well-informed, experienced, and sufficiently diligent tenderers. This concept most likely refers to the general professional market participants that the contracting authority is aiming for. In case C-368/10, Commission v Netherlands, the Court stated in para. 56 that “the 152 principle of equal treatment and the obligation of transparency which flows from it require the subject-matter of each contract and the criteria governing its award to be clearly defined from the beginning of the award procedure.”40 More specifically the Court stated with regard to technical specifications and on the basis of the principles, including the principle of transparency, that “technical specifications must afford equal access for tenderers and not have the effect of creating unjustified obstacles to the opening up of public procurement to competition and be sufficiently precise to allow tenderers to determine the subject-matter of the contract and to allow contracting authorities to award the contracts, being clearly indicated, so that all tenderers know what the requirements established by the contracting authority cover.”41 (our emphasis). 18.8.2.4. The contracting authority’s own stipulations In several cases, the Court stated that if the contracting authority stipulates terms or 153 conditions for the competition in advance, these must be followed.42 If the contracting authority has written, for instance, that all companies which meet one of the conditions stated in Article 57, para. 4 (voluntary grounds for exclusion) will be excluded, then the contracting authority must exclude these. If the contracting authority stipulates that all offers containing reservations will be excluded, the contracting authority does not have the scope to accept offers containing reservations regardless of whether these could be accepted in other contexts. Under the circumstances, compliance with the principle of transparency could mean 154 that the principle of proportionality (another of the main principles of Article 18) cannot be applied – see C-171/15, Connexxion Taxi Services. Once the contracting authority has stipulated a certain condition there is no longer an opportunity to make a proportionality assessment in order to consider whether, e.g., an offer must be rejected. This C-423/07, Commission v Spain, para. 58. See also C-299/08, Commission v France, paras. 41 and 43. 41 C-368/10, Commission v Netherlands, para. 62. 42 See e.g. C-278/14, SC Enterprise, and C-42/13, Cartiera Dell’Adda. 39 40

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shows that the principle of transparency is more important than the principle of proportionality in connection with a procurement. When a contracting authority has stipulated a condition for participation in a procurement a deviation from the above would result in uncertainty regarding the competition framework. Even though such a rule may result in a tenderer being rejected from a procurement based on an insignificant (non-proportional) condition, all tenderers will have been notified of the conditions in advance and will have had the opportunity to take these into account when preparing their offers.

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A new feature of the Public Sector Directive is the explicit introduction of the proportionality principle into the text of the directive. In the previous 2004-directive the proportionality principle was only mentioned in the preamble. Although the principle had a less prominent position it was still part of the legal background of the directive partly due to the general status of the principle of proportionality within EU law and partly due to the eminent position of the principle underlying a number of provisions of the directive. In view of the explicit reference in Article 18 of the Public Sector Directive to the principle of proportionality the principle must be expected to become of increasing importance in the application of the procurement directives. The principle of proportionality is applied in a number of different ways. Sometimes it is applied in its entirety (with all three components of the principle involved)43 and sometimes the CJEU only applies the part that might be relevant in a particular case. 44 This uneven approach is both applied within EU-law in general and within public procurement law. The principle of proportionality has been a part of the procurement rules already from the very beginning of public procurement legislation within EC/EU although it has not always been apparent. In the new directives the principle of proportionality plays a more distinct role and some of the provisions are specifically based on the principle. An such example is the access provided by Article 57, para. 6, to self-cleaning. According to this provision an economic operator that might be subject to exclusion due to one of the conditions described in Article 57 now has the chance to prove that he has initiated measures with the purpose of improving and re-establishing his reputation and will once again be trustworthy in the eyes of the contracting authorities. The proportionality principle can be difficult to apply for contracting authorities since the assessment of what is proportionate and what is not is not an easy assessment to make. The opposite of making use of a proportionality assessment is applying measured provisions based on detailed requirements. An example can be found in the Public Sector Directive Article 58, para. 3, which states that the maximum required turn-over for a contract must be 2 times the estimated value of the contract. This is very approachable for the contracting authority but not necessarily the most accurate instrument when trying to assess the suitable level of turn-over for a specific contract. Previously, this assessment was subject to a proportionality assessment which is still the case for any selection criterion other than that of turn-over, see Article 58, para. 1, last sentence. The proportionality principle has been applied in a number of different situations in regard to public procurement procedures. Most cases have concerned the selection 43 The principle of proportionality consists of: 1) a test of suitability, 2) a test of necessity, and 3) proportionality stricto sensu. 44 For more on the proportionality principle, see the introductory chapter, section 0.3.2.2.

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phase. The reason is that the selection phase is characterized by the need to ensure that the abilities and qualities of the applicants are at a level where the applicants are able to fulfil the contract from both a financial and a technical point of view. At the same time the selection phase is not intended to find the best applicant for the job since the winner is found based on other merits (the award criteria). Therefore the selection phase must implicitly strike a balance between accessibility to the procedure and exclusion of those applicants not capable of fulfilling the contract. The principle of proportionality plays a significant role in regard to the selection pro- 160 cess. The reason is that the selection process, unlike the award process, only has the distinct purpose of finding economic operators that are qualified and not necessarily the best qualified economic operators. At the same time the qualifications of any economic operators must be measured against the specific contract. These two characteristics jointly underscore the principle of proportionality in the process of selection. Furthermore, the principle is important during all the stages of the selection phase: exclusion stage, assessing the abilities of the economic operators and, if relevant, the quantitative selection (shortlisting). In case C-213/07, Michaniki, the Court had to address whether incompatibility be- 161 tween the media sector and the sector for public purchasing in national law was in breach of the principle of proportionality (and other rules). The case concerned a prohibition for media companies to participate in procurement procedures. The Court stated that such rules could be allowed according to EU law as long as they were compliant with the principle of proportionality (para. 61). In the case in question the prohibition did not allow for any exceptions. The Court stated that for such rules where there are no exceptions there is an infringement of the principle of proportionality (para. 63 and 66). It has to be allowed for economic operators to document that their participation does not give rise to any concern. Case C-376/08, Serrantoni Srl, also related to a situation concerning the access to participate in a procurement procedure, but in this case with regard to economic operators participating in a consortium: such economic operators were not allowed to also participate by individually in the same procurement procedure as the consortium. This was also a prohibition ruling out the possibility of exception and the Court repeated previous judgments in stating that since the exclusion was automatic and absolute such an arrangement would be in breach with the principle of proportionality (para. 38). There are also limits to the principle of proportionality and these limits are typically 162 caused by a clash with the other principles. In case C-599/10, Slovensko, the Court stated that the contracting authority is not obligated to seek clarification if there are uncertainties in a tender – not even in view of the principle of proportionality. It could be argued that it would be disproportionate to exclude a tender from the competition just because the tender contains some unclear elements and therefore potentially establishing an obligation to seek clarification. Such an obligation and the communication that it would require could potentially lead to lack of transparency and thereby also to a breach of the equal treatment principle. In case C-171/15, Connexxion Taxi, the Court concluded that if a contracting authority in relation to a procurement procedure has stated that every economic operator that is caught by the conditions for exclusion in the directive will be excluded, it will not be permissible to make the exclusion subject to a proportionality assessment. The Court explained this by stating: “Therefore, the assessment of the exclusion at issue in the light of the principle of proportionality, where the tender conditions of the contract concerned provide for the rejection of tenders which are covered by such an exclusion clause without any assessment of that principle, is liable to place the econo-

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mic operators concerned in an uncertain position and adversely affect the principle of equal treatment and compliance with the obligation of transparency.”45 (Our italics) 163 It is quite clear that in consideration of the principles of equal treatment and transparency bearing of the proportionality principle is limited. As for other examples of the application of the principle of proportionality, see cases C-358/12, Consorzio Stabile Libor Lavori Pubblici, C-538/07, Assitur Srl, C-549/13, Bundesdruckerei GmbH, C-425/14, Impresa Edilux, and C-46/15, Ambisig.

18.10. Narrowing competition – the competition principle 164

The wording of Article 18, 2nd sentence reads as follows: “The design of the procurement shall not be made with the intention of excluding it from the scope of this Directive or of artificially narrowing competition. Competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators.”

The provision is new in the procurement context even though the issue of competition has played a vital part of public procurement throughout the years. There is a similar provision in the Utilities Directive Article 36, para. 1, last sentence. There are no similar provisions in the Concessions Directive or the Defence and Security Directive. In regard to the latter the reason for the absence of such a provision is that this directive is inspired by the 2004-directives. Instead of a general competition requirement the is a number of provisions ensuring that competition is not restricted under specific circumstances. 165 The issue of competition has been part of the procurement rules for decades. 46 A number of references to competition have been found in the directives and also in case law. One of the first significant references to competition came in case C-243/89, Commission v Denmark (Storebaelt case) relying on the fact that the 9th recital of the preamble to the previous Construction Directive contained a reference to the importance of competition. The Court concluded that in order to ensure the competitive situation the contracting authority is required not to discriminate between the tenderers which basically amounts to the introduction of the principle of equal treatment. Since then the concept of competition has gained increasing attention in the rules as well as in case law. Over the years the the Court of Justice has made numerous references to competition in a public procurement context, see e.g. C-213/12, Impresa Pizzarotti, C-213/07, Michaniki, C-336/12, Manova, C-138/08, Hochtief, C-286/99, Lombardini, C-470/99, UniversaleBau and C-247/02, Sintesi. Even though it is obvious that competition plays a role in the procurement regime it is far from clear exactly what that role signifies apart from expressing an overall purpose underpinning the tender procedures. The references to competition are not consistent since the Court has used a different terminology in many of the cases. Phrases such as free competition47, undistorted competition48 and effective competition49 have been used50 and it could be argued that this incongruent approach does not help to support a uniform understanding or application of the consideration to competition.

C-171/15, Connexxion Taxi, para. 43. For more on this part of Article 18, see Albert Sanchez Graells, Public Procurement and the EU Competition Rules, chapter 5, especially p. 207 et seq. and Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 631. 47 C-285/99 and C-286/99, Lombardini and Mantovani, para. 76. 48 C-454/06, Pressetext, para. 31 and 79. 49 C-147/06 and C-148/06, SECAP, para. 29 and C-21/03 and C-34/03, Fabricom, para. 26. 45

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According to Article 18, para. 1, last sentence the design of the procurement shall not be made with the intention of excluding it from the scope of the Public Sector Directive or of artificially narrowing the competition. These concepts have not yet be the subject of cases at the Court and it is therefore not entirely clear how the provision will be interpreted. It is stated that it would amount to a breach of Article 18, para. 1, last sentence if a procurement procedure is designed with the intention of excluding it from the Public Sector Directive. This part can be seen less as a reference to the concept of competition and more as a reference to the issues of preventing circumvention of the directive. The reference to design must refer to the organization of the procurement procedures. However, it will probably also cover the design of the contract even though this is not expressly stated. An example of the latter is the division of one contract into several with the purpose of splitting up the contract value on several contracts whereby, as a consequence, each contract falls below the economic thresholds and hence will not be subject to the procedures of the Public Sector Directive. It could be argued that the Public Sector Directive already holds a number of provisions relating to if and when the directive must be applied, inter alia the rules on economic thresholds (Article 4), the exceptions (Article 10), the rules on in house-providing (Article 12), etc. The provision in Article 18, para. 1, last sentence will probably apply to situations apart from those explicitly mentioned in the directive. It must be assumed that the scope for the application of first part of Article 18, para. 1, last sentence is very narrow since it will only apply to a very few situations. Article 18, para. 1, last sentence also provides that the design of the procurement shall not be made with the intention of artificially narrowing competition. This sentence is not very clear and the drafters of the provision have provided a description of what exactly is meant by artificially narrowing the competition stating that competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators. At a first reading artificially narrowing competition is basically a question of whether or not there is discrimination: no tenderer must be unduly favoured or disadvantaged. Therefore there is a significant overlap between this part of the provision and the principle of equal treatment.51 With the significance of the latter principle in mind this principle would probably often be invoked in such situations leaving Article 18, para. 1, last sentence to play a diminished role. The most problematic part of Article 18, para. 1, last sentence, is the reference to “intention”.52 Including the subjective intention of the contracting authority when this entity prepares procurement or when making decisions in the course of the tendering procedure changes the provision and the application dramatically. It is extremely difficult to assess what exactly is the intention of a contracting authority for any given action. That 50 For more on the variation of the terminology used, see Albert Sanchez Graells, Public Procurement and the EU Competition Rules, p. 199. Graells dismisses that the difference in terminology could have any real importance and states that “this debate seems to be largely formal and potentially misleading, and it is argued that these terminological differences should not obscure the fact that these different references were clearly intended to stress that the EU public procurement regime has a direct and particularly close link with the principle of competition as a general principle of EU law.” 51 Sue Arrowsmith agrees with this interpretation and argues that Article 18, para. 1, last sentence seems to be “a simple manifestation of the more general equal treatment principle, as designing any aspect of the procurement for this reason rather than based on other needs and preferences in the project would clearly infringe that principle”, see The Law of Public and Utilities Procurement, p. 631. 52 For further discussion on this troublesome part of the provision, see Albert Sanchez Graells, Public Procurement and the EU Competition Rules, p. 210.

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assessment is difficult especially since most decisions could be ascribed to one or more legitimate reasons (e.g. the contracting authority could award a contract directly to a specific economic operator under the pretences that he thinks this is legitimate according to, inter alia, the rules on negotiated procedures without a prior notice even though this rules is not applicable). It would seem difficult to establish with any amount of certainty that the intention of the contracting authority is to circumvent the procurement rules. There are no indications as to how the interpretation of the intention must be conducted.53 It must be assumed that only when the intention of the contracting authority is clear from the context of the decision (of design or within the procedure) the provision will be applied. This leaves a very narrow window for application of Article 18, para. 1, last sentence. 171 It has been argued that the references in case law and the references in the directives establish a competition principle. It could be argued that since the issue of competition is now part of the provision containing the principles of procurement a competition principle therefore exists. The existence of a competition principle is, however, debated. 54 There is no question that it would be legitimate to refer to a competition principle, but it is more doubtful if it will be possible to find a well-defined content of such a principle. Based on the case law it could be argued that there is a competition principle, but since the content of this principle is far from clear it is difficult to define exactly what such a principle should involve.55 172 The wording of Article 18, para. 1, last sentence is distinctly different from the wording of other principles (on equal treatment, transparency and proportionality) and it could be argued that the competition principle is not a principle in the normal meaning of a principle. You could almost state that the provision contains too many details and instructions to be labeled a principle. Furthermore, in order to see Article 18, para. 1, last sentence as a consolidation of a competition principle the broadness of the principle should be continued in the provision. This is not the case since not all aspects of narrowing competition is covered though the specific wording of the provision. 173 The question can be asked as to whether there are two strings of applying competition in the public procurement context: the broad concept evolved from the case law (although subject to different terminologies) and the more focused application of Article 18, para. 1, last sentence. For all practical purposes the provision in Article 18, para. 1, last sentence is more detailed and would therefore be applied rather than a more loosely worded principle. However, as submitted the scope of application for Article 18, para. 1, last sentence must be assumed to be very limited.

53 Albert Sanchez Graells suggests that the intention must be seen in the light of the effect of the specific action or decision under scrutiny, see Public Procurement and the EU Competition Rules, p. 211. It is difficult to agree with this approach since it seems to remove one of the basic components from the provision (the matter of the intention of the contracting authority). 54 As advocates for two different interpretations on including competition considerations into public procurement (and existence of a competition principle), see as advocate Albert Sanchez Graells, “Public Procurement and the EU competition rules” at 199 and as opponent Sue Arrowsmith, ‘The Purpose of the EU Procurement Directives: End, Means and the Implications for National Regulatory Space for Commercial and Horizontal Procurement Policies’ in Cambridge Yearbook of European Legal Studies Vol 14, 2011-2012 at 34. 55 Albert Sanchez Graells devotes attention to the task of describing such a principle (see Public Procurement and the EU Competition Rules) but it is probably not wrong to state that the legal foundation for defining a uniform competition principle is not strong enough (yet): the mere contoures of a principle primarily based on the use of the word/concept of competition and the wish to promote this concept based on a fragmented case law is difficult to melt into one convincing principle.

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18.11. Measures concerning environmental, social and labour issues 18.11.1. General The wording of Article 18, para. 2 is as follows:

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“Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X.”

The provision is partly continued from Directive 2004/18 Article 27 with some changes. There are similar rules in the Utilities Directive Article 36, para. 2, the Concessions Directive Article 30 and the Defence and Security Directive Article 24 (this concerns the same non-economic issues but with a more lenient approach). 175 Recital 37 contains the following details on Article 18, para. 2 reads as follows: “With a view to an appropriate integration of environmental, social and labour requirements into public procurement procedures it is of particular importance that Member States and contracting authorities take relevant measures to ensure compliance with obligations in the fields of environmental, social and labour law that apply at the place where the works are executed or the services provided and result from laws, regulations, decrees and decisions, at both national and Union level, as well as from collective agreements, provided that such rules, and their application, comply with Union law. Equally, obligations stemming from international agreements ratified by all Member States and listed in Annex X should apply during contract performance. However, this should in no way prevent the application of terms and conditions of employment which are more favourable to workers. The relevant measures should be applied in conformity with the basic principles of Union law, in particular with a view to ensuring equal treatment. Such relevant measures should be applied in accordance with Directive 96/71/EC of the European Parliament and of the Council and in a way that ensures equal treatment and does not discriminate directly or indirectly against economic operators and workers from other Member States.”

This part of Article 18 is very different from the rest of the provision. The provision 176 relates to a number of very specific conventions and is very precise in its wording regarding the obligations related to it. Therefore this is quite distant from the nature of the principles in Article 18, para. 1. The reason why para. 2 is coupled with Article 18, para. 1, is probably caused by the importance and general nature of both parts of the provision. By combining the rule of environmental issues, labour and social law with the general principles the provision combines some of the most prominent rules of the directive. Of course there is also the direct link between the two paras of Article that in recital 37 it is underlined that the rules referred to in para. 2 must ensure equal treatment and be applied in conformity with this principle. The provision in Article 18, para. 2 obliges the Member States to ensure compliance. 177 This basically means that instruments for ensuring such compliance should appear in the implementing rules of the Member States. The provision mentions a number of laws and regulations but it seems quite clear that the approach to national legislation must be one of informality: including collective agreements in the provision sends the signal that any effective means of regulation in the member States must be covered by Article 18, para. 2. 178 Annex X comprise the following rules, conventions etc: – ILO Convention 87 on Freedom of Association and the Protection of the Right to Organise; – ILO Convention 98 on the Right to Organise and Collective Bargaining; – ILO Convention 29 on Forced Labour; – ILO Convention 105 on the Abolition of Forced Labour; Michael Steinicke

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– – – – –

ILO Convention 138 on Minimum Age; ILO Convention 111 on Discrimination (Employment and Occupation); ILO Convention 100 on Equal Remuneration; ILO Convention 182 on Worst Forms of Child Labour; Vienna Convention for the protection of the Ozone Layer and its Montreal Protocol on substances that deplete the Ozone Layer; – Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal (Basel Convention); – Stockholm Convention on Persistent Organic Pollutants (Stockholm POPs Convention); – Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade (UNEP/FAO) (The PIC Convention) Rotterdam, 10 September 1998, and its 3 regional Protocols. 179

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The list contains the fundamental 8 ILO conventions. The question is whether other conventions within the area of social, environmental and labour law issues that are not listed might be able to reach similar benefits and importance. The wording of the provision and the wording in Annex X do not suggest any broad interpretation and therefore it must be assumed that only conventions on the list are covered by Article 18, para. 2. In recital 37 there is a specific reference to Directive 96/71 of the European Parliament and the Council concerning the posting of workers in the framework of the provision of services. The directive is essential in order to ensure the working conditions for workers posted in other Member States. Over the last few years the CJEU has ruled in a several cases on Directive 96/71 emphasizing whether it is allowed for the contracting authority to require a minimum wage to be paid to all workers involved in a specific contract. In case C-346/06, Rüffert and C-549/13, Bundesdruckerei GmbH, the Court reached the conclusion that it was not possible to require minimum wage to be paid in connection with public contracts. In the latest decision, C-115/14, RegioPost GmbH, the Court seems to have modified the line of the previous cases. In all three cases the relevant rules are partly national provisions, partly different EU-provisions, the procurement directives and the TFEU provisions on the free movement of services (TFEU Article 56). In all three cases what was essential was the application of the procurement directives’ rules on contract conditions, and whether or not the contract conditions were in accordance with the EU law. In all the cases the Court stated that the element that a company from another Member State (other than the contracting authority) was forced to give a higher salary to the employees in connection to the services in the contracting authority’s Member State is an obstacle to the economic operator’s possibilities of participating in and win competitive tender procedures. The requirement to apply minimum wages might mean that the economic operator would loose a competitive advantage in relation to participating in procurement procedures and might also make the realisation of the free movement less attractive. Therefore the starting point is that it will be in breach of the free movement rules to establish such requirements. National requirements on minimum wage might be accepted anyway if the rules are founded in legitimate considerations. In all of the cases the Court stated that protection of workers can be seen as a legitimate consideration (see C-115/14, RegioPost, paragraph 70). In the two first cases (Rüffert and Bundesdruckerei) the Court found that the rules on minimum wage did not consistently observe the relevant consideration and therefore there was no legitimate reason to establish obstacles to the free movement of services in the way it was practised. In these cases the national requirements on minimum wage therefore were found to be 332

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in breach of the TFEU. In the last case, RegioPost, the Court reached the opposite result: rules on minimum wage were legitimate. Different elements might explain the different result between the three cases. In case C-15/14, RegioPost the Court stated that particularly the cases Rüffert and Re- 184 gioPost resemble each other but that there were differences in the two cases that explain the different results. The Court stated: ”It is clear from paragraphs 38 to 40 of the judgment in Rüffert … that although the Court concluded, in the context of the examination of the national measure at issue in the case that gave rise to that judgment in the light of Article 56 TFEU, that that measure could not be justified by the objective of the protection of workers, it based that conclusion on certain characteristics specific to that measure, which clearly distinguish that measure from the national measure at issue in the main proceedings. Thus, in the judgment in Rüffert … the Court based its conclusion on the finding that what was at issue in the case that gave rise to that judgment was a collective agreement applying solely to the construction sector, which did not cover private contracts and had not been declared universally applicable. Furthermore, the Court observed that the rate of pay set by that collective agreement exceeded the minimum rate of pay applicable to that sector under the AEntG. The minimum rate of pay imposed by the measure at issue in the main proceedings is laid down in a legislative provision, which, as a mandatory rule for minimum protection, in principle applies generally to the award of any public contract in the Land of Rhineland-Palatinate, irrespective of the sector concerned.” (paragraphs 73-75) (Our italics)

In case C-549/13, Bundesdruckerei, the Court stated the following with regard to the 185 protection of workers (paragraphs 32-33): ”However, the Court has already held that, in so far as it applies solely to public contracts, such a national measure is not appropriate for achieving that objective if there is no information to suggest that employees working in the private sector are not in need of the same wage protection as those working in the context of public contracts [reference to the Rüffert case, paragraphs 38 to 40]. In any event, the national legislation at issue in the main proceedings, in so far as its scope extends to cover a situation such as that in the dispute in the main proceedings, in which employees carry out a public contract in a Member State other than that to which the contracting authority belongs and in which the minimum wage rates are lower, appears disproportionate.” (Our italics)

The result in Bundesdruckerei seems, as a matter of course, to be different since the 186 service was to be produced in another Member State than the contracting authority’s and thereby also a different Member State from where the minimum was required. The Court identifies the problem in stating “By imposing, in such a situation, a fixed minimum wage corresponding to that required in order to ensure reasonable remuneration for employees in the Member State of the contracting authority in the light of the cost of living in that Member State, but which bears no relation to the cost of living in the Member State in which the services relating to the public contract at issue are performed and for that reason prevents subcontractors established in that Member State from deriving a competitive advantage from the differences between the respective rates of pay, that national legislation goes beyond what is necessary to ensure that the objective of employee protection is attained.”56 In relation to the two earlier cases the Rüffert case seems interesting in relation to 187 RegioPost since it is only a matter of degree that separates the two cases and the results. In the Bundesdruckerei case (paragraph 32) the Court writes with a reference to the 188 Rüffert-case that the circumstance that only public contracts are covered seems to be decisive for the breach of the rules. The Court stated (paragraphs 39 and 40): ”As stated at paragraph 29 of this judgment, since this case concerns the rate of pay fixed by a collective agreement such as that at issue in the main proceedings, that rate is applicable, as a result of a 56

C-549/13, Bundesdruckerei, paragraph 34.

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law such as the Landesvergabegesetz, only to a part of the construction sector falling within the geographical area of that agreement, since, first, that legislation applies solely to public contracts and not to private contracts and, second, that collective agreement has not been declared universally applicable. The case‑file submitted to the Court contains no evidence to support the conclusion that the protection resulting from such a rate of pay – which, moreover, as the national court also notes, exceeds the minimum rate of pay applicable pursuant to the AEntG – is necessary for a construction sector worker only when he is employed in the context of a public works contract but not when he is employed in the context of a private contract.”

It seems essential in the Rüffert case whether there is a distinction between public and private activities in a situation where there is a uniform need for protection in both parts of the sector. It makes sense that the need for protection is divided according to sectors since wages vary a lot between sectors and therefore the tradition and the need for a minimum wage also vary between sectors. It seems to be important to the Court that everybody within a sector that has a real need will be covered by the protection in order for the consideration (the protection of workers) to be seen as legitimate by the Court. 189 In the Court’s argumentation in RegioPost focus is on several factors separating the two cases (Rüffert and RegioPost) whereas the argumentation presented in Rüffert concerns the need for protection (including a comparison between the need for protection in public and private contracts) which is of no major importance to reach the result in RegioPost. The difference between Rüffert and RegioPost could be viewed as an expression of the view that the vital element in the cases has been the coverage of the protection, i.e. how many sectors? How is the coverage? (legislation or collective agreement) and whether both private and public activities are covered? The broader the coverage the better the chances of being allowed to require the payment of a minimum wage in connection to public contracts. This approach can probably be in zync with the actual circumstances and the result in the Rüffert case does not seem to mirror the argumentation in the central paragraphs in the Rüffert case. Furthermore, it cannot be excluded that the Court with its latest decision reached the result in order to ensure the possibility that in the context of public contracts this consideration can sought – something that seems difficult on the background of the Court’s statements in Rüffert and Bundesdruckerei. 190 Regardless of whether there are practical and/or political motives behind the Court´s result it will have to be concluded that with RegioPost there has been an improvement of the possibilities to include such requirements of a social or labour law character in public contracts. 18.11.2. Article 18, para. 2 in context The provision in Article 18, para. 2, represents important issues which can be detected by the number of other provisions in the Public Sector Directive referring to Article 18, para. 2 requiring compliance with this provision. Therefore a number of provisions provide references to Article 18, para. 2, thus supporting the pursuit of environmental, labour law and social issues in the context of public procurement. 192 One first example can be found in Article 56, para. 1 where it is stated how the procedure of public procurement is conducted focusing on the different criteria that must be considered. Besides the reference to the selection and award criteria the provision finishes by stating: “Contracting authorities may decide not to award a contract to the tenderer submitting the most economically advantageous tender where they have established that the tender does not comply with the applicable obligations referred to in Article 18(2).” 191

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The next example is found is Article 57 on exclusion of economic operators. In Arti- 193 cle 57, para. 4(a), the contracting authority has the opportunity (but is not obligated) to exclude economic operators “where the contracting authority can demonstrate by any appropriate means a violation of applicable obligations referred to in Article 18(2)”. Also the rules on abnormally low tenders (Article 69) contain references to Article 18, 194 para. 2. Article 69, para. 2(d) and Article 69, para. 3 (the latter contains the only clear obligation to exclude a tender which is abnormally low) In Article 69, para. 2(d) it is stated: “The explanations referred to in paragraph 1 may in particular relate to: compliance with obligations referred to in Article 18(2).” Hereby the obligations from Article 18, para. 2, is one of the questions that a contracting authority should ask for in order to gain information related to the economic operator’s abnormally low offer. Since in Article 69, para. 2 there is a (in principle) non-exhaustive list there are other issues both in and off the list that could be important or even decisive instead of compliance with Article 18, para. 2. A new and potentially more important element is found in Article 69, para. 3 that provides: “Contracting authorities shall reject the tender, where they have established that the tender is abnormally low because it does not comply with applicable obligations referred to in Article 18(2).”

This is the only explicit situation where it is obligatory to reject a tender which is abnormally low. For more, see the commentary to Article 69. Finally, Article 18, para. 2, also plays a part in relation to the rules on subcontracts in 195 Article 71. According to Article 71, para.1: “Observance of the obligations referred to in Article 18(2) by subcontractors is ensured through appropriate action by the competent national authorities acting within the scope of their responsibility and remit.”

Furthermore, Article 71, para. 6, states that with the aim of avoiding breaches of the 196 obligations referred to in Article 18(2) appropriate measures may be taken. Such measures can be where the national law of a Member State provides for a mechanism of joint liability between subcontractors and the main contractor, the Member State concerned shall ensure that the relevant rules are applied in compliance with the conditions set out in Article 18(2). Furthermore, appropriate measures can also include contracting authorities verifying (in accordance to Article 59, 60 and 61) whether there are grounds for exclusion of subcontractors pursuant to Article 57. Article 71, para. 6(b) provides: “In such cases, the contracting authority shall require that the economic operator replaces a subcontractor in respect of which the verification has shown that there are compulsory grounds for exclusion. The contracting authority may require or may be required by a Member State to require that the economic operator replaces a subcontractor in respect of which the verification has shown that there are non-compulsory grounds for exclusion.” For more, see the commentary to Article 71.

Article 19 Economic operators 1. Economic operators that, under the law of the Member State in which they are established, are entitled to provide the relevant service, shall not be rejected solely on the ground that, under the law of the Member State in which the contract is awarded, they would be required to be either natural or legal persons. However, in the case of public service and public works contracts as well as public supply contracts covering in addition services or siting and installation operaMichael Steinicke

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tions, legal persons may be required to indicate, in the tender or the request to participate, the names and relevant professional qualifications of the staff to be responsible for the performance of the contract in question. 2. Groups of economic operators, including temporary associations, may participate in procurement procedures. They shall not be required by contracting authorities to have a specific legal form in order to submit a tender or a request to participate. Where necessary, contracting authorities may clarify in the procurement documents how groups of economic operators are to meet the requirements as to economic and financial standing or technical and professional ability referred to in Article 58 provided that this is justified by objective reasons and is proportionate. Member States may establish standard terms for how groups of economic operators are to meet those requirements. Any conditions for the performance of a contract by such groups of economic operators, which are different from those imposed on individual participants, shall also be justified by objective reasons and shall be proportionate. 3. Notwithstanding paragraph 2, contracting authorities may require groups of economic operators to assume a specific legal form once they have been awarded the contract, to the extent that such a change is necessary for the satisfactory performance of the contract. Literature: Michael Steinicke, ‘Qualification and Shortlisting’, in: Trybus, Caranta and Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, p. 106 et seq.

This provision is carried forward from Article 4 of Directive 2004/18/EC. There are corresponding provisions in Article 37 of Directive 2014/25/EU (the ‘Utilities Directive’), Article 26 of Directive 2014/23/EU (the ‘Concessions Directive’) and Article 5 of Directive 2009/81/EC (the ‘Defence and Security Directive’). 2 The provision should be seen in the context of Article 2(1)(10) of the Procurement Directive which defines ‘economic operators’ as ‘any natural or legal person or public entity or group of such persons and/or entities, including any temporary association of undertakings, which offers the execution of works and/or a work, the supply of products or the provision of services on the market’; see the commentary on this provision. See also the definitions of a ‘tenderer’ in Article 2(1)(11) and a ‘candidate’ in Article 2(1)(12), both of which are closely linked to economic operators. 3 While the concept of an economic operator is largely carried forward from earlier legislation, it has been necessary to make a few changes in the new rules in order to make its use more appropriate. Recital 14 of the Public Sector Directive focuses on clarifying the concept of an economic operator: ‘the notion of “economic operators” should be interpreted in a broad manner so as to include any persons and/or entities which offer the execution of works, the supply of products or the provision of services on the market, irrespective of the legal form under which they have chosen to operate. Thus, firms, branches, subsidiaries, partnerships, cooperative societies, limited companies, universities, public or private, and other forms of entities than natural persons should all fall within the notion of economic operator, whether or not they are “legal persons” in all circumstances.’ This recital primarily relates to economic operators; see further in the commentary on Article 2(1)(10). Recital 15 states that: ‘It should be clarified that groups of economic operators, including where they have come together in the form of a temporary association, may participate in award procedures without it being necessary for them to take on a specific 1

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legal form. To the extent this is necessary, for instance where joint and several liability is required, a specific form may be required when such groups are awarded the contract. It should also be clarified that contracting authorities should be able to set out explicitly how groups of economic operators are to meet the requirements concerning economic and financial standing as set out in this Directive, or the criteria relating to technical and professional ability, which are required of economic operators participating on their own. The performance of contracts by groups of economic operators may necessitate setting conditions which are not imposed on individual participants. Such conditions, which should be justified by objective reasons and be proportionate, could for instance include requiring the appointment of a joint representation or a lead partner for the purposes of the procurement procedure or requiring information on their constitution.’ This recital focuses on the allocation of obligations within the framework of the temporary cooperation of two or more undertakings. According to the recital, on the one hand there should be flexibility that allows participation in a procurement procedure without it being necessary for participants to take on a specific legal form. On the other hand, contracting authorities have a legitimate interest in making demands on groups of economic operators for the group to function appropriately. For example, there can be a requirement for there to be a representative of a group in connection with fulfilling the practical aspects of the procurement process, or a requirement for information about how such a group is organised. A factor which a contracting authority will typically take into account in connection 4 with groups of economic operators is the risk that such groups may infringe competition regulations, i.e. Article 101 of the Treaty on the Functioning of the European Union (TFEU). The provision seeks to take account of differences between the laws of the Member 5 States for carrying on different professional occupations. Particular requirements for the legal organisation of an undertaking can mean that undertakings in other Member States do not have access to provide a specific service.

19.1. Rejection of candidates or tenderers because of their legal form Article 19(1) of the Public Sector Directive provides that candidates or tenderers 6 which are entitled to provide a service under the law of the Member State where they are established, may not be rejected solely on the ground that they would be required to be either a natural or legal person under the law of the Member State in which the contract is awarded. The wording gives the impression that the legal form of an organisation can be relevant to the rejection of an economic operator as long as it is not the sole ground for rejection. Several Member States have rules requiring certain kinds of occupations to be carried on by entities that have a specific legal form, for example a specific kind of company.1 In the first instance, the prohibition of rejection applies to participation in a contest. 7 It is not clear from Article 19(1) what the situation will be when a contest has been concluded and a foreign operator has won the tender. It must be assumed that Article 19(3) applies to this situation. This allows contracting authorities to require groups of economic operators to adopt a specific legal form once they have been awarded a contract, if this is necessary for the satisfactory performance of the contract.

1 For examples of this in Denmark see Steinicke/Groesmeyer, EU’s udbudsdirektiver med kommentarer, p. 516.

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19.1.1. Information about persons performing a contract Contracting authorities may require information about the names and professional qualifications of the persons who are to provide a service. This applies to persons employed by the undertaking, and presumably also natural persons employed by other legal persons whose qualifications are relied on; see the Ballast Nedam2 cases and implicitly Article 63. There are a number of EU provisions on the Member States’ mutual recognition of diplomas and other qualifications. Article 53 TFEU contains a provision which authorises the adoption of secondary legislation to ensure the mutual recognition of diplomas, certificates and other evidence of formal qualifications acquired in another Member State. The Council has adopted several directives on mutual recognition. The most important of these is Directive 2005/36/EC on the recognition of professional qualifications (as amended). The term ‘relevant professional qualifications’ was previously used. This express requirement that the professional qualifications should be relevant has not been carried forward in the Public Sector Directive. However, it must be assumed that the professional qualifications about which information must be given are those that are relevant to the task in question. This will also be in accordance with Article 58(1), second paragraph, according to which: ‘All requirements shall be related and proportionate to the subject-matter of the contract.’ 9 Article 19(1), second paragraph, is also linked to Article 58(4), according to which contracting authorities may impose requirements to ensure that economic operators possess the necessary human and technical resources with the technical and professional ability and experience to perform the contract to an appropriate quality standard; see the commentary on Article 58. Article 19(1), second paragraph, only covers candidates and tenderers who are natural persons but not legal persons, whereas Article 58 covers both. 8

19.2. Tenders submitted by groups of undertakings Article 19(2) of the Public Sector Directive concerns the right of economic operators to take part in procurement proceedings on equal terms with operators that fulfil specific requirements as to their legal form. It states that contracting authorities may not require operators to have a specific legal form in order to submit a tender or a request to participate. Once a contest has been concluded it is permissible to require undertakings to adopt the form provided for in national law. Such a requirement can only be made after the procurement process has been completed, but it ought to be made clear in the procurement documentation that there will be such a requirement once a tenderer has been awarded the contract. 11 Under a new provision, a contracting authority may clarify in the procurement documents how groups of economic operators can fulfil the requirements laid down for individual operators. It may be that specific entities must satisfy the technical requirements. Where this is the case, the provision states that such requirements must be objectively justified. Thus there must be a reason for any requirements for economic and financial standing or technical and professional ability are to be fulfilled. There is only a reference to the rules on the capacities or operators and to Article 58. There is no allowance for the allocation of grounds for exclusion between the partici10

2 Case C-389/92 Ballast Nedam and Case C-5/97 Ballast Nedam. This provision was previously only found in the Utilities Directive, since the provision of such services is closely connected with the persons who are to provide them. The provision now applies to all kinds of contracts, though it will still be primarily relevant for services contracts and works contracts.

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pants in a group. The basis for the application of these rules (in Article 57) is that all the members of a group should fulfil the conditions. Pursuant to Article 19(2), the Member States may establish standard terms for how 12 groups of economic operators are to meet their requirements. Nothing is stated about how these standard terms should be presented, and it may be difficult to find common terms, given that the organisational frameworks for individual groups can vary widely. As something new, and entirely in line with the need set out in recital 15, Article 13 19(2), last paragraph, provides that any conditions for the performance of a contract by groups of economic operators which differ from those imposed on individuals must be justified by reasons that are objective and proportionate. This does not refer to the conditions relating to the award of a contract but to the conditions relating to the performance of a contract. While it may be reasonable to impose special requirements in order to put individual candidates or tenderers on an equivalent footing with a group consisting of several entities in relation to the selection criteria, it is more difficult to see the justification of imposing special conditions for the performance of a contract by a group of economic operators compared with individual operators. This must primarily refer to the organisational framework and legal form for the performance of the contract. General requirements as to the content of the contract and how it is performed can hardly differ between individual operators and groups of operators. Neither Article 19, nor the definition in Article 2(1)(10) nor the rules on the selection 14 of candidates or tenderers say anything about the extent to which it is possible to make changes to the composition of groups during the procurement process. This is not a relevant concern with individual economic operators. Changes to the composition of groups of economic operators are governed by Article 72 of the Directive; for further on this see the commentary on Article 72. However, Article 72 does not govern the possibility of making changes to groups of economic operators during the procurement process, nor are there other provisions in the Directive that expressly govern the possibility of making such changes.3 The Court of Justice of the European Union (CJEU) ruled on this question in Case C-396/14 MT Højgaard A/S and Züblin A/S. In Højgaard and Züblin the CJEU started by referring to the argument made by the Advocate General, that a strict application of the principle of the equal treatment of tenderers would lead to the conclusion that only those economic operators who have been pre-selected can, in that capacity, submit tenders and be awarded contracts (paragraph 39). This means that pre-selected economic operators and those who submit tenders must be legally and substantively the same (paragraph 40). Thus there is great flexibility allowing entities to organise themselves as tenderers prior entering into a procurement procedure, but there is limited scope for changing the formal framework of a tenderer once the selection has been made. In contrast to the Opinion of the Advocate General, the CJEU said that the requirement for legal and substantive identity may be qualified in order to ensure adequate competition in a negotiated procedure (paragraph 41). The CJEU referred to Article 54(3) of Directive 2004/17 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors, which allowed contracting authorities to take account of the need to ensure adequate competition when determining the number of candidates selected.

3 There is a provision on this in § 147 of the Danish Procurement Law implementing the Directive. However, the provision differs on several points from the case law of the CJEU.

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The CJEU also said that it is a condition for an economic operator’s continued participation that it does not breach the principle of equal treatment. It might be considered a trifle unnecessary to state this since the case concerned compliance with this principle. The CJEU then laid down some general guidelines for when a change can be made to a pre-selected group of economic operators during the procurement process. It stated that there will not be a breach of the principle of equal treatment if: 1) an economic operator by itself meets the selection requirements laid down by the contracting entity, and 2) the continuation of the economic operator’s participation in the procedure does not, in itself, put the other tenderers at a competitive disadvantage (paragraph 44). The CJEU noted that, according to the reference made to it, Per Aarsleff A/S (an original and continuing member of the group awarded the contract) would have been preselected if it had sought pre-selection as an individual entity. The CJEU left it to the referring court to determine whether Aarsleff ’s taking on the contracts of 50 salaried staff of E. Pihl og Søn (the other original member of the group awarded the contract), including individuals who were key to the implementation of the construction project concerned, thereby acquired a competitive advantage at the expense of the other tenderers (paragraph 47). The CJEU did not give any detailed guidance on how such an assessment should be made. On the basis of the specific circumstances of the case, the CJEU also noted: ‘having regard to information in the file which indicates that, first, the contract constituting the Aarsleff and Pihl group was concluded on the very day when the judgment declaring E. Pihl og Søn insolvent was delivered, and, second, that group’s first tender was lodged the following day without the signature of the liquidator of E. Pihl og Søn, it must further be stated that it is for the referring court to determine that the lodging of that first tender was not vitiated by an irregularity that was such as to preclude Per Aarsleff continuing to take part, in its own name, in the negotiated procedure concerned’ (paragraph 46). It is difficult to place this judgment within the wider framework. In line with the Opinion of the Advocate General, the CJEU focused on whether the further participation of an undertaking gave it a competitive advantage in relation to the other participants in the tendering process. The Advocate General pointed to several examples of potential advantages, including that: ‘Aarsleff may have decided to participate in the tender on its own on the basis of information not available to the other tenderers when they decided to take part. (52) In particular, MTHZ claimed that when Aarsleff, following Pihl’s insolvency and the consequent dissolution of the group created in order to take part in the procedure, was able to take that decision, it knew exactly how many undertakings participating in the procedure had submitted a tender and, even, that the tender submitted by the group of which Aarsleff was a member had been assessed as the second best tender’ (point 81). The Advocate General also referred to Aarsleff taking over the contracts of 50 salaried workers from Pihl, which was the only factor expressly referred to by the CJEU. Since this factor seems to have been relevant to an assessment of whether there was a competitive advantage for a changed group of economic operators participating in a procurement process, it will presumably be taken into account in assessing whether an improper competitive advantage has been obtained. This case is also referred to in the commentary on Article 18 on the principle of equal treatment. 15 The principle of mutual recognition applies in full, so there must be recognition of economic operators from other Member States which, in these other Member States, are organised in a corporate form that is equivalent to a corporate form required for carrying on the activity in question in the Member State where the contracting authority is situated.

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19.3. Requirements as to the legal form of operators It is the Member States that lay down the rules for groups and for the legal form that 16 groups must adopt once they have been awarded a contract. Thus Member States may lay down rules on whether, and if so under what conditions, it is possible to make changes to a group once an award has been made. In Case C-57/01 Makedoniko, the CJEU had to decide whether the provision in what is now Article 19(2) of the Procurement Directive meant that EU law prohibits making changes to the composition of groups that submit tenders and take part in public procurements. The case concerned a change to a group of public works contractors taking part in a procurement process for the award of a public works contract. The question was whether Article 21 of Directive 93/37 dealing with groups of contractors meant that the group lost the right to take part and thus to be awarded the contract if the change took place after the submission of tenders and after the pre-selection of the group. The CJEU stated that: ‘The only provision of Directive 93/37 dealing with groups of contractors is Article 21. That is confined, first, to stating that tenders may be submitted by groups of contractors and, second, to preventing them from being required to assume a specific legal form before the contract has been awarded to the group selected. It must be pointed out that Article 21 makes no provision about the composition of such groups. Rules about their composition are thus a matter for the Member States’. 4 See also the CJEU’s decision in Case C-71/92 Commission v Spain, in which the Spanish rules on the status as a legal person were found to be contrary to the Procurement Directive. However, the CJEU stated that it is in accordance with the Procurement Directives to require tenderers to have legal capacity,5 i.e. the capacity to sue and be sued in the courts.

Article 20 Reserved contracts 1. Member States may reserve the right to participate in public procurement procedures to sheltered workshops and economic operators whose main aim is the social and professional integration of disabled or disadvantaged persons or may provide for such contracts to be performed in the context of sheltered employment programmes, provided that at least 30 % of the employees of those workshops, economic operators or programmes are disabled or disadvantaged workers. 2. The call for competition shall make reference to this Article. This provision is carried forward in almost unchanged form from Article 19 of Direc- 1 tive 2004/18/EC. There is a corresponding provision in Article 38 of Directive 2014/25/EU (‘the Utilities Directive’). The new Public Sector Directive gives expanded scope for having special regard for 2 undertakings that promote the integration in society of disabled or disadvantaged persons. In addition to Article 20, Article 77 introduces the right to reserve certain social or other types of contracts to specified socio-economic undertakings. Both these possibilities are referred to in recital 36:

4

56.

5

Paragraphs 60-61. On this decision, see Adrian Brown in: Public Procurement Law Review, 2003, NA Case C-71/92, para. 40.

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Employment and occupation contribute to integration in society and are key elements in guaranteeing equal opportunities for all. In this context, sheltered workshops can play a significant role. The same is true for other social businesses whose main aim is to support the social and professional integration or reintegration of disabled and disadvantaged persons, such as the unemployed, members of disadvantaged minorities or otherwise socially marginalised groups. However, such workshops or businesses might not be able to obtain contracts under normal conditions of competition. Consequently, it is appropriate to provide that Member States should be able to reserve the right to participate in award procedures for public contracts or for certain lots thereof to such workshops or businesses or reserve performance of contracts to the context of sheltered employment programmes.

3

The difference between Article 20 and Article 77 is basically that Article 20 is directed at specific kinds of persons as employees in an undertaking (sheltered workshops – see further below), whereas Article 77 is not only focused on the employees but to a greater extent on how such undertakings are structured and operated (among other things with a focus on how any profit is used and the aims of the undertakings). For further on Article 77, see the commentary on it.

20.1. Advantages for sheltered workshops The provision was introduced by the 2004 Public Sector Directive, and among other things the focus was on ensuring that, by reserving certain contracts for sheltered workshops, it could open up the market for such workshops and give them access to public contracts. At the same time it was important to find a suitable definition of a ‘sheltered workshop’ in order to prevent abuse of the provision. On the one hand the model seeks to ensure potential competition, and on the other hand it seeks to ensure that these kinds of entities should have access to the market without opening up for abuse. 5 While it is not expressly stated, the provision must mean that no different treatment is allowed other than that based on the fact that the participating tenderers or candidates are sheltered workshops.1 This means that it is not permitted to favour national sheltered workshops over foreign sheltered workshops since the other rules of the Public Sector Directive apply to the award of such contracts. No conclusive definition is given of a ‘sheltered workshop’. This is so even though there seems to have been a change to what constitutes a sheltered workshop while the term itself is retained. In the former Directive there was some form of definition in the provision itself which stated that sheltered employment programmes exist ‘where most of the employees concerned are handicapped persons who, by reason of the nature or the seriousness of their disabilities, cannot carry on occupations under normal conditions.’2 The focus here seems to be on the extent to which such undertakings can be competitive. Under Article 20 in the new Directive the provision appears to have been altered, as the main focus is on the social and professional integration of disabled or disadvantaged persons. However, there does not seem to be any substantive change to the purpose of the provision despite the change to its wording. The definition of a ‘sheltered workshop’ does not prevent Member States limiting the possibilities for exceptions to specific kinds of workshops. 6 According to the wording of the provision it is possible to reserve certain contracts for sheltered workshops and similar economic operators. There is no express scope for 4

1 See the European Parliament’s original proposal for Directive 2004/18/EC and the Commission’s amended draft for Directive 2004/18/EC (COM(2002) 236 final, at Article 19 b). 2 In the Parliament’s original proposal this definition was supplemented by a statement referring to handicapped persons who have the security associated with an employment or apprenticeship contract with a view to adapting to the employment market. It is difficult to say why the original proposal was dropped.

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arranging mixed contests, in which both sheltered workshops and undertakings that operate under normal competitive conditions participate, but where sheltered workshops are nevertheless given advantages. Such a contest could be arranged, allowing some discount from the price offered by sheltered workshops so as to give them a competitive advantage. However, this would immediately raise a number of questions, such as how large a percentage or how large an absolute amount of a discount should be allowed sheltered workshops. Conversely, it could be argued that if it is made clear in the contract notice that this model will be used, undertakings that operate under normal competitive terms will be clear about the advantages given to sheltered workshops and how such advantages will be manifested, so they will be able to participate on such a basis. Such a model could also be allowed from the perspective that it is better for competition as it will nevertheless enable some competition and thus help open the internal market. In other words there are good arguments for using this model as it is a less restrictive way of enabling sheltered workshops to sell their products. It may be difficult to find authority for the above in the provision, but it can be said to be in the spirit of Article 20. The provision states that the contract notice must contain information about this, 7 and it is clear from Annex V, Part B, Section II(1)(5) that a contracting authority must indicate whether a public contract is restricted to sheltered workshops, or whether the provision of a service is reserved by law, regulation or administrative provision to a particular profession. The same applies if a contracting authority uses prior information notices. To the extent that the second method is permitted, where the contract is not reserved to sheltered workshops but these are given some competitive advantage, the contract notice should contain information about this fact and about how the advantage is given. However, the formulation in Annex V, Part B, Section II does not indicate that this method can be used. On the basis of its wording, the provision seems to cover economic operators whose 8 main aim is the social and professional integration of disabled or disadvantaged persons. This applies to economic operators where at least 30 % of the employees are disabled or disadvantaged workers. There is no definition of ‘disadvantaged persons’, and it must be assumed that the way in which a worker may be disadvantaged is not decisive, merely that their condition restricts their work capacity and thus affects the scope for the undertaking to compete for public contracts on an equal footing with other undertakings. It is also unclear how the 30 % of employees who are disabled or disadvantaged is to be calculated. In many situations a workforce is calculated according to the number of its full-time employees (either ‘full-time’ employees or ‘full-time equivalent’ employees, i.e. where two employees each working 50 % of the time count as one full-time equivalent). However, it is not clear whether this approach should be used in this context since it is a characteristic of many of the relevant employees that they are unable to work fulltime.

Article 21 Confidentiality 1. Unless otherwise provided in this Directive or in the national law to which the contracting authority is subject, in particular legislation concerning access to information, and without prejudice to the obligations relating to the advertising of awarded contracts and to the information to candidates and tenderers set out in Articles 50 and 55, the contracting authority shall not disclose information forMichael Steinicke

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warded to it by economic operators which they have designated as confidential, including, but not limited to, technical or trade secrets and the confidential aspects of tenders. 2. Contracting authorities may impose on economic operators requirements aimed at protecting the confidential nature of information which the contracting authorities make available throughout the procurement procedure. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 1339.

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The provisions on confidentiality in Article 21 are carried forward almost unamended from Article 6 of Directive 2004/18/EC. It was first in the 2004 Public Sector Directive that express provisions were included on confidentiality. There are corresponding provisions in Article 39 of Directive 2014/25/EU (the ‘Utilities Directive’) and Article 28 of Directive 2014/23/EU (the ‘Concessions Directive’). There are also provisions on confidentiality and additional rules in Directive 2009/81/EC (the ‘Defence and Security Directive’), since confidentiality naturally plays a major role in the defence and security sector. The aim of the provision is to give economic operators that participate in procurement procedures the possibility of securing the confidentiality of the information which they submit to a contracting authority.

21.1. The confidentiality of tenderers’ information The main technical rule in Article 21 is that economic operators can designate the information which they forward to a contracting authority as confidential. This means that the contracting authority may not thereafter make such information public. However, there is the important qualification that the prohibition of disclosure is subject to reservations both under the Public Sector Directive and the laws of the contracting authority’s home Member State. For many contracting authorities and undertakings that participate in EU procurements the reality is still that national rules on freedom of information determine the extent to which an economic operator can make reservations for confidentiality; see further below. It is probable that Article 21 will give economic operators a false sense of security about the information they give to a contracting authority so there can be unnecessary misunderstandings between contracting authorities and economic operators with regard to rights and obligations with respect to confidentiality. 3 As examples of the kinds of information that can be designated as confidential, Article 21 refers to technical or trade secrets and the confidential aspects of tenders. These examples show that Article 21 is particularly directed at information where it is generally recognised that there must be some level of protection with regard to an economic operator’s capacity to continue operating in a competitive market. In principle an economic operator can designate any kind of information as confidential, since Article 21 does not require the information to be of a particular nature or to have a specific significance for the operator in order to be classified as confidential. Furthermore, Article 21 does not require economic operators to specify their confidentiality classifications or give reasons for them. This means that it is enough for operators to make very general statements, for example, that all information contained in a tender is confidential. However, an operator must be clear that in most cases the exceptions described below will put significant limits on claims of confidentiality. In recital 51 to the Directive it is emphasised that the provisions on the protection of confidential information do not prevent public disclosure of non-confidential parts of 2

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concluded contracts. It must be assumed that this will cover non-confidential information exchanged during the course of the procurement procedure. Article 21 does not contain a reservation that information that is already in the public domain cannot be designated as confidential. However, it must be assumed to be a precondition for classification as confidential (at least in order for it to have effect; see below) that the information is not already generally available. According to the wording of Article 21, it is the information that an economic operator has forwarded that can be designated as confidential. This must refer to information that has come into the hands of the contracting authority through the actions of the economic operator, whether sent directly by them or by their forwarding the information to the contracting authority by other means, including via a third party. Article 21 does not require the information to be designated as confidential when it is sent to the contracting authority. There is nothing to prevent the information being designated as confidential at a later date, but this must necessarily be without effect on disclosures that may already have taken place when the contracting authority becomes aware of the operator’s designation. Nor does Article 21 require that information that is designated confidential is given in a tender or a request to participate. Any information forwarded in connection with entering into a public contract may be designated confidential. Under the prohibition in Article 21 a contracting authority may not disclose information that is designated confidential. This presumably covers all forms of disclosure, whether made to one person or several persons and regardless of how the disclosure is made. The term disclosure does not mean that the prohibition only covers situations where the information is broadcast to the public at large. The exchange of information internally within a contracting authority is assumed not to be covered by the prohibition in Article 21, and an authority must be able to pass on information to technical, legal or other advisers assisting it in the procurement process. If several contracting authorities are jointly involved in offering a public contract, information may be passed between them without contravening Article 21. Article 21 sets no time limit to the protection of confidential information. Judged purely on the basis of the provision one could assume that prohibitions apply both during and after the procurement procedure, or some other award of a public contract pursuant to the Public Sector Directive. However, there is presumably a general upper limit whereby the Public Sector Directive only governs the procedures connected with entering into public contracts. While the Directive exceptionally applies once a contract has been entered into, the confidentiality provision in Article 21 cannot be assumed to apply after that point. However, it would have been helpful if the Directive had contained a precise time limit for the confidentiality requirement pursuant to Article 21.1 There is the important reservation to the prohibition of disclosure that it is subject to the supervening provisions of Articles 50 and 55 of the Directive. Both these provisions concern information that a contracting authority must give about the result of a procurement procedure, both by a notification to the Publications Office of the European Union which is published in the Official Journal (see Article 50) and by directly notifying the participating economic operators (see Article 55), or in response to a request from a participating economic operator for more detailed reasons (Article 55(2)). 1 Recital 51 to the Public Sector Directive refers to confidentiality about subsequent changes to contracts entered into and it seems clear that considerations for confidentiality also apply to these; this is one of the few examples of the procurement rules extending into the period in which the contract is in force; see Article 72.

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Both Article 50(4) and Article 55(3) allow contracting authorities to withhold information about the award of a contract if its release would impede law enforcement or otherwise be contrary to the public interest, would harm the legitimate commercial interests of a particular economic operator, public or private, or might prejudice fair competition between economic operators. Apart from in these cases, a contracting authority may not refrain from disclosing information that is relevant for fulfilling its obligation to give information and to state its reasons pursuant to Articles 50 and 55. The fact that information is designated as confidential pursuant to Article 21 is not a sufficient ground for a contracting authority not to disclose the information if its disclosure is necessary for the fulfilment of its obligation to give information about and the reasons for the award of the contract. 8 Article 21 must also be understood to mean that confidentiality is also governed by the rules that apply under the laws of the contracting authority’s home Member State, though there is a no entirely clear reference to the national law to which a contracting authority is subject. It is outside the scope of this commentary to discuss the specific confidentiality rules of the Member States. If a contracting authority receives a request for access to information on the basis of national rules, it must be assumed that Article 21 of the Public Sector Directive does not apply to such a request. Similarly, a contracting authority must assess whether an exception to any national rules on access to information can be relevant. If an economic operator has designated specific information in its tender as confidential, and possibly given the reasons therefore, quite apart from Article 21 the contracting authority will be bound to take account of this in its decision on access to information. 9 However, it will be a different matter whether it is relevant to the general scope of the prohibition of disclosure in Article 21 that a contracting authority can and must disclose certain information, for example information in a tender which the tenderer has designated as confidential, in the event of a request for access to information made under national law. Normally the fact that some information is generally available, as everyone can obtain the information under national rules by making a request for access to it, will mean that confidentiality cannot be reserved and that the contracting authority is not obliged to maintain confidentiality in another context. For economic operators participating in EU procurements it will still be of practical relevance that a contracting authority is prevented from disclosing to other tenderers certain information received from the operator, even though the other tenderers may be able to obtain the information by requesting access to it under national law. The significance of confidentiality during the procurement procedure is also apparent from Article 30(3), last paragraph, which states that, in connection with competitive dialogues, a contracting authority may not reveal to the other participants solutions proposed or other confidential information communicated by a candidate or tenderer participating in the dialogue without its agreement. Such a confidentiality provision concerns confidentiality about the process and in relation to the other participants in the contest. 10 It was previously unclear to what extent a contracting authority could limit the right of economic operators to designate information as confidential under Article 6 of the 2004 Procurement Directive, for example by making it a condition for participation in a procurement procedure that the contracting authority shall have the right to disclose information to a certain extent and/or to certain persons. Article 6 of the 2004 Public Sector Directive did not allow for this. Moreover, the provision would lose much of its meaning if, at any time, a contracting authority could re346

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strict an economic operator’s right to designate information as confidential. It must thus be assumed that a contracting authority may not impose a general condition that economic operators wishing to participate in a procurement process must refrain from designating the information they submit as confidential. It would be highly impractical if a contracting authority were to be totally prevented from disclosing confidential information to a necessary extent and to authorities and others where there is no risk of setting aside the operator’s legitimate interests or fair competition between operators; see the considerations referred to in Article 55(3). There are thus good reasons for allowing contracting authorities some scope for imposing a condition allowing them some right to disclose information that has been forwarded on the basis of confidentiality. In any case, it must be a condition that the contracting authority ensures that a third party, to whom the information is disclosed, respects its confidentiality.

21.2. Confidentiality of the contracting authority’s information The confidentiality provision in the 2004 Public Sector Directive was focused on the 11 confidentiality of the information provided by tenderers. But in the 2014 Public Sector Directive, Article 21(2) introduced a new provision explicitly allowing contracting authorities to impose requirements on economic operators aimed at protecting the confidential nature of information which the contracting authorities make available during the procurement procedure. Even though there has not previously been such an express provision, the Directives have not contained any express hindrance to contracting authorities requiring tenderers to deal with information given them in the course of a procurement procedure under special conditions. While there was no similar provision in the 2004 Public Sector Directive, Article 12 13(1) of the Utilities Directive contained a provision that allowed contracting authorities to impose requirements with a view to protecting the confidential nature of information which they make available, particularly in the context of providing technical specifications to interested economic operators, of the qualification and selection of economic operators and of the award of contracts. This provision may be seen as a precursor to the general provision now contained in Article 21(2) of the 2014 Public Sector Directive. Such a possibility of protecting information is especially relevant in the utilities sector where at least some contracting authorities carry on business in competition with others and they can thus have a special need to classify some information as confidential. Neither the Public Sector Directive nor the Utilities Directive take account of the situation that a contracting authority, for example an undertaking in the utilities sector, can have a legitimate interest in preventing a competing undertaking participating in and possibly winning an EU procurement contest which the contracting authority has initiated for part of the services in the area where the two operators compete. It must be assumed that the contracting authority could reject the competing undertaking’s participation in the procurement, at least if the exchange of information during the procedure and/or after the award of the contract or in the course of cooperation would be contrary to the competition law rules against agreements in restraint of trade; see Article 101 of the Treaty on the Functioning of the European Union.

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Article 22 Rules applicable to communication 1. Member States shall ensure that all communication and information exchange under this Directive, in particular electronic submission, are performed using electronic means of communication in accordance with the requirements of this Article. The tools and devices to be used for communicating by electronic means, as well as their technical characteristics, shall be non-discriminatory, generally available and interoperable with the ICT products in general use and shall not restrict economic operators’ access to the procurement procedure. Notwithstanding the first subparagraph, contracting authorities shall not be obliged to require electronic means of communication in the submission process in the following situations: (a) due to the specialised nature of the procurement, the use of electronic means of communication would require specific tools, devices or file formats that are not generally available or supported by generally available applications; (b) the applications supporting file formats that are suitable for the description of the tenders use file formats that cannot be handled by any other open or generally available applications or are under a proprietary licensing scheme and cannot be made available for downloading or remote use by the contracting authority; (c) the use of electronic means of communication would require specialised office equipment that is not generally available to contracting authorities; (d) the procurement documents require the submission of physical or scale models which cannot be transmitted using electronic means. In respect of communications for which electronic means of communication are not used pursuant to the second subparagraph, communication shall be carried out by post or other suitable carrier or by a combination of post or other suitable carrier and electronic means. Notwithstanding the first subparagraph of this paragraph, contracting authorities are not obliged to require electronic means of communication in the submission process to the extent that the use of means of communication other than electronic means is necessary either because of a breach of security of the electronic means of communications or for the protection of the particularly sensitive nature of information requiring such a high level of protection that it cannot be properly ensured by using electronic tools and devices that are either generally available to economic operators or can be made available to them by alternative means of access within the meaning of paragraph 5. It shall be the responsibility of the contracting authorities requiring, in accordance with the second subparagraph of this paragraph, means of communication other than electronic means in the submission process to indicate in the individual report referred to in Article 84 the reasons for this requirement. Where applicable, contracting authorities shall indicate in the individual report the reasons why use of means of communication other than electronic means has been considered necessary in application of the fourth subparagraph of this paragraph. 2. Notwithstanding paragraph 1, oral communication may be used in respect of communications other than those concerning the essential elements of a procurement procedure, provided that the content of the oral communication is documented to a sufficient degree. For this purpose, the essential elements of a procurement procedure include the procurement documents, requests for participa348

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tion, confirmations of interest and tenders. In particular, oral communications with tenderers which could have a substantial impact on the content and assessment of the tenders shall be documented to a sufficient extent and by appropriate means, such as written or audio records or summaries of the main elements of the communication. In all communication, exchange and storage of information, contracting authorities shall ensure that the integrity of data and the confidentiality of tenders and requests to participate are preserved. They shall examine the content of tenders and requests to participate only after the time limit set for submitting them has expired. For public works contracts and design contests, Member States may require the use of specific electronic tools, such as of building information electronic modelling tools or similar. In such cases the contracting authorities shall offer alternative means of access, as provided for in paragraph 5, until such time as those tools become generally available within the meaning of the second sentence of the first subparagraph of paragraph 1. Contracting authorities may, where necessary, require the use of tools and devices which are not generally available, provided that the contracting authorities offer alternative means of access. Contracting authorities shall be deemed to offer suitable alternative means of access in any of the following situations, where they: (a) offer unrestricted and full direct access free of charge by electronic means to those tools and devices from the date of publication of the notice in accordance with Annex VIII or from the date when the invitation to confirm interest is sent. The text of the notice or the invitation to confirm interest shall specify the internet address at which those tools and devices are accessible; (b) ensure that tenderers having no access to the tools and devices concerned, or no possibility of obtaining them within the relevant time limits, provided that the lack of access is not attributable to the tenderer concerned, may access the procurement procedure through the use of provisional tokens made available free of charge online; or (c) support an alternative channel for electronic submission of tenders. In addition to the requirements set out in Annex IV, the following rules shall apply to tools and devices for the electronic transmission and receipt of tenders and for the electronic receipt of requests to participate: (a) information on specifications for the electronic submission of tenders and requests to participate, including encryption and time-stamping, shall be available to interested parties; (b) Member States, or contracting authorities acting within an overall framework established by the Member State concerned, shall specify the level of security required for the electronic means of communication in the various stages of the specific procurement procedure; that level shall be proportionate to the risks attached; (c) where Member States, or contracting authorities acting within an overall framework established by the Member State concerned, conclude that the level of risks, assessed under point (b) of this paragraph, is such that advanced electronic signatures as defined by Directive 1999/93/EC of the European Parliament and of the Council are required, contracting authorities shall accept advanced electronic signatures supported by a qualified certificate, taking into account whether those certificates are provided by a certificate services

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provider, which is on a trusted list provided for in Commission Decision 2009/767/EC, created with or without a secure signature creation device, subject to compliance with the following conditions: (i) the contracting authorities shall establish the required advanced signature format on the basis of formats established in Commission Decision 2011/130/EU and shall put in place necessary measures to be able to process these formats technically; in case a different format of electronic signature is used, the electronic signature or the electronic document carrier shall include information on existing validation possibilities, which shall be under the responsibility of the Member State. The validation possibilities shall allow the contracting authority to validate online, free of charge and in a way that is understandable for non-native speakers, the received electronic signature as an advanced electronic signature supported by a qualified certificate. Member States shall notify information on the provider of validation services to the Commission, which shall make the information received from the Member States available to the public on the Internet; (ii) where a tender is signed with the support of a qualified certificate that is included on a trusted list, the contracting authorities shall not apply additional requirements that may hinder the use of those signatures by tenderers. In respect of documents used in the context of a procurement procedure that are signed by a competent authority of a Member State or by another issuing entity, the competent issuing authority or entity may establish the required advanced signature format in accordance with the requirements set out in Article 1(2) of Decision 2011/130/EU. They shall put in place the necessary measures to be able to process that format technically by including the information required for the purpose of processing the signature in the document concerned. Such documents shall contain in the electronic signature or in the electronic document carrier information on existing validation possibilities that allow the validation of the received electronic signature online, free of charge and in a way that is understandable for non-native speakers. 7. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 to amend the technical details and characteristics set out in Annex IV to take account of technical developments. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 to amend the list set out in points (a) to (d) of the second subparagraph of paragraph 1 of this Article where technological developments render continued exceptions from the use of electronic means of communication inappropriate or, exceptionally, where new exceptions must be provided for because of technological developments. To ensure the interoperability of technical formats as well as of process and messaging standards, especially in a cross-border context, the Commission shall be empowered to adopt delegated acts in accordance with Article 87 to establish the mandatory use of such specific technical standards, in particular with regard to the use of electronic submission, electronic catalogues and means for electronic authentication, only where technical standards have been thoroughly tested and proved their usefulness in practice. Before making the use of any technical standard mandatory, the Commission shall also carefully consider the costs that this

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may entail, in particular in terms of adaptations to existing e-procurement solutions, including infrastructure, processes or software. Literature: Roger Bickerstaff, ‘E-procurement under the new EU procurement Directives’, PPLR, 2014, p. 134; Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 363.

The provision in Article 22 is a continuation of the previous Public Sector Directive 1 2004/18 Article 42, even though with some substantive changes. There are similar provisions in the Utilities Directive 2014/25 Article 40, the Concessions Directive 2014/23 Article 29 (in a reduced version) and – in a version that has a striking resemblance to the previous Public Sector Directive 2004/18 – the Defence and Security Directive 2009/81 Article 36. The framework for communication in the Concessions Directive is more flexible which is in accordance with the regulation of concessions in Directive 2014/23 in general.1 The Defence and Security Directive also contains less detailed rules and a less ambitious approach to the use of electronic communication which is basically caused by the fact that this directive is based on the previous procurement directives (2004 Directives – from a time with less advanced technology). The provision in Article 22 on electronic communication is the next generation of 2 rules on electronic communication in public procurement. The provision in Article 22 contains rules which are more explicit and detailed than those of the previous Article 42 in Directive 2004/18, but this is a natural consequence of the overall development in view of the technical means used in procurement. Furthermore, where the previous provisions intended to level electronic communication with every other means of communication the approach of the new directive is more focused on the specifics of electronic communication.2 The background for Article 22, and not least the background for the adjustments that 3 have occurred since 2004, is the ambition of the EU to make procurement procedures fully electronically based.3 The considerations behind this are described in recital 52 of the preamble: “Electronic means of information and communication can greatly simplify the publication of contracts and increase the efficiency and transparency of procurement processes. They should become the standard means of communication and information exchange in procurement procedures, as they greatly enhance the possibilities of economic operators to participate in procurement procedures across the internal market. For that purpose, transmission of notices in electronic form, electronic availability of the procurement documents and – after a transition period of 30 months – fully electronic communication, meaning communication by electronic means at all stages of the procedure, including the transmission of requests for participation and, in particular, the transmission of the tenders (electronic submission) should be made mandatory. Member States and contracting authorities should remain free to go further if they so wish.”

With the obvious advantages achievable through electronic communication follows a number of situations where electronic communication is not possible or suitable. Recital 52 also states: “It should also be clarified that mandatory use of electronic means of communications pursuant to this Directive should not, however, oblige contracting authorities to carry out electronic processing of tenders, nor should it mandate electronic evaluation or automatic processing.” (Our italics) Furthermore, the recital mentions that no Roger Bickerstaff, ‘E-procurement under the new EU procurement Directives’, PPLR, 2014, p. 145-146. See Roger Bickerstaff, ‘E-procurement under the new EU procurement Directive’, PPLR, p. 136-137. 3 The policy and considerations behind the new rules are to some extent presented by the Commission in A Strategy for E-Procurement (COM (2012) 179) and the Communication End-to-End e-procurement, COM (2013) 453. 1

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elements of the public procurement process after the award of the contract should be covered by the obligation to use electronic means of communication, nor should internal communication within the contracting authority. The transition to fully electronic means of communication necessitates considerations as to how to deal with the situations where electronic communication is not suitable, or where the requirements established for electronic communication cannot be sustained. Furthermore, the development of the electronic communication since the 2004directives has made it possible and even necessary that all means of communication have to be evaluated. 4 The most obvious change in Article 22 is that it is now required that electronic communication must be used in all phases of the procurement procedure. This requirement is effective from October 18 2018, see Article 90, para. 2. Excepted from this requirement are, however, provisions where the ”use of electronic means is mandatory pursuant to Articles 34, 35 or 36, Article 37(3), Article 51(2) or Article 53.” These situations are subject to the overall deadline for transposing the directive. Furthermore, Article 90, para. 2 also allows Member States to postpone the application of Article 22(19) for central purchasing bodies until 18 April 2018.

22.1. The use of electronic communication Public Sector Directive Article 22, para. 1 establishes the framework for communication in a procurement procedure with the modifications that are set forth in the other provisions in Article 22. The purpose is to ensure that submitting applications and tenders is matched by a high degree of security as regards the content of the application and tender and as regards the handling of them in the procurement procedure. The main rule is that application of electronic means of communication is mandatory. Previously it was generally possible to submit applications and tenders by means of letters or fax but that is no longer possible to the same extent. Electronic communication is conducted through electronic means, as defined in Article 2, para. 1(19). “Communication and information exchange” must be assumed to cover all forms of contact between the contracting authority and the tenderer or applicants including contact which is not specified in the Public Sector Directive, e.g. any contact between a contracting authority and a tenderer with the purpose of clarifying a reservation made in a tender (see the commentary to Article 18, para. 1). On oral communications, see the commentary to Article 22, para. 2. Article 22, para. 1 furthermore states the fundamental condition that the applied means of communication must be generally available and therefore cannot limit the access of the economic operators to the award procedure. 6 The concept “generally available” is not based on any specific standards for electronic means of communication since the development within technology is moving at such a pace that standards would be detrimental to the innovation of new electronic means. Instead, focus should be on identifying the specific criteria to be applied when electronic means are generally available – apart from the fact that the communication cannot limit the access to the procurement procedure. The requirement of “generally availability” was introduced in Directive 2004/18. In context of the 2004-directive the Commission recommended a pragmatic approach based on the criteria that the access to the procurement procedure may not be limited, see section 2.1.1 in the document on “Requirements for conducting public procurement using electronic means under the new public procurement Directives 2004/18/EC and 2004/17/EC”. The Commission thereby emphasised specific elements like the electronic means’ geographical coverage and the formalities and procedures which are necessary 5

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for access to the network, the costs connected to the application of the specific tool and the level of knowledge of the technology. The Commission stated: “If a means of communication implies a connection to a network which is not available everywhere and to everybody and/or the use of equipment which is not in common use (i.e. satellite communication today) and/or the costs of which are unreasonably high for the use to which it is destined, the means cannot be deemed to satisfy the requirement of general availability.” A way for the contracting authority to ensure general availability is to give access to the contracting authority’s relevant network which enables the access of the economic operators to the procurement procedure.4 22.1.1. Fundamental principles for electronic communication The requirement in Article 22, para. 1 that the means of communication must be 7 generally available, applies to electronic communication. The provision establishes that the tools used for electronic communication and their technical characteristics must be – non-discriminatory, – generally available and – functionally compatible with commonly applied products within the information and communication technology (ICT). Article 2, para. 1 applies only to electronic communication since fax, (other) written communication and oral communication is accessible to everybody and at the same time technologically simple and therefore also functionally compatible. Article 22 uses the concepts “tools”, “devices” and “means of communication”. These 8 contents of these concepts differ. It must be assumed that the concepts “tools” and “devices” refer to the products which are applied as part of the electronic communication but do not require the presence of a network. Tools and devices for electronic communication are primarily covering software but also other equipment which is used by both sides in the procurement with the intention of being able to communicate efficiently. As opposed to “tools” and “devices” there is a definition of “electronic means” in the Public Sector Directive Article 2, para. 1(19), according to which electronic means covers “electronic equipment for the processing (including digital compression) and storage of data which is transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means”. Article 22, para. 1 and the requirements for the chosen instruments apply to tenders and requests for application, but also to any other communication in public procurement, including electronic access to the procurement documents. It must be assumed that, as a matter of principle, everybody with an internet access 9 through an ordinary computer with standard applications and standard programs must be able to participate in a procurement procedure. This covers the situation where the economic operator owns or has such tools at its disposal or the situation where the contracting authority is making the necessary instruments available. In relation to economic operators’ ownership of the instrument, issues like price, whether the instrument is easy to use, acquire and install will play a role as to determining whether the instrument is 4 Previously, the Commission has stated that it is a fair assumption that each part in the procurement covers its own costs in relation to the connection to the relevant element of the procurement procedure. If the tenderer was to pay for the connection the Commission felt that this payment must be legitimized, proportionate and may not discriminate or limit access to the procurement procedure, see section 2.1.1 in working document, SEC (2005) 959.

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considered available. A contracting authority might remove all concerns regarding the possibilities of the economic operators of possessing the necessary availability by letting the instrument be at the disposal of the participants. For all the requirements the following applies: They must be assessed in the context of the specific procurement and the requirements for the equipment of the participants which it is suitable and proportionate to expect for a tender procedure like the one in question. In a tender procedure regarding ICT-services there might well be reason to expect more in regard to ICT knowledge than what could be expected in a tender procedure regarding office supplies, and the same level of costs for supplying communication tools might be unfair at a small-scale purchase of goods but quite proportional in a tender procedure regarding a larger PPP-project using competitive dialogue. 10 The principle on non-discrimination will have to be read in accordance with the Union-wide non-discrimination concept which is prohibiting discrimination based on nationality. Based on the principle of equal treatment differential treatment in general will be forbidden too. 11 Furthermore, the tools for electronic communication must be functionally compatible with commonly applied ICT-products. Functionally compatible instruments allow for communication between different systems. If there is no compatibility this could effectively limit the economic operators participation in a procurement procedure. The requirement in Article 22, para. 1 is that the electronic instruments must be able to function and interact with commonly applied equipment and ordinarily used applications and thereby ensure the overall functionality as regards the communication and exchange of data through standard tools.

22.2. The possibility of oral communication The provision in Article 22, para. 2, is new compared to previous directives. The background is described in recital 58 of the preamble: “While essential elements of a procurement procedure such as the procurement documents, requests for participation, confirmation of interest and tenders should always be made in writing, oral communication with economic operators should otherwise continue to be possible, provided that its content is documented to a sufficient degree. This is necessary to ensure an adequate level of transparency that allows for a verification of whether the principle of equal treatment has been adhered to. In particular, it is essential that oral communications with tenderers which could have an impact on the content and assessment of the tenders be documented to a sufficient extent and by appropriate means, such as written or audio records or summaries of the main elements of the communication.” As it is seen recital 58 in preamble is very close to the wording of Article 22, para. 2. 13 Article 22, para. 2 allows for oral communication in situations which are not essential elements of the procurement. This means that procurement documents, requests for participation, confirmation of interest and tenders cannot be subject to oral communication. The wording leaves the impression that this reference relates to the specific submitting of the original documents themselves. This means that oral negotiations based on a tender would still be possible even though submitting the tender itself will have to be in writing. Also, any other request relating to the content of the tender (searching for clarifications, additional information and communication with the intention to correct errors) could be made orally subject, however, to the necessary condition concerning documentation. 14 On the other hand, the provision allows for the use of oral communication in (all) other situations. It requires that it is possible to provide the documentation requested in the provision. As it shows from Article 22, para. 2 the conditions for documenting such 12

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oral communication are very broad – either written or audio recorded documentation. There are no further indications as to how and when such documentation must be produced. This will probably also depend on the situation in which the oral communication has taken place. Typically, minutes of shorter meetings containing all relevant conclusions would suffice even though the requirement could increase if it would be suitable due to the matter of the oral communications.

22.3. Integrity of data and confidentiality According to Article 22, para. 3 it is a fundamental condition for the form of commu- 15 nication chosen that the data integrity and the confidentiality of tenders and applications are protected. The same applies in relation to the storage of information. Furthermore, the provision sets down the more specific limitation that communication, exchange of information and storage of information must be conducted in a way so that the contracting authority will not be able to examine the content of the tenders or applications before expiration of the time limit. The provision does not explicitly forbid to open the files but merely that contracting authorities cannot open the files with the purpose of getting acquainted with the content. It might therefore be allowed to open the files in order to see if there would be any technical difficulties, e.g. compatibility issues connected to the submitted files. If technical difficulties were present this would prevent the contracting authority from opening the tender and application procedure. Most contracting authorities are aware that tenders shall not be opened before the expiration of the time limit. Some contracting authorities are probably less aware that the same applies to applications. The requirement of confidentiality is of a general nature and applies beyond the spe- 16 cific prohibition against the contracting authority gaining knowledge of the applications and tenders before the expiration of the time limit. The requirement presupposes that the contracting authority before as well as after the opening of applications and tenders must ensure that the confidentiality of these are not violated through the communication, exchange and storage of information in the procurement procedure. If a tenderer has demanded confidentiality in regard to the tender, see Article 21, or such confidentiality has been ensured through the procurement documents, the contracting authority must ensure confidentiality both in the way the applications and tenders are stored, including after the opening, and in the subsequent use and handling of the tenders and applications. As an example the contracting authority must ensure that if he entrusts the submitted tenders to an external consultant in the procedure this will have to be carried out in such a way that the confidentiality will neither be compromised when transferred nor when used or stored at the premises of the consultant. It must be assumed that the requirement to preserve confidentiality until the expira- 17 tion of the time limit only covers issues at the disposal of the contracting authority. If the contracting authority inadvertently gains knowledge of the information from a tender not yet opened, e.g. if the tenderer without restrictions has passed such information to others than the contracting authority, the contracting authority cannot be assumed to have breached Article 22, para. 3. Furthermore, this would also not oblige the contracting authority to reject the tender. In this situation the relevant consideration regarding secrecy is attached to the relevant tenderer who gives up this right by sharing information regarding the un-opened tender.

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22.4. The use of specific electronic tools Article 22, para. 4 determines that there may be situations where very specific tools are needed. The provision gives the opportunity for Member States to require such specific tools in regard to works contracts and design contests. The directive exemplifies the situation by referring to building information electronic modeling tools, but any similar types of tools would be applicable. Since such tools might not be generally available the contracting authority must provide alternative means of access until such general availability is reached. The specifics for such alternative access are regulated in Article 22, para. 5. 19 It could be argued that also some complex services could be of such a character that it would make sense to consider specific tools. The reference in Article 22, para. 4 is very specific and the provision only applies to works and design contests regardless of similar needs for, e.g., complex services. 18

22.5. Tools and devices not generally available 20

As a new feature in the rules on communications in the Public Sector Directive Article 22, para. 5 have been introduced. The reason for this new provision is one of balance: Since there is an obligation for the Member States to ensure entirely complete electronic procurements from 2018 there is a need to allow deviations from the rules on specific communication requirements in the procedures.5 Therefore it is allowed for the contracting authorities to require tools and devices which are not generally available provided that the contracting authority offers suitable solutions. The provision presents three situations that would each fulfill the conditions for being an alternative solution. The contracting authority will have the choice between the three options: (a) offer unrestricted and full direct access free of charge by electronic means to those tools and devices from the date of publication of the notice in accordance with Annex VIII or from the date when the invitation to confirm interest is sent. The text of the notice or the invitation to confirm interest shall specify the internet address at which those tools and devices are accessible; (b) ensure that tenderers having no access to the tools and devices concerned, or no possibility of obtaining them within the relevant time limits, provided that the lack of access is not attributable to the tenderer concerned, may access the procurement procedure through the use of provisional tokens made available free of charge online; or (c) support an alternative channel for electronic submission of tenders. The latter solution will have the function of covering every other kind of solution not included in the two first mentioned.

22.6. Rules for submission of tenders and requests to participate 21

The provision in Directive 2004/18 Article 42, para. 5 is upheld in the Public Sector Directive Article 22, para. 6, with a number of additions. Article 22, para. 6 contains specific rules on systems for electronic submission of tenders and receipt of requests to participate. The provision in para. 6 is only applicable in context with electronic communication and only in connection with certain communication purposes – submission of tenders and requests to participate. 5 See also Roger Bickerstaff, ‘E-procurement under the new EU procurement Directives’, PPLR, 2014, p. 139.

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Article 22, para. 6 initially states that that systems for electronic submission of tenders 22 and requests for participate must obey the requirement established in Annex IV to the Public Sector Directive as well as the conditions described in Article 22, para. 6 (a)-(c). As stated in Annex IV tools and devices for the electronic receipt of tenders, requests for participation as well as plans and projects in design contests must at least guarantee, through technical means and appropriate procedures, that: „(a) the exact time and date of the receipt of tenders, requests to participate and the submission of plans and projects can be determined precisely; (b) it may be reasonably ensured that, before the time limits laid down, no-one can have access to data transmitted under these requirements; (c) only authorised persons may set or change the dates for opening data received; (d) during the different stages of the procurement procedure or of the design contest access to all data submitted, or to part thereof, must be possible only for authorised persons; (e) only authorised persons must give access to data transmitted and only after the prescribed date; (f) data received and opened in accordance with these requirements must remain accessible only to persons authorised to acquaint themselves therewith; (g) where the access prohibitions or conditions referred to under points (b), (c), (d), (e) and (f) are infringed or there is an attempt to do so, it may be reasonably ensured that the infringements or attempts are clearly detectable.”

As compared to the previous Public Sector Directive 2004/18 Annex X the new Annex IV has been simplified which is becoming since some previous uncertainties have been removed.6 It is not entirely clear whether there requirement to ensure that the exact time and date of tenders, requests to participate and the submission of plan and projects can be determined precisely is fulfilled by automatic recording of the time and date. However, it has been submitted that it is not quite clear whether this requirement would actually demand some kind of special solution, or the automatic solution would suffice.7 The automatic recording will probably be enough. The requirement in Annex IV section (d) allowing only authorized persons to have access to all data submitted during the procurement procedures has been criticized for disturbing the way that the data is transmitted internally between the members of the contracting authority’s procurement team. It has been stated that “it cannot be correct that the regulatory requirements for e-communications mechanisms impose technological restrictions on the dissemination of this information.”8 Besides the requirements established in Annex IV there are further three provisions 23 setting the stage for submission of tenders and requests to participate. First of all according to Article 22, para. 6(a) all the necessary information in regard to submitting tenders and requests to participate must be generally accessible. Second, contracting authorities of the Member States must specify the security level required for the relevant e-communications. Such level must be proportionate to the risks. Finally, third, if a Member State or a contracting authority concludes that it is necessary to require advanced electronic signatures, the authority will have to accept signatures supported by qualified electronic certificates based on the Commission’s framework for such advanced signatures. As mentioned in the Public Sector Directive the regime regulating the use of ad- 24 vanced electronic signatures covered Directive 1999/93/EC, Commission Decision 2009/767/EC and Commission Decision 2011/130/EU. Directive 1999/93/EC has been 6 For more, see Roger Bickerstaff, ‘E-procurement under the new EU procurement Directives’, PPLR, 2014, p. 140. 7 Ibid., p. 140. 8 Ibid., p. 140-141.

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repealed by Regulation 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and the regulation also includes the rules of the two mentioned decisions. The rules on electronic signatures are found in Regulation 910/2014 section 4. 25 It is not explicitly stated who is responsible for discrepancies arising in connection with the application of electronic means when submitting a tender. In the situations where the contracting authority has announced the technical requirements in advance and these requirements can be characterised as generally available in the sense that it is software which is either owned by all (or most) economic operators or which can easily be attained and installed, any deviation from the contracting authority’s regulation will be the economic operator’s responsibility. The contracting authority may probably permit the economic operator to bring or even install a system which will be necessary in order to open the files containing the tender. The question remains, however, if the contracting authority may require that the economic operator installs the necessary system. However, it is probably not decisive whether there is a permission or a requirement to do so as the tenderer must have an interest in installing the relevant system since the tender cannot be submitted if the system is not installed. 26 In Article 22, para. 6(b) it is stated that there must be proportionality in connection to establishing the security level required for the electronic means of communication. Proportionality is required since an excessive level of security potentially could make it difficult to participate in tendering procedures in situations. Therefore the security level should be adjusted to specific situation/contract. In recital 57 of the preamble the background is described: ”Before specifying the level of security required for the electronic means of communications to be used at the various stages of the award procedure, Member States and contracting authorities should evaluate the proportionality between on the one hand the requirements aimed at ensuring correct and reliable identification of the senders of the communication concerned as well as the integrity of its content, and on the other hand the risk of problems such as in situations where messages are sent by a different sender than that indicated. All other things being equal, this would mean that the level of security required of, for instance, an email requesting confirmation of the exact address at which an information meeting will be held would not need to be set at the same level as for the tender itself which constitutes a binding offer for the economic operator. Similarly, the evaluation of proportionality could result in lower levels of security being required in connection with the resubmission of electronic catalogues or the submission of tenders in the context of mini-competitions under a framework agreement or the access to procurement documents.”

Article 23 Nomenclatures 1. Any references to nomenclatures in the context of public procurement shall be made using the Common Procurement Vocabulary (CPV) as adopted by Regulation (EC) No 2195/2002. 2. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 to adapt the CPV codes referred to in this Directive, whenever changes in the CPV nomenclature must be reflected in this Directive and they do not imply a modification of the scope of this Directive. 1

This provision is new in the procurement directives. At the same time it represents a welcome clarification and uniform approach to the description of goods, services and works. Previously such descriptions have been divided between three nomenclatures: CPC, NACE and CPV. In the previous Public Sector Directive the CPV was defined in 358

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Article 1, para. 1(14), but there were no provision like Article 23. According to the previous Article 1, para. 1(14) if there was a conflict between the CPC and NACE on the one hand and the CPV on the other hand, the former would apply. This has been reversed in Article 23. The background for introducing the new regime on nomenclatures is described in 2 recital 119 in the preamble: “It is appropriate to identify those services by reference to specific positions of the Common Procurement Vocabulary (CPV) as adopted by Regulation (EC) No 2195/2002 of the European Parliament and of the Council, which is a hierarchically structured nomenclature, divided into divisions, groups, classes, categories and subcategories. In order to avoid legal uncertainty, it should be clarified that reference to a division does not implicitly entail a reference to subordinate subdivisions. Such comprehensive coverage should instead be set out explicitly by mentioning all the relevant positions, where appropriate as a range of codes.” (Footnote omitted)

It is stated that the primary purpose is to identify services, but the nomenclature has a more general application. The wording in Article 23 has a general approach not limited to services. This is also clear from Annex II listing some works activities. It is written as an introduction to the Annex that in the case of different interpretations between the NACE and the CPV the latter will apply. One of the primary applications of the CPV-nomenclature is in the context of social 3 and other specific services (Articles 74-77) under the so-called light regime. The ordinary services and the social and other specific services are subject to very different procedures and therefore it is important to be able to distinguish between the two groups. The instrument to do this is the CPV. The wording is that the CPV shall be used in the context of public procurement. This 4 is different from most of the provisions in the directive where the scope of application is limited “to this directive” or similar. The phrase “in the context of public procurement” stretches beyond the present directive, and potentially to the other procurement directives, to other directives and regulations with some kind of relation to public procurement and to situations only regulated by the TFEU as well. From a legal perspective the extent of Article 23 is limited to the Public Sector Directive.

Article 24 Conflicts of interest Member States shall ensure that contracting authorities take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators. The concept of conflicts of interest shall at least cover any situation where staff members of the contracting authority or of a procurement service provider acting on behalf of the contracting authority who are involved in the conduct of the procurement procedure or may influence the outcome of that procedure have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, 2014, p. 1291; Peter Braun and Ceren Berispek, ‘Conflict of interest in public award procedures: Deloitte Business Advisory NV v Commission of the European Communities (T-195/05)’, PPLR, 2008, NA53-59.

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The provision in Article 24 of Directive 2014/24/EU on public procurement (the ‘Public Sector Directive’) is new. There is no corresponding provision in Directive 2009/81/EC (the ‘Defence and Security Directive’) or in Directive 2014/23/EU (the ‘Concessions Directive’). However, both these directives require the application of the general principles of equal treatment, non-discrimination and transparency (Article 4 of the Defence and Security Directive and Article 3 of the Concessions Directive). Article 35 of the Concessions Directive also includes a provision on combating corruption and preventing conflicts of interest. Article 42 of Directive 2014/25/EU (the ‘Utilities Directive’) contains a provision corresponding to Article 24 of the Public Sector Directive. The general purpose of the provision is to ensure that relations between a contracting authority (including its advisers) and tenderers are not such as to lead to unequal treatment or distortion of competition. 2 Under the provision Member States must ensure that contracting authorities take the necessary measures to prevent conflicts of interest. This must be understood as meaning that the Member States have a duty to consider how this can be ensured in connection with implementing the Directive in national law. This obligation of the Member States usually merely consists of including in national law a provision with the same content as Article 24. It will not be necessary for the Member States, for example, to state which specific measures must be adopted in order to prevent conflicts of interest. Thus, based on its wording Article 24 must mean that if a contracting authority is cannot avoid a conflict of interest, this is the responsibility of the Member State and not something for which the contracting authority is responsible. However, Article 24 must be construed together with Article 57, according to which contracting authorities may exclude or may be required by Member States to exclude from participation in a procurement procedure any economic operator where a conflict of interest or a breach of the principle of equal treatment cannot be effectively remedied by less intrusive measures. This means that a contracting authority cannot preclude an independent obligation to avoid conflicts of interest by reference to the responsibility of the Member State, as set out in Article 24. 3 Basically there are two related kinds of cases in which there is a risk of a competitive advantage being obtained on the basis of relations between a contracting authority and an economic operator. The first is the situation where a potential tenderer may have obtained a competitive advantage through their role as an adviser to the contracting authority. The second is the situation in which a competitive advantage arises merely from the existence of some other form of connection between the contracting authority and the economic operator. The two situations are similar, but nevertheless sufficiently different to be dealt with under two different provisions. The situation involving advisers or consultants is governed by Articles 40 and 41, whereas conflicts of interest are governed by Article 24. Articles 40 and 41 of the Public Sector Directive provide that contracting authorities may seek advice from independent experts with a view to preparing a procurement procedure. However, the provisions also state that advisers may not obtain any competitive advantage from their roles as advisers in connection with participation in subsequent tendering. Like Article 24, Articles 40 and 41 require contracting authorities to avoid unequal treatment or distortion of competition, and if unequal treatment or distortion should nevertheless arise, the contracting authority should take measures to ensure that competition is not distorted by the participation of the adviser as candidate or tenderer. Previously the two different situations under Article 24 and under Articles 40 and 41 were directly covered by the principle of equal treatment. This gave greater flexibility in enforcement. Under the new provisions all questions of eligibility must be dealt with under the correct provision (i.e. Article 24 or Articles 40 and 41). This division makes it 1

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necessary to look more closely at these two sets of rules, and there are reasons for making a clearer distinction between situations that fall under one or the other of the provisions as they are no longer subject to the same tests. Under national law some situations concerning eligibility can be assumed to concern technical dialogue and some conflicts of interest. An example of this can be seen in Case C-538/13 eVigilo. In the eVigilo case the contracting authority had had dealings with advisers who worked at the Technical University of Kaunas. When the tenders were received it appeared that one of the tenders was based on expertise from people who were employed at the same university. In this case the facts were dealt with both from the perspective of a technical dialogue (at least as applied in the Fabricom case) and from the perspective of conflicts of interest. What was decisive was the acquaintance between the contracting authority’s advisers and the tenderer’s experts, but it was not considered important whether there had been a transfer of knowledge based on the function of the contracting authority’s advisers as advisers to the tenderer. Article 24 has two parts. The first sets out the contracting authority’s obligations in 4 relation to conflicts of interest. On the one hand it states what a contracting authority must do (take appropriate measures to effectively prevent, identify and remedy) and on the other hand it sets out the situation that must be ensured (to avoid distortion of competition and to ensure equal treatment of all economic operators). Article 24 then sets out what is meant by a ‘conflict of interest’.

24.1. The concept of a conflict of interest As stated, this is a new provision in the Public Sector Directive. This does not mean 5 the problem is new or that it has not been possible to deal with it under the previous rules. The problem was previously dealt with under the principle of equal treatment; see Article 18 of the current Directive. The provision deals with both distortion of competition and unequal treatment. It requires Member States ‘to avoid any distortion of competition and to ensure equal treatment of all economic operators.’ Thus there is an expectation that both considerations will be provided for – both avoiding a distortion of competition and ensuring equal treatment. There will undoubtedly be many cases where a conflict of interests will both lead to a distortion of competition and unequal treatment. However, there may also be situations where a potential conflict of interest could lead either to a distortion of competition or unequal treatment. A conflict of interests can involve an organisational or other connection between a 6 tenderer and a contracting authority which can result in a risk that the contracting authority’s decision in connection with a procurement is not impartial and give some advantage to the tenderer. A corresponding form of rules on eligibility can be seen in the administrative laws of some Member States which contain provisions prohibiting persons employed in or working for the administration from being involved with specific cases in which, for various reasons, they have a special but inappropriate interest. The aim of Article 24 is to ensure that all Member States have such provisions preventing conflicts of interest resulting from such connections between contracting authorities and tenderers. It must be assumed that Article 24 covers anticipated or potential discrimination. The 7 provision states that there will be a conflict of interest where it ‘might be perceived’ to compromise the impartiality and independence of the parties in the decision-making process. This means that where it appears that there could be some harm to the procurement procedure, this will be sufficient for there to be a conflict of interests. This can be seen in Case C-538/13 eVigilo, where the Court of Justice of the European Union (CJEU) Michael Steinicke

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ruled that an unsuccessful tenderer may not be required to provide tangible proof that a biased decision has been made or that some other difference in treatment. The mere risk of unequal treatment appears to be enough. One can question whether the mere risk of unequal treatment is decisive and not the result itself. The wording of Article 24 seems to suggest that where there is a mere risk that the procurement procedure ‘might be perceived’ to compromise the principle of equal treatment, there will be a breach of the Article. This presumably means that where the participation of a person in the decision-making for a procurement could cause doubt about the impartiality of the decision, that person cannot take part, even if the actual result does not seem to be contrary to procurement law. Where a question of eligibility arises prior to the decision, there will unquestionably be a need to exclude such a person from the decision-making process. Where such a person has participated in the decision-making and question are subsequently raised about their eligibility, it be considered whether a substantive error appears to have been made or whether it is sufficient to find that an ineligible person has taken part in the decision-making, and that there has thus been a breach of Article 24. 8 Article 24 states that a ‘conflict of interests’ covers situations where a contracting authority pursues an interest which can be perceived as compromising their impartiality and independence. It does not state what is meant by ‘impartiality’, even though there might be situations where this is in doubt. In Case C-538/13 eVigilo, the CJEU had to consider the meaning of the term ‘bias’, as used in the legislation of the Member State concerned. The case was based on Directive 2004/18/EC (the ‘2004 Public Sector Directive’). The CJEU pointed out that the concept of ‘bias’ and the criteria for it are to be defined by national law. The same applies to the rules relating to the legal effects of possible bias. The CJEU went on: ‘Thus, it is for national law to determine whether, and if so to what extent, the competent administrative and judicial authorities must take into account the fact that possible bias on the part of the experts had no effect on the decision to award the contract.’ The CJEU stated that both the concept of bias and the legal consequences of the existence of bias are to be decided under national law. In many ways it can be difficult to reconcile this with the new procurement rules. The definition of a conflict of interests in Article 24, second sentence, uses the term ‘impartiality’. There will thus be a conflict of interests if there is a risk that a person’s financial, economic or other personal interests will bring the impartiality and independence of the procurement procedure into question. If the term ‘bias’ is defined under national law, this will mean that that the extent of the above provision will be restricted to the Member States. Thus there will be different levels of protection against conflicts of interest depending on the host Member State for the procurement. This does not seem tenable, given that conflicts of interest reflect the principle of equal treatment, as pointed out in the eVigilo decision. It is therefore questionable whether defining the concept of ‘bias’ at national level will be the right approach under the new Public Sector Directive. The CJEU has also stated that the legal effects of bias on procurement procedures are a matter for national law. This also presents a challenge to the new rules. Under the new Public Sector Directive a tenderer is excluded from taking part if there is a conflict of interest in connection with the procurement and if the conflict of interest could result in unequal treatment or distortion of competition (Article 57). If the Member States could determine the legal effects of a conflict of interests, this could compromise the system under the new Directive.

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24.2. Different kinds of conflicts of interest The interests typically covered by Article 24 include where a contracting authority has 9 an interest in awarding the contract to a specific tenderer. For example, a contracting authority may have an ownership interest in the tenderer and will thus appear to have an interest in awarding the contract to that tenderer. Conflicts of interest can take different forms. The provision covers all relations where there can be a ‘financial, economic or other personal interest’. From the definition of a conflict of interests it is clear that the provision covers all kinds of persons involved in a procurement procedure, from the contracting authority’s employees and representatives to the employees of advisers and other external entities that play a role in the decisionmaking process. There is thus a broad definition covering all kinds of personal interests. The references indicate interests of a financial nature, but the definition can also cover other interests, such as family and social interests. ‘Other personal interest’ should clearly be seen as a catch-all category compared with the other two categories which are of a financial nature. These the other kinds of conflicts of interest can exist where there is a family connection between the contracting authority and the tenderer, for example if a woman is a director of a tendering undertaking and her husband takes part in the contracting authority’s decision-making. This situation is easier to deal with than where a conflict of interests is due to structural relations. The example given in the preceding paragraph can be dealt with by the husband of the director of the tendering undertaking removing himself from the procedure and passing his function to a colleague. Where companies are part of the same group or have some structural connection it can be much more difficult to deal with a conflict of interest, as the only practical alternative appears to be organisational separation, typically by selling the undertaking. Even if the description of the interests that can result in a conflict of interests is not intended to be restrictive, it is possible to categorise different kinds of situations with common characteristics which can be dealt with using the same template. The following sets out three categories of conflicts of interest:1 – There is a corporate or structural connection, in a broad sense, between a tenderer and the contracting authority. – There is common representation of a tenderer and the contracting authority. – There is some other connection with the potential to exercise control and a community of interest between a tenderer and the contracting authority. This categorisation is made with a view to systematising the application of the provision on conflicts of interest. The background to it is the existence of corporate connections which create relations between the parties that are of a more permanent nature and thus not easily alterable. Common representation can be of a less permanent nature, even though such relations can be based on legislation and thus be firmly rooted. The ‘other connections’ category is a catch-all category covering all other forms of conflicts of interest. This category is based on the possibility of making good potential breaches of Article 24 on grounds of conflicts of interest that are not easily adaptable, i.e. based on the ‘seriousness’ of the conflict.

1 This categorisation follows the practice in the decisions of the Danish Complaints Board for Public Procurement over the last 15 years.

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24.2.1. Corporate or structural connection 10

In this context ‘corporate connection’ covers not only the situations where a company’s share of ownership of another company fulfils the corporate group criteria in companies legislation, the law on financial statements, tax law or other laws. ‘Corporate connection’ refers to the existence of an organisational connection or common interest between two independent legal entities. The assessment of possible ineligibility in the context of procurement, due to a corporate connection, can find support from the Ballast Nedam cases2 in which there was an examination of whether account should be taken of the expertise of subsidiary companies in the eligibility of a parent company in an EU procurement procedure. The CJEU did not deal directly with the question of eligibility, but it did rule that, in the appropriate circumstances when applying the procurement directives, a purely legal separation between undertakings may be disregarded. Such an approach may be necessary to ensure that the principle of equal treatment is effectively upheld. Corporate connections can unquestionably play a role in the assessment of conflicts of interest as this provision deals with the common interests of the parties to a procurement which clearly includes structural or corporate relations. With conflicts of interest, what must be decisive is whether it can be established that there is such a close connection between the companies that there is a risk that this may result in a difference of treatment. Among other things, the essential question is how close the connection must be between a contracting authority and a tenderer for the tenderer to be ineligible, and whether the organisational situation can in itself lead to ineligibility. The clearest example of this will be where the contracting authority has 100 % ownership of an undertaking that submits a tender for a public contract. In such a situation in which there is the highest risk of unequal treatment, as the 100 % ownership creates the closest possible alignment of the interests of the contracting authority and the tenderer. The provision does not give an unambiguous guide as to whether a connection can in itself lead to ineligibility. Presumably this means that a contracting authority cannot dismiss a tenderer purely on the basis of the organisational structure however close the connection may be, but the contracting authority should attempt to remedy any conflict of interest. It must thus be assumed that in so far as there is an organisation overlap between two independent legal entities, this can be relevant to the assessment that a contracting authority must make in connection with the procurement. In other words, in such situations there will be a presumption of a conflict of interests. It is debatable whether the requirement to make good a situation will always be helpful. The CJEU has not decided whether it is possible to disqualify a party merely on the basis of an organisational connection. In several cases the Danish Complaints Board for Public Procurement has considered such a relationship, and the case law on common representation (Decision of 15 December 1999, Lifeline I/S) could be understood as meaning that there is not a basis for ineligibility just because there is some form of organisational connection between a contracting authority and a tenderer.3 However, in decision of 17 November 2003 Helsingør Municipality, the Complaints Board stated that where the same persons are involved in both the contracting authority and a tenderer, that tenderer will always have a competitive advantage over other tenderers, so the Board found that it was contrary to the principle of equal treatment to allow the tender2 3

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er to take part in the procurement procedure. Since the then Danish rules on eligibility were special provisions, this case cannot necessarily be taken as expressing the current law relating to the Public Sector Directive. Another question is whether there must be actual control for there to be ineligibility. Presumably not. It must be assumed that the mere fact that a contracting authority and a tenderer have overlapping ownership interests means that there can be a conflict of interests. This is because the mere fact that the contracting authority has some involvement with a tendering company will be sufficient for that contracting authority to have an interest in that tenderer being awarded the contract. The fact that the contracting authority has some control over the tenderer cannot be said to increase this risk. At the same time, it must be assumed that the more intensive the degree of control, the greater must be its interest in the tenderer being awarded the contract. This means that while both situations are potentially covered by Article 24, the stronger degree of control by a contracting authority over a tenderer will result in a corresponding increase in the risk of a conflict of interests. This means that where a tenderer has corporate control over a contracting authority 11 this will result in ineligibility. In this situation the tenderer has an improper incentive to award the contract to itself. However, this situation can only arise where the contracting authority is a public law body or a private law utility company since traditionally public authorities cannot be subsidiaries in a corporate group. In these situations it is naturally not decisive that the tenderer has the legal power to influence the award decision but ‘merely’ that there is a potential conflict of interest. Article 24 requires measures to be taken to avoid or prevent conflicts of interest. This means that where there are ties between a contracting authority and a tenderer the resolution of a conflict of interests is neither easy nor practicable. Where there is considered to be a conflict of interests resulting in unequal treatment or a distortion of competition, the only alternative to exclusion from participation in the procurement seems to be to dispose of the ownership interest. Such a solution would presumably not be possible in time or be strategically attractive for the parties. What of the situation where a person has been involved in the technical specification of a procurement contract, for example by drawing up a report making a recommendation to the decision-making body? In this case even if this person does not take part in the decision itself, they have been involved in establishing the basis on which the decision is taken. While this situation would presumably not involve a conflict of interest, it can be covered by Articles 40 and 41 of the Public Sector Directive. 24.2.2. Common representation Another kind of situation is that in which either the tenderer or the contracting au- 12 thority has a representative in the other party. There will presumably be a difference in how these two situations are assessed under Article 24. This refers to a different form of representation than that arising from being part of the same corporate group, for example where a member of the evaluation committee is also a member of the management of the tenderer, or where a member of the contracting authority sits on the board of the tenderer (for example on the basis of legislation). Where a representative for the contracting authority sits as an official representative and the purpose of the participation is to exercise a public law supervisory function, this might reduce the risk of ineligibility. However, this might involve a risk of unequal treatment, even though the risk will presumably be less than where the representative sits as an ordinary member of a decision-making body.

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It must be assumed that it is sufficient for a person to be ineligible that they take part in the review of the tenders received and that it is not necessary that they should take part in the actual decision-making. The reason why an ineligible person may not take part in the review of tenders is that it is possible, during a review, to express preferences or that the general feeling or the other participants can be influenced. 13 In Case T-160/03 AFCon Management Consultants, the General Court (GC) had to consider a situation where an employee of an undertaking that was part of a consortium participating in a procurement procedure was a member of the evaluation committee. The procurement was made by the Commission under the Tacis programme (Technical Assistance to the Commonwealth of Independent States) and the Financial Regulation (Regulation (EC, ECSC, Euratom) No 2548/98) and not pursuant to the Procurement Directives. Since the basis for such a procurement is very similar to that under the Procurement Directives, and since the situation was dealt with on the basis of the principle of equal treatment, the decision gives an indication of the GC’s attitude to the question of eligibility under the Procurement Directives. In this case, a person who was a member of the evaluation committee was also employed by a company that was a member of one of the bidding consortiums (GFA). The evaluation committee made its review and took a decision before the conflict of interest was revealed. The Commission thereafter excluded that person from the evaluation committee and repeated the evaluation from the beginning. The Commission allowed the consortium in question to participate in the procedure. The second evaluation reached the same decision as the first, namely the consortium to which the ineligible person was attached won the competition. The claimants in the case criticised the Commission for not having taken full account of the consequences of the conflict of interest. In the view of the claimants it would have been most correct to exclude GFA from tendering. The GC stated that it was highly questionable and contrary to the principle of equal treatment in public contracts ‘that a person who helps to evaluate and select tenders for a public contract has the contract awarded to him’.4 The GC went on to say that the Commission had failed to fulfil its administrative law obligation, including the obligations of sound financial management and the principle of equal treatment, by failing to act in the situation in question. 14 The GC concluded by stating that: ‘the Commission, in failing to investigate the relations between Mr A and the GFA consortium, made a manifest error of assessment. In infringing the principle of sound administration in that way, the Commission also violated the principle of equal treatment as between tenderers, which requires it to examine each tender impartially and objectively in the light of the requirements and general principles governing the tendering procedure, in order to ensure that all the tenderers are afforded the same opportunities. The principle of equal treatment prohibits comparable situations from being treated differently and different situations from being treated alike, unless such treatment is objectively justified. In this instance, there were serious doubts as to the lawfulness of GFA’s tender. As long as those doubts subsisted, the consortium’s situation was different from that of all the other tenderers. By failing to open an inquiry aimed at putting an end to that situation, the Commission treated GFA in the same way as all the other tenderers, even though such treatment was not objectively justified. In infringing the principle of equal treatment in that way, the Commission violated a rule of law whose purpose is to confer rights on individuals. However, since it has been established that the Commission failed to act with due diligence to take the steps needed to continue with the tendering procedure, the legality of the decision not to exclude GFA from the remainder of the procedure cannot be assessed. Whether the decision is lawful is directly dependent on the result of the inquiry which the Commission should have undertaken in order to satisfy itself that there was no collusion. Since the factual aspects of the case-file do not sup4

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port a finding of such collusion, the Court must reject the complaints by which the applicants seek to show that the Commission should have excluded GFA from the tendering procedure.’5

This decision gives rise to several comments. First, the case did not concern the Pub- 15 lic Sector Directive, but other EU procurement rules. However, this does not mean there is no comparison with the situation under the Public Sector Directive, particularly as the principle of equal treatment will clearly be very similar to (and may be assumed to be identical to) the principle under the Public Sector Directive. Second, administrative law considerations formed part of the basis for the decisions, and these considerations do not play a role in the Member States’ application of the procurement rules. The GC’s arguments based on administrative law are not included in the present context. What is most interesting about this judgment is that even though the element which could potentially result in a biased decision had been removed from the evaluation, namely the exclusion of the representative from a tenderer, the GC nevertheless believed there was a risk of the wrong decision being made. The reason for this must be that the GC believed that the influence on the sentiment or some other circumstance connected with the evaluation could continue to exist despite the absence of the ineligible person. It could also be that, during their time in the evaluation committee, the ineligible person could have made an indelible impression on the other members of the committee so they would find it difficult to disregard the views of this person. The GC said that the contracting authority (the Commission) should have considered whether the undertaking in question should have been entirely excluded from the competition, even after the ineligible person had been excluded. 24.2.3. Other shared interest The category of ‘other shared interest’ covers one or more forms of shared interests 16 arising from other than formal representation or corporate structure. The category can be seen as a catch-all category, since more informal shared interests can result in a breach of the principle of equal treatment so the application of the rules on ineligibility will not be necessary. Where a representative for a tenderer participates in the evaluation of tenders, there will be common representation as described above. A person may also be excluded from taking part in an evaluation, not on the basis of some representative connection but for some other reason. This will be the case where an undertaking participates in evaluating a tender when it is linked to the tenderer by virtue of acting as an adviser to the tenderer; in this situation the adviser may be ineligible. If different treatment is due merely to the fact that the adviser will be predisposed to give a tenderer an advantage because of a connection between the two entities, this will be covered by Article 24. There was an example of such a conflict of interest in a case ruled on by the Danish Complaints Board for Public Procurement on 19 February 2001, Zealand Care A/S. The case concerned a tender for an operational and administration agreement for recyclable products for elderly and handicapped persons in Frederikshavn Municipality. The tenders received were evaluated by a working group in which the municipality’s purchasing manager participated. The purchasing manager had agreed with the municipality that they would leave their post on 31 July 2000. Subsequently the purchasing manager had discussions with the managing director of Zealand Care A/S about employment in that company. The Board’s decision was based on the central position of the purchasing manager for the contracting authority, taken together with the fact that possible employment 5

Paras. 90-92.

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with the appellant had been discussed at the time when the purchasing manager had given notice to quit and was a member of the respondent’s working group which evaluated the tenders. The Board found that there had been a breach of the principle of equal treatment. 17 A special interest can also arise where a person has a link to both the contracting authority and a tenderer. This person may be organisationally independent but have representative relations with both the contracting authority and a tenderer, but they can also have a connection with the contracting authority through a personal relationship with someone who has a connection with a tenderer. There can also be potential shared interests based on a variety of relationships. 18 A financial or other personal interest may be manifested in various ways. In addition to the nature of the relevant interest there may be an extended group of persons affected, as third parties (advisers, consultants) can also be involved.6 19 On the basis of the wording of Article 24 it must be assumed that tenderers must be excluded if there is merely a potential for ineligibility. The effect of ineligibility need not necessarily be evident prior to ineligibility being imposed, as there need only be a shared interest which could potentially lead to unequal treatment or bias. 24.2.4. Technical dialogue or conflict of interest? 20

Conflicts of interest can arise either on their own or in connection with technical dialogue. See section 24.1 above on the relationship between Article 24 and Articles 40 and 41. If there are situations in which there appear to be both a conflict of interest and technical dialogue it will be necessary to find out which of the two circumstances govern the situation. However, in principle the yardstick for both situations is whether there is a distortion of competition or, in particular, a breach of the principle of equal treatment. Correspondingly, the consequence of the existence of a conflict of interest in connection with a technical dialogue will ultimately be the exclusion of the economic operator from the procurement. It must be assumed that where a contracting authority and a tenderer use the same adviser, this must be assessed in accordance with the case law on the eligibility of advisers. 24.2.5. Conflicts of interest in the contractual phase

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According to its wording, Article 24 does not appear to cover situations where, in the contract phase itself, i.e. after the tendering procedure is over, there can be a risk of ineligibility. This situation clearly differs from the kind of conflict of interest directly governed by Article 24. In Case T-195/05 Deloitte Business Advisory NV, the GC ruled that the contracting authority (the Commission) had correctly excluded a tenderer on the ground that there was a risk that the award of the contract to the tenderer in question would result in ineligibility in the contract phase. Specifically, the tender included some control functions relating to some of the Commission’s programmes, and the tenderer had been given some of the means which were subject to the control function. Since the Commission believed that there was a conflict of interest in relation to the task offered for tender, it excluded the tenderer. It should be noted that this case concerned the Financial Regulation which specifically governs procurements by the EU’s institutions. 6 In a ruling of 20 February 2004, Miri Stål A/S, the Danish Complaints Board for Public Procurement ruled that a representative for an undertaking who took part in the evaluation of tenders had a conflict of interests as the undertaking concerned was to be a subcontractor for one of the tenderers. Thus the representative, and their company, had an interest in that particular tenderer being selected.

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The Financial Regulation differs on a number of points from the Procurement Directives, and in this case a provision in the Financial Regulation explicitly governed the problem. Given the differences between the Financial Regulation and the Procurement Directives it could be argued that it is not correct to attribute significance to Case T-195/05 Deloitte Business Advisory NV vis-à-vis the Procurement Directives. It has been stated that this is not the case, as the decision was primarily based on the principle of equal treatment rather than express provisions in the Financial Regulation.7 Basically the situation will not be governed by Article 24 as it does not involve a conflict of interest that directly affects the competitive situation of the procurement but rather the contractual relations under national law. Thus it is possible to apply the principle of equal treatment, but the situation is more similar to situations governed by Article 57 than Article 24.

24.3. Proof According to the general evidential requirements relating to the principle of equal 22 treatment and eligibility, it is for the contracting authority to show that it is probable that there is a breach of the principle. This may be different in relation to the question of ineligibility; see Joined Cases C-21/03 and C-34/03 Fabricom SA. In this case the CJEU ruled that the procurement rules preclude national rules whereby a person who has been instructed to carry out research, experiments, studies or development in connection with public works, supplies or services is not permitted to apply to participate in or to submit a tender for those works, supplies or services without that person being given the opportunity to prove that the experience which they have acquired was not capable of distorting competition.8 The case must similarly be expected to apply to the general decisions of contracting authorities on whether an undertaking used as an advisor can participate in subsequent tendering. While the case concerned the eligibility of advisers, the evidential burden could be applicable by analogy to conflicts of interest so that, for example, a Member State does not allow undertakings with a specific connection to a contracting authority to participate in the authority’s procurements. The significance of the judgment in the context of conflicts of interest will thus be that, as long as a tenderer is given the opportunity to show that there has not been a breach of the principle of equal treatment, contracting authorities can generally exclude an undertaking that has a specified relationship to a contracting authority without the contracting authority having to show that it is probable that such participation will give the undertaking a competitive advantage and thus breach the principle of equal treatment. This shifts the burden of showing the probability of a breach of the principle of equal treatment to the undertaking that has acted as an advisor etc. It is now the advisory undertaking that must show that participation in a procurement procedure will not result in a breach of the principle. On 13 March 2015 the CJEU gave judgment in Case C-538/13 eVigilo Ltd, on conflicts of interest in public procurement procedures. Questions were referred to the CJEU for a preliminary ruling on a dispute between eVigilo Ltd and Lithuania’s General Department of Fire and Rescue at the Ministry of the Interior, as the contracting authority, concerning the evaluation of tenders in a public procurement procedure. After the procedure had been initiated in 2010, one of the unsuccessful tenderers, 23 eVigilo Ltd, had brought proceedings on various matters concerning the procurement. 7 See Peter Braun and Ceren Berispek, ‘Conflict of interest in public award procedures: Deloitte Business Advisory NV v Commission of the European Communities (T-195/05)’, in: PPLR, 2008, NA53-59. 8 Para. 36.

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They raised a question about the impartiality of the experts who had assessed the tenders. eVigilo believed it was possible to show that there were professional relations between these assessors and the specialists referred to in the winning tender. eVigilo argued that the specialists referred to in the winning tender were colleagues at the Technical University of Kaunas of three of the six experts appointed by the contracting authority who drew up the tender documents and evaluated the tenders. The national court, Lietuvos Aukščiausiasis Teismas, decided to stay proceedings and refer questions to the CJEU for a preliminary ruling. One of these questions, as reformulated by the CJEU, was whether Articles 2, 44(1) and 53(1)(a) of the 2004 Public Sector Directive must be interpreted as precluding a finding that an evaluation of tenders is unlawful solely because a tenderer has had a significant connection with experts appointed by the contracting authority to evaluate the tenders without other evidence being examined, including the fact that those experts may have been biased and whether this had an effect on the decision to award the contract, without the unsuccessful tenderer being required to provide tangible proof that those experts were biased. The CJEU pointed out that the principles of equal treatment and transparency were relevant to cases of conflicts of interest. In particular, since at that time there was no express directive provision on conflicts of interest, the principle of equal treatment and the obligation of transparency, which is its corollary, is essentially intended to preclude any risk of favouritism or arbitrariness on the part of the contracting authority with respect to certain tenderers or certain tenders.9 The CJEU stated that a conflict of interests entails a risk that a contracting authority may be guided by considerations unrelated to the contract in question and that preference may be given to a tenderer for that reason alone. A conflict of interests was thus liable to infringe Article 2 of the 2004 Public Sector Directive. The fact that the contracting authority appointed experts to act on its behalf to evaluate the tenders submitted did not relieve it of its responsibility to comply with the requirements of EU law. 24 The CJEU also emphasised that a ‘finding of bias on the part of an expert requires in particular the assessment of facts and evidence that comes within the competence of the contracting authorities and the administrative or judicial control authorities’ (paragraph 37 of the judgment). The CJEU went on to say that, in the absence of EU rules governing the matter it is for each Member State to lay down detailed rules for administrative and judicial procedures to safeguard the rights which individuals derive from EU law. According to the CJEU, a Member State may establish that an expert may be biased purely on the basis of an objective situation, in order to prevent any risk that a contracting authority could be guided by considerations unrelated to the contract (paragraph 41). In paragraph 43 of its judgment the CJEU added: ‘it follows that the contracting authority is, at all events, required to determine whether any conflicts of interests exist and to take appropriate measures in order to prevent and detect conflicts of interests and remedy them.’ In paragraph 42 the CJEU stated that contracting authorities must treat economic operators equally and non-discriminatorily and act in a transparent way, and that they have been given an active role in applying these principles of public procurement. Consequently, if an unsuccessful tenderer presents objective evidence calling in question the impartiality of one of the contracting authority’s experts, it is for that contracting authority to examine all the relevant circumstances which have led to the adoption of the decision on the award of the contract to prevent and detect conflicts of interests and remedy them, including, where appropriate, requesting the parties to provide certain information and evidence.10 9

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In the eVigilo case the CJEU stated that evidence relating to connections between ex- 25 perts appointed by the contracting authority and specialists of an undertaking awarded the contract, in particular the fact that those persons worked together at the same university, belonged to the same research group or had employer/employee relationships at that university, if proved to be true, constituted such objective evidence as must lead to a thorough examination of the circumstances; see paragraph 45. Finally, the CJEU concluded that the provisions of the Public Sector Directive must be interpreted as not precluding a finding that the evaluation of a tender is unlawful solely on the ground that the tenderer has had a significant connection with experts appointed by the contracting authority to evaluate the tenders. At all events the contracting authority was required to determine the existence of possible conflicts of interests and to take appropriate measures to prevent, detect and remedy them. An unsuccessful tenderer could not be required to provide tangible proof of the experts’ bias in an action for annulment of an award decision on the ground that the experts were biased. The CJEU concluded that it is, in principle, a matter of national law to determine whether, and if so to what extent, the competent administrative and judicial control authorities must take account of the fact that a possible bias on the part of experts may have had an effect on a decision to award a contract. The CJEU’s ruling gives the impression that it is acceptable that national law should determine whether a specific link between a contracting authority (or its representative) and a tenderer will lead to the exclusion of a tender. It is not clear from the CJEU’s ruling or its other reasoning whether the CJEU’s conclusion, that there must be a possibility of showing that the link between the contracting authority and the tendered has had no influence on the competition, is conditional. Where the circumstances do not show any influence on the competition, there will not be any discrimination under the principle of equal treatment and thus there will not be a basis for excluding a tenderer solely on this basis.11 If the CJEU’s conclusion were to be understood as not allowing the possibility to refute an assumed influence on competition it would presumably be contrary to the CJEU’s earlier case law in this area; see Case C-213/07 Michaniki. In Case C-213/07 Michaniki the CJEU had to rule on whether legislation which, in 26 order to protect transparency in the economic functioning of the State, ‘a provision which lays down … that the status of owner, partner, main shareholder or management executive of a media undertaking is incompatible with the status of owner, partner, main shareholder or management executive of an undertaking contracting to perform a works, supply or services’.12 One of the questions referred for a preliminary ruling concerned whether such an absolute prohibition of awarding public contracts to such undertakings was compatible with the principle of proportionality. The CJEU concluded that EU law precluded a Member State from ‘establishing an irrebuttable presumption that the status of owner, partner, main shareholder or management executive of an undertaking active in the media sector is incompatible with that of owner, partner, main shareholder or management executive of an undertaking which contracts with the State or a legal person in the public sector in the broad sense to perform a works, supply or services contract’ (emphasis added).13 The purpose of provision was to prevent or hinder Case C-538/13 eVigilo Ltd, para. 44. While Article 24 does not require there to be a possibility for a tenderer to refute an assumption of a conflict of interests, it does require there to be a possibility to refute an assumption of ineligibility of advisers under the associated provision in Article 41. 12 Case C-213/07 Michaniki, para. 26. 13 Case C-213/07 Michaniki, para. 69. 10

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fraud and corruption, and this aim was acknowledged by the CJEU; see paragraph 60. However, the CJEU emphasised the importance of allowing a party the possibility of showing that, despite any evidence that might be advanced by a competitor, there is no real risk of the type referred to; the CJEU referred to paragraphs 33 and 35 of the Fabricom case. It is thus only possible to uphold a national provision that establishes an assumption that there is a negative influence on competition on the basis of the activities of an economic operator if there is a possibility of providing evidence that, in the actual case, there is no such distortive effect on competition. This means that the decision in the eVigilo case will only be compatible with the decisions in the Michaniki and Fabricom cases etc. if the law allows for the establishment of a presumption of an effect on competition, but where an economic operator or contracting authority has the possibility of showing that there is no effect in fact. Such a result will also be most in accordance with the principle of equal treatment which prohibits any form of discrimination. This means not only that equal treatment is ensured for all undertakings that do not have any links with the contracting authority, but also for all undertakings that do have such a link but where the link is not significant with regard to the procurement in question.

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TITLE II RULES ON PUBLIC CONTRACTS Chapter I Procedures Article 25 Conditions relating to the GPA and other international agreements In so far as they are covered by Annexes 1, 2, 4 and 5 and the General Notes to the European Union’s Appendix I to the GPA and by the other international agreements by which the Union is bound, contracting authorities shall accord to the works, supplies, services and economic operators of the signatories to those agreements treatment no less favourable than the treatment accorded to the works, supplies, services and economic operators of the Union. Literature: Anderson/Müller, The Revised Agreement on Government Procurement (GPA): Key Design Features and Significance for Global Trade and Development, 2017; Arrowsmith/Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform, World Trade Organization, 2011; Arrowsmith, ‘Reviewing the GPA: The Role and Development of the Plurilateral Agreement after Doha’, in: Journal of International Economic Law, 2002, p. 761; Arrowsmith/Linarelli/Wallace, Regulating Public Procurement. National and International Perspectives, 2000; Caroli Casavola, ‘Global Rules for Public Procurement’, in: Noguellou/Stelkens (eds), Droit comparé des contrats publics. Comparative Law on Public Contracts, 2010, p. 27; DawarI/Skalova, ‘The Evolution of EU Public Procurement Rules and its Interface with WTO: SME Promotion and Policy Space’, in: Olykke/Sanchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules, 2016, p. 59; Kim, Political Institutions and the Government Procurement Agreement of the WTO, PPLR 2009, p. 1; Nwogwugwu, Towards the Harmonisation of International Procurement Policies and Practices, PPLR 2005, p. 131.

Today the public procurement regime in Europe is very much shaped as a cascade.1 1 Seen from the bottom you have national or domestic rules which have to comply with EU rules which in turn have to comply with international agreements. The latter covers for instance bilateral free trade agreements that contain commitments by the Union in the field of procurement as it was explicitly indicated in the amendments to the Commission’s proposal tabled by the European Parliament. One such case is the Free Trade Agreement negotiated with South Korea whose Article 9 relates to public procurement which is one target area according to Article 1 of the same Agreement. If the Transatlantic Trade and Investment Partnership (TTIP) Agreement between the EU and the US were ever to be concluded, this provision would indeed become very relevant.2 The reform proposal of the Commission foresaw a specific annex to list these agreements and to be updated as necessary by the same Commission, but this idea was later dropped. Among these international agreements the GPA – which is expressly mentioned – is 2 indeed the most relevant.3 The GPA is a plurilateral agreement signed in 1994 in Marrakesh within the framework of the WTO. Being a plurilateral agreement means that not 1 The metaphor of the building blocks is also quite adequate in describing the situation: P. Trepte, Regulating Procurement, 2004, p. 37; only the cascade suggests a specific order among the different blocks. 2 On the current perspectives C.R. Yukins and M. Bowsher, ‘Brexit and the Trump Election: Finding a Way Forward for Transnational Procurement. The Year That Changed Almost Everything’, 4/2016 EPPPL 258 et seq.; Z. Raczkiewicz, ‘Public Procurement within the Framework of a Transatlantic Trade and Investment Partnership’, 4/2016 EPPPL 263 et seq.; R. D. Anderson and P. Pelletier, ‘The Government Procurement Chapter of the Trans-Pacific Partnership Agreement: An Assessment of its Potential Impact’, 4/2016 EPPPL 270 et seq.

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all WTO members are parties to the GPA. At present, the parties mostly belong to the developed world. Beside the EU and its 28 Member States parties are for instance Canada, Japan, the United States.4 Late in 2011 negotiations were concluded on a new GPA. This revised agreement has entered into force on 6 April 2014 for those parties having already ratified it, among them the EU and the US. Some of the bilateral free trade agreements mentioned in the previous section – such as the one negotiated with South Korea – had anticipated the application of the revised GPA among the parties. Reference here will be to the revised GPA.5 3 The obligations flowing from the GPA have acted as an inhibitor of further simplification and flexibility in the reform of EU law.6 The GPA is often referred to in the European Commission Green Paper on the modernisation of EU public procurement policy Towards a more efficient European Procurement Market.7 For instance in order to counter the pressure from some Member State to rise the thresholds the Commission objected that:8 “Any increase in the applicable thresholds in the EU would automatically involve a corresponding increase in all the agreements concluded by the EU (meaning not only in the GPA, but also in all other international agreements). This situation could in turn trigger requests for compensation from our partners. These requests could be quite significant”.

More generally:9 “A number of procedural requirements originate directly from the GPA and the bilateral agreements signed by the EU, such as the deadlines for different procedures, the conditions for using a negotiated procedure without publication or the publication of a contract award notice. Abandoning or changing these requirements would not be possible without a renegotiation of the EU’s international obligations”.

In the end, the Commission’s proposal for a new directive on public procurement accepted a ‘Lighter regime for sub-central contracting authorities’: “In line with the WTO Government Procurement Agreement, the proposal provides a simplified procurement regime that applies to all contracting authorities below the central government level, such as local and regional authorities. These purchasers may use a prior information notice as a means of calling for competition. If they make use of this faculty, they don’t have to publish a separate contract notice before launching the procurement procedure. They may also set certain time limits in a more flexible way by mutual agreement with participants”.10

3 See S. Arrowsmith/J. Linarelli/D. Wallace, Regulating Public Procurement. National and International Perspectives, p. 157 et seq. 4 See Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the Agreements reached in the Uruguay Round multilateral negotiations (1986 to 1994). 5 See R. D. Anderson/A. C. Müller, The Revised Agreement on Government Procurement (GPA): Key Design Features and Significance for Global Trade and Development, 2017 p. 1 et seqq. (available at https://www.wto.org/english/res_e/reser_e/ersd201704_e.pdf ). 6 See K. DawarI/M. Skalova, ‘The Evolution of EU Public Procurement Rules and its Interface with WTO: SME Promotion and Policy Space’, in: Olykke/Sanchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules, 2016, p. 59 et seq.; for instance with reference to thresholds A. Tokár, ‘Institutional Report’ in: U. Neergaard, C. Jackson, G.S. Ølykke (eds), Public Procurement Law: Limitations, Opportunities and Paradoxes. The XXVI FIDE Congress in Copenhagen, 2014 Congress Publications Vol. 3, 2014, p. 211 et seq. 7 COM(2011) 15 final, at pp. 8, 10, 13 (twice), 16, 17 (three times), 20 (twice), 48, and 54 (four times, but within the same paragraph). 8 At p. 10, sub question 6; see the discussion by P. Telles, ‘Public Procurement Financial Thresholds in the EU and their relationship with the GPA’, 3/2016 EPPPL p. 205 et seqq. 9 At p. 13, sub question 13. 10 COM(2011) 896 final, at p. 8.

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Not unlike the EU rules, the GPA provisions aim at opening up to foreign competi- 4 tion domestic public procurement markets.11 Indeed already as first thing in the preamble of the GPA the parties have recognised “the need for an effective multilateral framework for government procurement, with a view to achieving greater liberalization and expansion of, and improving the framework for, the conduct of international trade”. Recital 17 of the Public Sector Directive reiterates this by clarifying that: “The aim of the GPA is to establish a multilateral framework of balanced rights and obligations relating to public contracts with a view to achieving the liberalisation and expansion of world trade”.

This translates into a general principle of non-discrimination, according to which contracting authorities of the States party to the GPA must treat foreign suppliers, goods and services in a way that is no less favourable than the way local suppliers, goods and services are treated (Article IV(1) and (2) of the revised GPA). 12 Instrumental to this end is the familiar combination of procedural rules and reme- 5 dies. In the revised GPA the former are given a place of honour in Article IV on ‘General principles’. Under Article IV(4) – ‘Conduct of Procurement’ – “A procuring entity shall conduct covered procurement in a transparent and impartial manner that: (a) is consistent with this Agreement, using methods such as open tendering, selective tendering and limited tendering […]”. As it was the case with the old EU public procurement directives, the procedures are defined in Article I. Following the alphabetical order: “limited tendering means a procurement method whereby the procuring entity contacts a supplier or suppliers of its choice” (lit. h); “open tendering means a procurement method whereby all interested suppliers may submit a tender” (lit. m), and “selective tendering means a procurement method whereby only qualified suppliers are invited by the procuring entity to submit a tender” (lit. q). These procedures basically correspond to those which in the EU are called ‘negotiated procedure without prior publication’, ‘open’ and ‘restricted’ procedures. Article XIII lists the exceptional grounds under which ‘limited tendering’ is allowed. The grounds are the familiar ones for which recourse to negotiated procedures were allowed under the old EU directives. Somewhat familiar provisions also concern qualification, technical specification, deadlines and so on. This is of course hardly surprising since it was already recalled that EU rules are often cast following the mould of the GPA. The revised GPA has also introduced some new provisions on different aspects of e-procurement. Concerning remedies, Article XX the WTO Dispute Settlement Understanding ap- 6 plies to Party to Party disputes, and indeed a limited number of cases concerning public procurement was thus adjudicated in the past.13 Moreover, and possibly more interestingly from the point of view of suppliers, Article XVIII provides that the Parties to the revised GPA must set up domestic review procedures. In words strongly reminiscent of Article 1 of Directive 89/665/EEC as revised by Directive 2007/66/EC, “a timely, effective, transparent and non-discriminatory administrative or judicial review procedure through which a supplier may challenge a breach of the Agreement” must be organised at domestic level.14 Due process rules also apply in case the complaint is heard by a review body which is not a court and whose decisions are not subject to judicial review. In 11 See Trepte, Public Procurement in the EU: A Practitioner’s Guide, p. 247 et seq.; Arrowsmith/Linarelli/ Wallace, Regulating Public Procurement. National and International Perspectives, p. 185. 12 It is discussed how far this allows for sustainability considerations: see L. Tosoni, ‘The impact of the revised WTO Government Procurement Agreement in the EU procurement rules from a sustainability perspective’, 1/2013 EPPPL 41 et seq. 13 All information is available at http://www.wto.org/english/tratop_e/gproc_e/disput_e.htm#gpadispu tes; the weakness of this review system, is rightly stressed by Arrowsmith/Linarelli/Wallace, Regulating Public Procurement. National and International Perspectives, p. 175.

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line with international standards better suited to the contract implementation case, Article XVIII also provides that in the event of a complaint “the Party of the procuring entity conducting the procurement shall encourage the entity and the supplier to seek resolution of the complaint through consultations”. Obviously given the polycentric nature of award disputes, if the procuring entity changes its mind following the complaint, the supplier who was favoured in the first place will in turn raise a complaint. More sensibly the revised GPA has taken on board from the European experience the standstill period. Rapid interim measures to preserve the supplier’s opportunity to participate in the procurement must be provided for. Corrective action or compensation for the loss or damages suffered, which may be limited to either the costs for the preparation of the tender or the costs relating to the challenge, or both, must be provided for in case the breach of GPA rules is to be established. Article XVIII has clearly benefited from the experience gained in Europe through the application of Directive 89/665/EEC as revised by Directive 2007/66/EC (see below Part V).15 7 As it is the case with the EU directives, the GPA does not apply to all and every public procurement procedure. Only those procedures specified in the parties’ coverage schedules have to be carried out in accordance with the rules of the GPA.16 The coverage schedules are contained in Appendix I to the GPA. The schedule of each party contains several annexes which define the concerned party’s commitments with respect to four dimensions of coverage, namely, the procuring entities, the goods and services (including, albeit in a separate Annex, construction services), the threshold values and the exceptions to the coverage. As a consequence, the obligations of the Parties under the GPA have a variable shape, meaning that each of them has opened different sections of its domestic public procurement market. 17 The overall picture, also taking into account exceptions and derogations negotiated by the different parties, is very complicated. Basically, under the GPA the EU has committed itself to a coverage which is in line with EU secondary legislation. Article 25 of the new Public Sector Directive refers to the Annexes to the GPA covering central and sub-central government (Annexes 1 and 2) and goods and services (Annex 4 and 5). Annex 3 lists other entities and is instead relevant under Article 43 of the Utilities Directive. The picture is complex enough, since for instance concerning services the EU followed the positive list system, and did the same concerning goods procured by defence ministries (with broad coverage including e.g. “Chapter 96: Brooms, brushes, powder-puffs and sieves’ even when purchased by a defence ministry). For the EU the GPA still does not cover the procurement of agricultural products made in furtherance of agricultural support programmes and human feeding programmes (e.g. food aid including urgent relief aid), and the procurement for the acquisition, development, production or co-production of programme material by broadcasters and contracts for broadcasting time. 8 This having been said, it is submitted that Article 25 does not really belong to the Chapter on ‘procedures’. Contracting authorities are to use the procedures laid down in the Public Sector Directive, not those in the GPA. It is up to the EU institutions to make 14 Indeed EU law influenced the reformed GPA under this (and other) respects: K. DawarI/M. Skalova, ‘The Evolution of EU Public Procurement Rules and its Interface with WTO: SME Promotion and Policy Space’, in: Olykke/Sanchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules, 2016, p. 60. 15 See the analysis in the papers collected by Treumer/Lichère (eds), Enforcement of the EU Public Procurement Rules, 2011. 16 See Arrowsmith/Linarelli/Wallace, Regulating Public Procurement. National and International Perspectives, p. 194 et seq. 17 See also R.D. Anderson/A.C. Müller, The Revised Agreement on Government Procurement (GPA): Key Design Features and Significance for Global Trade and Development, 2017 p. 8 et seq.

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sure that the two do not diverge. It is arguable that they do not, and that the procedures laid down in the public sector directive are not just consistent with the international obligations of the EU but go beyond what is required from the EU. Contracting authorities of the Member States are required, when they purchase according to the EU procedures, to also comply with the GPA by not discriminating foreign suppliers, goods or services insofar as the GPA is applicable. Ideally, this should have been provided in a specific provision following Article 18 of the Public Sector Directive on the general principles or as a second paragraph of the same article or, but this would have been somewhat less elegant, in conjunction with Article 19 in the regime applicable to economic operators. As recital 17 puts it: “For contracts covered by Annexes 1, 2, 4 and 5 and the General Notes to the European Union’s Appendix I to the GPA, as well as by other relevant international agreements by which the Union is bound, contracting authorities should fulfil the obligations under those agreements by applying this Directive to economic operators of third countries that are signatories to the agreements”.

Article 26 Choice of procedures 1. When awarding public contracts, contracting authorities shall apply the national procedures adjusted to be in conformity with this Directive, provided that, without prejudice to Article 32, a call for competition has been published in accordance with this Directive. 2. Member States shall provide that contracting authorities may apply open or restricted procedures as regulated in this Directive. 3. Member States shall provide that contracting authorities may apply innovation partnerships as regulated in this Directive. 4. Member States shall provide that contracting authorities may apply a competitive procedure with negotiation or a competitive dialogue in the following situations: (a) with regard to works, supplies or services fulfilling one or more of the following criteria: (i) the needs of the contracting authority cannot be met without adaptation of readily available solutions; (ii) they include design or innovative solutions; (iii) the contract cannot be awarded without prior negotiations because of specific circumstances related to the nature, the complexity or the legal and financial make-up or because of the risks attaching to them; (iv) the technical specifications cannot be established with sufficient precision by the contracting authority with reference to a standard, European Technical Assessment, common technical specification or technical reference within the meaning of points 2 to 5 of Annex VII; (b) with regard to works, supplies or services where, in response to an open or a restricted procedure, only irregular or unacceptable tenders are submitted. In such situations contracting authorities shall not be required to publish a contract notice where they include in the procedure all of, and only, the tenderers which satisfy the criteria set out in Articles 57 to 64 and which, during the prior open or restricted procedure, submitted tenders in accordance with the formal requirements of the procurement procedure. In particular, tenders which do not comply with the procurement documents, which were received late, where there is evidence of collusion or corruption, or which have been found by the contracting authority to be abnormally low, shall be Roberto Caranta

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considered as being irregular. In particular tenders submitted by tenderers that do not have the required qualifications, and tenders whose price exceeds the contracting authority’s budget as determined and documented prior to the launching of the procurement procedure shall be considered as unacceptable. 5. The call for competition shall be made by means of a contract notice pursuant to Article 49. Where the contract is awarded by restricted procedure or competitive procedure with negotiation, Member States may provide, notwithstanding the first subparagraph of this paragraph, that sub-central contracting authorities or specific categories thereof may make the call for competition by means of a prior information notice pursuant to Article 48(2). Where the call for competition is made by means of a prior information notice pursuant to Article 48(2), economic operators having expressed their interest following the publication of the prior information notice shall subsequently be invited to confirm their interest in writing by means of an invitation to confirm interest in conformity with Article 54. 6. In the specific cases and circumstances referred to expressly in Article 32, Member States may provide that contracting authorities may apply a negotiated procedure without prior publication of a call for competition. Member States shall not allow the application of that procedure in any other cases than those referred to in Article 32. Literature: Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014; Bovis, EU Public Procurement Law, 2nd ed. 2012; Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, 2nd ed. 2015; Burnett, ‘The New Rules for Competitive Dialogue and the Competitive Procedure with Negotiation in Directive 2014/24 – What Might They Mean for PPP?’, in: EPPPL 2/2015, p. 62 et seq.; Davey, ‘Procedures involving negotiations in the new Public Procurement Directive: key reforms to the grounds for use and the procedural rules’ PPLR 2014, p. 103 et seq.; González Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014; Lichère, ‘New Award Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014; Lichère, Quid de la place nouvelle des procedures négociées et du dialogue competitive? Bulletin Juridique des Contrats Publics 2014, p. 164 et seq.; Semple, A Practical Guide to Public Procurement, 2015; Telles /Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 131 et seq.; Tokár, ‘Institutional Report’, in: Neergaard/Jackson/Ølykke (eds), Public Procurement Law: Limitations, Opportunities and Paradoxes. The XXVI FIDE Congress in Copenhagen, 2014 Congress Publications, Vol. 3, 2014; Treumer, ‘Flexible Procedures or Ban on Negotiations? Will More Negotiation Limit Access to the Procurement Market?’ in: Ølykke/Risvig/Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, 2012, p. 135. 26.1. 26.2. 26.3. 26.4.

The preference for competitive procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Open and restricted procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Innovation partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conditions for applying a competitive procedure with negotiations or a competitive dialogue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.5. Call for competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.6. The exceptional nature of the negotiated procedure . . . . . . . . . . . . . . . . . . . . . . .

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6 14 16 17 43 46

As Abby Semple has rightly stressed, “The use of defined procedures is the hallmark of procurement regulated under the EU directives”.1 Procedures are the life and soul of public procurement law and this even more so with reference to supranational regimes.2 A. Semple, A Practical Guide to Public Procurement, 2015, p. 67. Please refer to R. Caranta, ‘The changes to the public contract directives and the story they tell about how EU law works’, in: CMLR 2015, p. 450. 1

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This is made plain by the traditional formula of Recital 1 of the Public Sector Directive. Surely “The award of public contracts by or on behalf of Member States’ authorities has to comply with the principles of the Treaty on the Functioning of the European Union (TFEU)”. However, and this justifies EU legislation under the principle of subsidiarity,3 “for public contracts above a certain value, provisions should be drawn up coordinating national procurement procedures so as to ensure that those principles are given practical effect and public procurement is opened up to competition”.

This is echoed in the very first provision of the Public Sector Directive. Article 1(1) reaffirms that: “This Directive establishes rules on the procedures for procurement by contracting authorities […]”.

What is relevant here is ‘award’ procedure. Award procedures are part of a wider procurement cycle which starts with planning, contract design and – passing through award procedures – hopefully ends in contract implementation. In this grand scheme of public procurement, award procedures are the phase going from publication of a contract notice to the award of the contract. Being moved by the urge to open up national public procurement markets to international competition, the EU and other supra-national regimes such as the GPA tend to focus on the award phase of the procurement cycle. See on this the comment to Article 25. The EU regime is, however, somewhat special in that the procurement reform has brought important forays in both contract preparation and implementation. (see Public Sector Directive, Art. 40, 41 and 70 and following). Moreover, Article 31 on innovation partnerships covers both award and contract implementation. Compared with the 2004 directive, the new Public Sector Directive devotes one spe- 2 cific article to all award procedures, including the open and the restricted procedure. Article 26 is the true tête de chapitre of Chapter I of Title II of the new directive dedicated to (award) procedures. Moreover the new directive now clearly distinguishes between the (award) procedures discussed here and techniques and instruments for electronic and aggregated procurement such as framework agreements, dynamic purchasing systems, electronic auctions, electronic catalogues, central purchasing bodies and joint procurement. (see Public Sector Directive Art. 33 and following). The distinction makes a lot of sense in that – as François Lichère correctly pointed out – techniques and instruments such as e-procurement tools may be used in conjunction with different award procedures.4 Having all the procedures brought together under one provision reinforces the notion 3 that the award procedures listed therein are the only ones available to the Member States which as a consequence cannot devise new procedures. This clearly follows from the case law, the Court of Justice having held that “the procedures for the award of public contracts that the Member States are permitted to use are listed exhaustively in Article 28 of that directive [2004/18/EC]”.5

3 See COM(2011) 896 final, at p. 6; this has not gone without contestation even before the directive was approved: see notably S. Arrowsmith, ‘The EC Procurement Directives, National Procurement Policies and Better Governance’, in: European Law Review 2002, p. 3 et seq. 4 F. Lichère, ‘New Award Procedures’, in: M. Trybus/R. Caranta/G. Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014, p. 82. 5 Case C-299/08 Commission v France [2009] ECR I‑11587, paragraph 28; the Court distinguished the situation under the (then) new directive when compared with an older one which was at the base of Joined Cases 27/86 to 29/86 CEI and Bellini [1987] ECR p. 3347; see also the conclusions by AG Mazák, paragraphs 12 ff.

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Supra-national public procurement regimes – the EU included – do not provide a comprehensive and definitive regulation of purchasing activities. Their provisions have to be implemented and supplemented by provisions adopted at national and in some jurisdictions such as the UK at sub-national level. As it was rightly remarked in the Green paper which laid the ground for the reform, simplification of EU rules may be offset by increased complexity at national level possibly leading to very divergent regimes within the internal market.6 The Commission and the other EU law makers had to strike a careful balance between over-regulating public procurement and giving to much free rein to the Member States. It is up for debate on which side they erred, but the Commission went a long way in complying with the proportionality principle proposing a so-called a ‘tool box’ approach which was to allow Member State a maximum of flexibility in adapting the procedures and tools to their specific situation.7 5 Basically, the system as envisaged under the tool box approach provided two standard forms of procedure (open and restricted procedure); moreover, subject to certain conditions, additional procedures were foreseen (the competitive procedure with negotiation, the competitive dialogue and/or the innovation partnership, and a new form of procedure for innovative procurement). The legislative process on the one hand watered down the conditions for having recourse to the additional procedures and on the other hand made their provisions mandatory for the Member States.8 The latter to a great extent translates into transferring the choice as to the award procedure to be followed from the law maker to each contracting authority. This corresponds to a more general pattern in the new directive(s) which is “the emphasis they put on choices to be made by individual contracting authorities”.9 On the other hand making the whole toolbox mandatory on the Member States translates in a quite complex system10 (and for sure in one which goes the opposite way from Sue Arrowsmith’s proposal for a simpler regime).11 The wisdom of compelling the Member States to implement the entire tool box in their domestic legislation can be doubted also because they have different conditions, and contracting authorities’ discretion is not everywhere a good thing.12 4

26.1. The preference for competitive procedures. 6

The new Public Sector Directive reaffirms the order of preference among the different award procedures. Article 26(1) which was left as it was in the Commission proposal requires contracting authorities to have recourse, as a general rule, to national procedures in line with those provided for in the directive which are opened by a call for competition. 6 COM(2011) 15 final, at p. 13; this is already the case as emerged from the evaluation report: see the reference in the explanatory memorandum accompanying the reform proposal COM(2011) 896 final, at p. 5; please refer also to Caranta, ‘General Report’, in: U. Neergaard/C. Jackson/G. S. Ølykke (eds), Public Procurement Law: Limitations, Opportunities and Paradoxes. The XXVI FIDE Congress in Copenhagen, 2014 Congress Publications Vol. 3, 2014, p. 97 et seq. 7 COM(2011) 896 final, at p. 6; see Caranta, ‘The changes to the public contract directives and the story they tell about how EU law works’, in: CMLR 2015, p. 455 et seq. 8 The change in the wording of Article 26 is rightly remarked by F. Lichère, ‘Quid de la place nouvelle des procedures négociées et du dialogue competitive?’, Bulletin Juridique des Contrats Publics 2014, p. 167. 9 A. Tokár, ‘Institutional Report’, in: U. Neergaard/C. Jackson/G.S. Ølykke (eds), p. 218. 10 E.g. Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/ Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 131. 11 S. Arrowsmith: Modernising the European Union’s public procurement regime: a blueprint for real simplicity and flexibility, PPLR 2012, p. 72; see Semple, A Practical Guide to Public Procurement, p. 67. 12 See A. Tokár, ‘Institutional Report’, in: U. Neergaard/C. Jackson/G.S. Ølykke (eds), p. 218.

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Indeed negotiated procedures, whether or not with prior publication, have always 7 been considered to be an exception to the rule of having recourse to open or restricted procedures which are more conducive to the respect of the principles of non-discrimination and transparency.13 Simply put, there was a ‘ban on negotiations’.14 Directive 2004/18/EC did still conform to this pattern. Only competitive dialogue was 8 added as a second award procedure suited in exceptional circumstances (‘particularly complex’ contracts) only. Indeed, Article 28 of that directive provided that contracting authorities had to: “award these public contracts by applying the open or restricted procedure. In the specific circumstances expressly provided for in Article 29, contracting authorities may award their public contracts by means of the competitive dialogue. In the specific cases and circumstances referred to expressly in Articles 30 and 31, they may apply a negotiated procedure, with or without publication of the contract notice”.

Competitive dialogue and negotiated procedures were all treated as exceptional.15 Moreover, under Article 29 (1) it was up to the Member States to choose whether or not to implement the provisions on competitive dialogue.16 The situation has in many respects changed with the new Public Sector Directive. 9 Sure open and restricted procedures are still the two only ‘general’ award procedures. “This confirms their central importance, in the eyes of the Union institutions, for the improvement of the internal market”.17 Contracting authorities may freely choose among them. The negotiated procedure without prior publication of a contract notice is still reserved for special situations which are regulated in Article 32. This notion is reinforced in Article 26 (6) which is analysed below. Recourse to one of the new procedures, the innovation partnership, is also limited to 10 a special circumstance. But this circumstance is somewhat subjective. It is up to a contracting authority to make up its mind and decide to contribute to the creation of an innovative product, service or works.18 Possibly with more impact on public procurement practice, the conditions allowing recourse to competitive dialogue have been to some extent watered down. Moreover, the same conditions open the way for contracting 13 See C.H. Bovis, EU Public Procurement Law, 2nd ed. 2012, p. 92 and 398; see also the critical assessment of this stance by K. Krüger, ‘Ban-on-Negotiations in Tender Procedures: Undermining the Best Value for Money’, in: K.V. Thai (ed), International Handbook of Public Procurement, 2009, p. 643 et seq.; some empirical data are presented by L. Chever/J. Moore, ‘Negotiated Procedures Overrated? Evidence from France Questions the Commission’s Approach in the Latest Procurement Reforms’, in: EPPPLR 2012, p. 228 et seq.; but see also the more nuanced remarks by M. Steinicke, ‘Public procurement and the negotiated procedure – A lesson to learn from U.S. Law?’, in: European Competition Law Review, 2001, p. 331 et seq. 14 S. Treumer, ‘Flexible Procedures or Ban on Negotiations? Will More Negotiation Limit Access to the Procurement Market?’, in: G.S. Ølykke/C. Risvig Hansen/C.D. Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, 2012, p. 136; see also Caranta, ‘The changes to the public contract directives and the story they tell about how EU law works’, in: CMLR 2015, p. 451 et seq. 15 See for references P. Telles/L.R.A. Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 132 and 144 et seq.; see also, with reference to the competitive dialogue, S. Treumer, ‘The field of application of competitive dialogue’, in: PPLR 2006, p. 312, and paragraph 16 of the opinion of AG Mazák in Case C‑299/08 Commission v France [2009] ECR I‑11587; the AG referred to P. Trepte, Public Procurement in the EU. A Practioner’s Guide, 2nd ed., p. 427, fn. 187. 16 For the choices and practices in some Member States see the contributions collected by S. Arrowsmith/S. Treumer, Competitive Dialogue in EU Procurement, 2012; see also M. Burnett/M. Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, 2nd ed. 2015, p. 47 et seq. 17 Tokár, ‘Institutional Report’, in: U. Neergaard/C. Jackson/G.S. Ølykke (eds), p. 214. 18 Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 160 et seq.

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authorities to use what is possibly the main innovation in the reform of award procedures rules, namely the competitive procedure with negotiation. 11 The reform has to some extent transplanted into the classic sector the approach which was previously reserved to the utilities and the defence sectors. Under Directive 2004/17/EC open, restricted and negotiated procedures were all general procedures, provided that a call for competition was made.19 Consequently, recourse to the negotiated procedure without prior publication of a contract notice was limited to exceptional cases.20 Under Directive 2009/81/EC contracting authorities are also given the choice between restricted, and negotiated procedure with prior publication of a contract notice. 21 12 One is tempted to conclude that the ‘tool box’ now contains two truly general (or normal)22 award procedures (open and restricted), two procedures which may be followed in many circumstances (competitive procedure with negotiations and competitive dialogue), and two truly exceptional procedures (innovation partnership and negotiated procedures without prior publication). Another way to see it, which is probably belied by the way Article 26(1) is drafted, would be to have the negotiated procedure without prior publication as the only truly exceptional award procedure, since the innovation partnership both involves a call for competition and the conditions for its use are not really very well defined. Indeed a number of rules concerning both the competitive procedure with negotiations and the competitive dialogue and the innovation partnership are drafted in a very similar if not identical way.23 Along similar lines Telles and Butler distinguish between ‘standard’, ‘special’ and ‘exceptional’ procedures. The open and restricted procedures which may be used in any circumstance and for any type of contract are truly ‘standard’. Competitive procedure with negotiations, competitive dialogue and innovation partnership have a special nature because they can be chosen only according to specific grounds for use. The negotiated procedure without prior publication is exceptional because it is a final option for contracting authorities when everything else fails.24 13 In the end choice of procedure “largely becomes a question of strategy for the contracting authority, taking account of the different time and resources commitments required by each procedure, and the structure for competition which it provides”.25

26.2. Open and restricted procedures Article 26(2) replicates in a different context the rule which was laid down in Article 28 of Directive 2004/18/EU and in the provisions that preceded it. Contracting authorities may always choose between open and restricted procedures. The definitions and detailed rules concerning these two procedures are analysed in the comments under Article 27 and 28 respectively. 15 EU law does neither direct nor nudge the choice between open and restricted procedures. As to the reasons which may militate in favour of choosing a restricted procedure 14

See S. Torricelli, Utilities Procurement, in: Trybus/Caranta/Edelstam (eds) 2014, pp. 241 et seq. Case C-250/07 Commission v Greece [2009] ECR I-4369. 21 See J. Gonzáles Garcia, Classic procurement Procedures, in: Trybus/Caranta/Edelstam (eds), 2014, p. 65; see for more details L.R.A. Butler, Transatlantic Defence Procurement: EU and US Defence Procurement Regulation in the Transatlantic Defence Market, 2017, p. 123 et seq., and M. Trybus, Buying Defence and Security in Europe: The EU Defence and Security Procurement Directive in Context, 2014, p. 310 et seq. 22 Bovis, EU Public Procurement Law, 2012, p. 92 et seq. 23 See also F. Lichère, ‘Quid de la place nouvelle des procedures négociées et du dialogue competitive?’, in: Bulletin Juridique des Contrats Publics 2014, p. 164 et seq. 24 P. Telles/L.R.A. Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 133. 25 Semple, A Practical Guide to Public Procurement p. 69; see also the table on time limits at p. 71. 19

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the high degree of complexity has been mentioned. It has been rightly maintained that those economic operators having been pre-selected are more eager to shoulder the costs related to drafting complex tenders since the limited number of competitors invited raises the chances each of them has of being awarded the contract. Conversely, those economic operators which have not been pre-selected are at least spared the costs of drafting the tender. More generally, however, for contracting authorities it is easier and less costly to decide between a limited number of preselected candidates, making restricted procedures attractive any time a too large participation in the award procedure is to be feared.26

26.3. Innovation partnership With reference to the innovation partnership Article 26(3) very much replicates the 16 formula of Article 26(2) which concerns open and restricted procedures. It does it to such an extent that the two provisions might well have been merged. The reason they were kept apart in the proposal of the Commission was that, in the view of the Commission, which was shared by the Council, the Member States were left free to decide whether or not to allow recourse to the innovation partnership. As the provision stands now, Member States must provide for the innovation partnership in their domestic legislation. It is left to each contracting authority to decide – within the limits laid down in Article 31 – if and when to set up an innovation partnership. As it will be discussed in more general terms in the comments concerning the next paragraph, the Member States may, however, seek to, more or less, direct the use of this discretion by contracting authorities.

26.4. Conditions for applying a competitive procedure with negotiations or a competitive dialogue Article 26 necessarily goes into much more detail in defining the conditions allowing 17 contracting authorities to have recourse to either a competitive procedure with negotiations or a competitive dialogue. It is important right from the outset to stress that these conditions are the same for the two procedures. The directive does not give any indication as to when one should be preferred over the other.27 However, the two procedures foreseen in Article 29 and 30 for the competitive proce- 18 dure with negotiations and the competitive dialogue respectively are significantly different.28 More into the details, the minimum requirement are to be set at the start of the competitive procedure with negotiations but not at the start of the competitive dialogue. Award criteria must be ‘specified’ at the outset of the competitive procedure with nego26 See S. Treumer, ‘The Selection of Qualified Firms to be Invited to Tender under the E.C. Procurement Directives’, in: PPLR 1998, p. 147 et seq.; see also S. Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014, p. 669; Gonzáles Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), 2014, p. 67. 27 See also Lichère, ‘New Award Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014, p. 91; J. Davey, ‘Procedures involving negotiations in the new Public Procurement Directive: key reforms to the grounds for use and the procedural rules’, in: PPLR 2014, p. 103. 28 How much the two procedures are different is very much debated: e.g. Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, spec. 197 et seq. and 220 et seq.; Lichère, ‘Quid de la place nouvelle des procedures négociées et du dialogue competitive?’, in: Bulletin Juridique des Contrats Publics 2014, p. 168 et seq.; Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 143; this debate extends the one that under Directive 2004/18/EC focused on the utility of the competitive dialogue: see Arrowsmith/Treumer (eds), Competitive Dialogue in EU Procurement, 2012, p. 76.

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tiation, but only ‘set out and defined’ at the outset of the competitive dialogue.29 Differently from the competitive procedure with negotiations, there is no ‘initial tender’ in the competitive dialogue. Final tenders may be ‘clarified, specified, optimised’ in the competitive dialogue; they are simply evaluated in the competitive procedure with negotiation.30 Finally, the tender chosen may to some extent be negotiated in a competitive dialogue procedure but it may not in a competitive procedure with negotiation. In the end, the procedure for competitive dialogue is discretely less stringent than the one for the competitive procedure with negotiations. It is therefore submitted that for reason of legal certainty it makes sense for the EU institutions to have codified both these discretely distinct procedures.31 19 On this basis and keeping in mind that the binding sequences of award procedures have been designed to foster equal treatment and fair competition among economic operators, it is submitted that in principle the competitive dialogue is still suited to particularly complex contracts, when contracting authorities are not even capable of setting minimum requirements.32 Moreover, if the needs of a contracting authority may be met by simply adapting readily available solutions (Article 26(4)(a)(i)) a recourse to a competitive dialogue would seem to be in breach of the proportionality (and competition)33 principle.34 20 As it was the case with the innovation partnership, the European Parliament pushed the Commission and the Council to accept that Member States shall (rather than ‘may’) provide for both the competitive procedure with negotiations and the competitive dialogue in their implementing legislation. Therefore, while in the proposal of the Commission the ‘tool box’ approach meant that each Member State could choose those procedures which were considered more suited to their peculiar domestic situations, today it is to a large extent up to each contracting authority to pick up the tool it considers more appropriate to the circumstances.35 This has rightly been criticised in that it facilitates abuses in those countries where the commitment to legality is weak if not inexistent. 36 It would, indeed, have been wiser to stick to the original proposal by the Commission.37

29 The difference is present in other linguistic versions of the two provisions: in French “précisent les critères d’attribution du marché“ and “indiquent et définissent également les critères d’attribution retenus”; in German “die Zuschlagskriterien spezifizieren” and “gleichzeitig erläutern und definieren sie in denselben Unterlagen die zugrunde gelegten Zuschlagskriterien”; in Italian “specificano i criteri per l’aggiudicazione dell’appalto” and “indicano e definiscono i criteri di aggiudicazione scelti”. 30 The practical relevance of this aspect is stressed by M. Burnett, The New Rules for Competitive Dialogue and the Competitive Procedure with Negotiation in Directive 2014/24 – What Might They Mean for PPP?, 2015, p. 70; see also Semple, A Practical Guide to Public Procurement, 2015 p. 75 et seq. 31 The opposite opinion is, however, more often entertained: see for instance Telles /Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 143; the debate involves also the innovation partnership. 32 See also C. Bovis, ‘Introduction’, in: C. Bovis (ed), Research Handbook of EU Public Procurement Law, 2016, p. 9. 33 A less directive approach in M. Burnett/M. Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, 2nd ed. 2015, p. 213. 34 Albeit with reference to different aspects A. Sanchez-Graells, ‘Truly Competitive Public Procurement as a Europe 2020 Lever: What Role for the Principle of Competition in Moderating Horizontal Policies?’, in: 2016 European Public Law 377 et seq. 35 See Tokár, ‘Institutional Report’, in: U. Neergaard/C. Jackson/G.S. Ølykke (eds), p. 214; Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 133. 36 E.g. R. Mastroianni, ‘Italie’, in: U. Neergaard/C. Jackson/G.S. Ølykke (eds), Public Procurement Law: Limitations, Opportunities and Paradoxes. The XXVI FIDE Congress in Copenhagen, 2014 Congress Publications Vol. 3, 2014, p. 560; N. Popović/F. Kuhta, Croatia, ibid., p. 272. 37 Caranta 2014, p. 173.

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To mitigate these risks it is submitted that, beside the enforcement of the specific safe- 21 guards which will be analysed in the comments on Article 29(5) and 30(3), in implementing Article 26(4) the Member States are empowered to direct the discretion of the contracting authorities by either listing situations in which the application of these two procedures or one of them is or is not advised and even is or is not allowed as a matter of national law.38 It is true that concerning award criteria the Court of Justice in the Sintesi case held that:39 “the abstract and general fixing by the national legislature of a single criterion for the award of public works contracts deprives the contracting authorities of the possibility of taking into consideration the nature and specific characteristics of such contracts, taken in isolation, by choosing for each of them the criterion most likely to ensure free competition and thus to ensure that the best tender will be accepted”.

One cannot rule out that a similar reasoning could be repeated with reference to the choice among award procedures. It seems to be reasonable to anticipate that the more a domestic provision will be rigid in limiting or annulling the margin of choice of contracting authorities, the more the chances will be that such a provision might be found to be in breach of EU law. The EU lawmakers were under much pressure from various stakeholders – contract- 22 ing authorities first among them – to introduce more flexible procedures involving negotiations.40 As the Green Paper preparing the reform recalled:41 “Contracting authorities sometimes complain that the regulatory instruments provided by the EU rules are not fully adapted to their purchasing needs. In particular, they claim that leaner and/or more flexible procedures are needed”.

One of the major innovations in the new Public Sector Directive is indeed the competitive procedure with negotiations, which allows for negotiations in a way so far unheard of in EU public procurement law (see Public Sector Directive Art. 29). Moreover, the conditions allowing for recourse to this procedure and to the competitive dialogue are quite relaxed, especially when compared to those which were provided under Article 29 of Directive 2004/18/EC with reference to the competitive dialogue. 42 It is possibly too soon to say whether these changes will be enough to assuage the concerns of contracting authorities with this particular procedure. Among the first reactions, some see the glass half full, others half empty.43 For instance Steen Treumer holds that we are faced with a “truly remarkable widening of the scope of flexible tender procedures”.44 Under Article 26 (4) contracting authorities may have recourse to either a competi- 23 tive procedure with negotiations or a competitive dialogue in basically two different 38 See generally on the power of Member States to adapt the procedures through national legislation Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 132 et seq.; see however S. Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014, p. 869 et seq. 39 Case 247/02 Sintesi [2004] ECR I-9231, para. 40. 40 Please refer to Caranta, The changes to the public contract directives and the story they tell about how EU law works, in: Common Market Law Review, p. 450. 41 COM(2011) 15 final, at p. 12. 42 See F. Lichère, ‘Quid de la place nouvelle des procedures négociées et du dialogue competitive?’, in: Bulletin Juridique des Contrats Publics 2014, p. 166. 43 See for further references Caranta 2014, p. 171 et seq. 44 S. Treumer, ‘Evolution of the EU Public Procurement Regime: The New Public Procurement Directive’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 12 et seq.; see also M. Burnett, ‘The New Rules for Competitive Dialogue and the Competitive Procedure with Negotiation in Directive 2014/24 – What Might They Mean for PPP?’, in: EPPPL 2/2015 p. 67.

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types of situations: when they do not (and possibly do not want to) buy ready-made offthe-shelf products or service (lit. a) and after having only received irregular or unacceptable tenders in a previous open or restricted procedure (lit. b). The conditions listed in Article 26 (4) are alternative rather than cumulative.45 The reader must be cautioned that these conditions have rightly been characterised as ‘repetitive and overlapping’.46 The first situation is where the reform has changed the rules of play most. The two procedures may be used when one or more of the situations described in lit. a are present. This means that each one of them alone is sufficient to allow contracting authorities to forgo the legislative preference for the open and restricted procedures. Of these conditions, some have been recast from the requirements laid down in Directive 2004/18/EC to enable recourse to the competitive dialogue. The more conservative proposal of the Commission had to a large extent conflated in what has become Article 26(4) the conditions which in Directive 2004/18/EC allowed for the use either of the negotiated procedures with prior publication of a contract notice or of the competitive dialogue. Moreover, it provided for different conditions concerning works procurements on the one hand and services or supplies on the other. Instead the Council has very much relaxed the legal requirements. The following analysis will start with the conditions somehow linked to those previously enabling recourse to the competitive dialogue rather than following the strict order of Article 26(4)(a). Under Article 29(1) of Directive 2004/18/EC competitive dialogue might have been used for the award of ‘particularly complex contracts’ when contracting authorities considered that “the use of the open or restricted procedure will not allow the award of the contract”. Under Article 1(11)(c) a public contract was considered to be ‘particularly complex’ where the contracting authorities were “not objectively able to define the technical means in accordance with Article 23(3)(b), (c) or (d), capable of satisfying their needs or objectives, and/or […] not objectively able to specify the legal and/or financial make-up of a project”.47 This was often the case with PPP.48 Article 23 of Directive 2004/18/EC provided for the possibility to draft technical specifications in terms of performance or functional requirements. See now the comment on Article 42(3). The condition that it was not possible to draft technical specifications even in the guise of performance or functional requirements has now been transformed into the much less stringent condition of the impossibility to refer to an established standard (lit. iv).49 Indeed, as Article 42(3) makes clear, the reference to standards constitutes a more ‘mechanic’ or ‘static’ way, so to say, to draft technical specifications.50 The objective impossibility to “specify the legal and/or financial make-up of a project” has instead been watered down to “specific circumstances related to the nature, the complexity or the legal and financial make-up or because of the risks attaching to them” which make it necessary to negotiate the tenders (lit. iii).51 It is to be stressed that ‘complexity’ is now a self-standing circumstance allowing recourse to one of the proce45 Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 145. 46 Tokár, ‘Institutional Report’, in: U. Neergaard/C. Jackson/G.S. Ølykke (eds), p. 214; see also Burnett/ Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 220. 47 See the analysis by S. Treumer, ‘The field of application of competitive dialogue’, in: PPLR 2006, p. 310 et seq. 48 M. Burnett, ‘The New Rules for Competitive Dialogue and the Competitive Procedure with Negotiation in Directive 2014/24 – What Might They Mean for PPP?’, 2015 p. 65. 49 See also J. Davey, ‘Procedures involving negotiations in the new Public Procurement Directive: key reforms to the grounds for use and the procedural rules’, in: PPLR 2014, p. 104. 50 Indeed as it has been remarked, “mandatory standards, taking time and compromise to be developed, tend to be antiquated”: M. Burgi, ‘Specifications’, in: Trybus/Caranta/Edelstam (eds), 2014, p. 44.

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dures considered here. By implication, complexity is no more required with reference to the legal and financial make-up requirement, and it is not required with regard to the inherently generic notion of ‘nature’. Reference to the ‘nature’ as well as to the ‘risks’ was already present in Article 30(1)(b) of Directive 2004/18/EC. However, the nature of the works, supplies, or services or the risks attaching thereto had to be such as not to permit prior overall pricing. This requirement has been omitted in the new Public Sector Directive. The risk, here, is that given its open-ended structure the clause might be translated not into a necessity to negotiate (itself a difficult notion to pinpoint precisely) but in a mere and speculative convenience to do so. Of the other two grounds listed in Article 26(4)(a) the one listed under lit. i is possi- 28 bly the more objective and as such the one which could more easily lend itself to adjudication in a review procedure. Indeed, a competitor – or the Commission in an infringement procedure – might very well prove that a readily available solution was in fact present on the (internal) market. A relevant case stemmed from an infringement procedure brought against Germany because a Land had bought software for managing vehicle registration through a negotiated procedure without prior publication. The Court of Justice held that it was not proven that similar software could have been supplied by some other economic operator since no market research had been conducted at European level.52 The question is whether even the need of minimal or very limited adaptations of a 29 readily available solution would be enough to allow contracting authorities to forgo the open and restricted procedures?53 On the one hand, Article 42(3) still allows contracting authorities to draft ‘descriptive’ technical specifications by reference to existing standards. Moreover, Article 45 leaves to the contracting authorities to decide whether or not to allow variants, imposing on them some burdens for the sake of transparency if they decide to do so. By implication, contracting authorities very much retain the power not to allow variants and to pretend to be supplied with exactly the goods or services they have described in the contract documents rather than with alternatives or replacements. As a matter of fact the structure of Article 45 is different from that of Article 46 on the division of contracts into lots which requires contracting authorities to state reasons why they decide not to subdivide a contract they intend to award. On this basis, one could conclude the contracting authorities may rather make use of a competitive procedure with negotiation (a competitive dialogue would not be appropriate when limited adaptations are enough to meet the needs of the contracting authority) than allowing variants if they do not want too. The advantages of such an approach for contracting authorities would be the possibility to discuss the suitability of alternatives or replacements with the suppliers, rather than simply – and more rigidly – to take or reject them following the approach embodies in Article 45. On the other hand, Article 42(5) makes it a duty for contracting authorities to accept goods or services which, while not complying with the standards, still satisfy in an equivalent manner the requirements defined in the technical specifications. More generally, the principle of proportionality seems to oblige contracting authorities not to reject tenders which show a minimum degree of variation, provided of course that the tenderers are ready to adapt the goods or services and shoulder the 51 See Lichère, Quid, 2014, p. 167; Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 145 et seq.; Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014, p. 874 et seq. 52 Case C-275/08 Commission v Germany [2009] ECR I-168, paragraph 61. 53 See also Burnett, ‘The New Rules for Competitive Dialogue and the Competitive Procedure with Negotiation in Directive 2014/24 – What Might They Mean for PPP?’, in: EPPPL 2/2015 p. 67 et seq.; Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014, p. 880 et seq.

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costs.54 Given that the competitive procedure with negotiation is not a ‘general’ procedure but is still an exception to the preference for open or restricted procedures in the end the preferred solution is that contracting authorities should allow variants when minimal or very limited adaptations of a readily available solution are needed rather than go through a competitive procedure with negotiations. The proportionality principle also points to this solution. 30 Finally we come to ‘design’ (lit. ii). This is probably Article 26(4)(a) at its laxest 55 since “there appears to be no de minimis or majority value test so that it is presumed that any requirement for design or innovation qualifies, however peripheral”.56 Contracting authorities are empowered to apply a competitive procedure with negotiations or a competitive dialogue when the contract either involves design or innovative solutions. If trying to distinguish innovative solutions from the adaptation of readily available solutions discussed in the previous paragraph one can surmise that the former requires more innovative thinking. But of course the distinction is subtle and in the end irrelevant since the grounds can be referred to cumulatively. From another point of view one may also wonder how to make the distinction between an innovative solution and an ‘innovative product, service or works’ the need for which allows contracting authorities to set up an innovation partnership. The answer is so elusive that one could think of the panoply of EU award procedures as a luxuriant and overgrown jungle rather than as a tool box.57 Once more the wisdom of compelling the Member States to implement the entire tool box in their domestic legislation can be doubted.58 31 All works procurements potentially involve design.59 Under Article 2(6) of the Public Sector Directive “‘public works contracts’ means public contracts having as their object one of the following: (a) the execution or both the design and execution, of works […]”. It is up to the contracting authority to decide whether to have a design component in the contract. Given that in Article 26(4)(a)(ii) the conjunction ‘or’ separates ‘design’ from ‘innovative solutions’ the design does not need to be necessitated by the absence of a ready made alternative, or by complex problems or even by the desire of the contracting authority to contribute to the creation of something new. Recital 43 confirms this in that it indicates that “For works contracts, such situations include works that are not standard buildings or where works includes design or innovative solutions”. Standard works do not need to include innovative solutions. Design is enough. 32 Similarly, concerning services, the contracting authority may well provide for a design component. With some contracts, such as those relating to software and more generally to IT, it is even difficult to think of a contract not involving design. Recital 43 attests to this. The use of a competitive procedure with negotiation or competitive dialogue is likely to be of value for services or supplies that require adaptation or design efforts. Such adaptation or design efforts are considered “particularly necessary in the case of complex purchases such as sophisticated products, intellectual services, for example some consultancy services, architectural services or engineering services, or major information and communications technology (ICT) projects. In those cases, negotiations may 54 On the proportionality principle as applied to public procurement law see Semple, A Practical Guide to Public Procurement 2015, p. 51 et seq. 55 See also Davey, ‘Procedures involving negotiations in the new Public Procurement Directive: key reforms to the grounds for use and the procedural rules’ PPLR 2014, p. 105. 56 L.R.A. Butler, ‘Innovation in Public Procurement: Towards the “Innovation Union”’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 373 et seq. 57 E.g. Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/ Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 133. 58 See A. Tokár, ‘Institutional Report’, in: U. Neergaard/C. Jackson/G.S. Ølykke (eds), p. 218. 59 See also Arrowsmith, The Law of Public and Utilities Procurement, 3 rd ed. 2014, p. 880.

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be necessary to guarantee that the supply or service in question corresponds to the needs of the contracting authority”.

This does not mean they might not be useful in other circumstances.60 In the end, the only line in the sand is that the two procedures should not be used only in respect of “off-the-shelf services or supplies that can be provided by many different operators on the market”. One could well wonder whether this lax clause referring to design might in the end 33 accommodate the mix of design and execution which was the substance of the French provisions on the marchés de définition which were found to be inconsistent with EU law by the Court of Justice following an infringement proceeding brought by the Commission.61 One somewhat formal – not to say formalistic – problem is that under French law two award procedures were concluded, one after the other (a marché d’exécution following the marché de definition).62 This would have rather characterised the procedure as an award following a design contest (see today Article 32 (4) and Articles 78 to 82). Or it might now assimilate it to an innovation partnership under Article 31.63 There was a more substantial issue, which arose from the very lax conditions provided by French law to allow recourse to a marché de definition. It could be used when the contracting authority was “unable to specify the aims and performances which the contract must meet, the techniques to be used, and the human and material resources required” (“n’est pas en mesure de préciser les buts et performances à atteindre, les techniques à utiliser, les moyens en personnel et en matériel à mettre en œuvre”). This goes much beyond what is allowed even now under Article 29(1) for the competitive procedure with negotiation, since the contracting authority must set down the minimum requirements. And, as both the Court of Justice and Advocate general Mazák remarked, this went (and goes) well beyond what is allowed under what has become Article 30(2) since in competitive dialogue contracting authorities shall set out and define their needs and requirements. 64 Reference to both the need for an innovative product and minimum requirement are also requested under Article 31(1) concerning the innovation partnership. Setting for the moment aside the question of the existence of a duty to give reasons 34 which will be discussed in the next section, it is difficult to avoid the impression that, with the exception of products which are so efficiently standardised that no innovation appears to be meaningful, a contracting authority can easily pretend to find itself in at least one of the situations listed in Article 26(4)(a). And one will suffice. 65 The real reason moving the contracting authority to do so would be the desire to negotiate with a (limited) number of economic operators. True in the system delineated by Article 26 the two procedures are still exceptional or special (NOT standard), and exceptions are to be read narrowly.66 For instance in Stadt Halle the Court of Justice recalled that:67 60 See Davey, ‘Procedures involving negotiations in the new Public Procurement Directive: key reforms to the grounds for use and the procedural rules’ PPLR 2014, p. 106; see also with reference to Recital 31 of Directive 2004/18/EC, Lichère, ‘New Award Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014, p. 87. 61 Case C-299/08 Commission v France [2009] ECR I-11587. 62 Both AG Mazák and the Court of Justice however relied very much on this: see paragraphs 22 and 37 respectively. 63 Butler, ‘Innovation in Public Procurement: Towards the “Innovation Union”’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 374 et seq. 64 See paragraphs 41 et seq. and 24 et seq. respectively. 65 Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 145. 66 See however Arrowsmith, The Law of Public and Utilities Procurement, 3 rd ed. 2014, p. 872 and 962 et seq.

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“concerning recourse to a negotiated procedure without the prior publication of a contract notice, that Article 11(3) of Directive 92/50, which provides for such a procedure, must, as a derogation from the rules intended to ensure the effectiveness of the rights conferred by the EC Treaty in relation to public service contracts, be interpreted strictly and that the burden of proving the existence of exceptional circumstances justifying the derogation lies on the person seeking to rely on those circumstances”.

However, the only textual limit to the free choice of the contracting authorities seems to be found in Article 18(1) which forbids contracting authorities to design the procurement – in this case the subject matter of the contract – to artificially narrow competition and unduly favour or disadvantage some economic operator.68 Such an intention is obviously difficult to prove.69 35 This leads to the question of whether contracting authorities are under a duty to give reasons as to the choice of awarding a contract by way of competitive procedure with negotiations or competitive dialogue rather than stick to the main road(s) represented by the open or restricted procedures? The answer is indeed positive,70 even if the level of detail and objectivity of the reasons to be given are a matter of discussion.71 In the system articulated in Article 26 the competitive procedure with negotiations and the competitive dialogue are still award procedures to be used in (although sloppily defined) specified circumstances. They are exceptions to the rule that public procurements are awarded following either an open or a restricted procedure. It is therefore submitted that the case law recalled above limiting the recourse to the old negotiated procedures and requiring contracting authorities to give reasons as to why they had recourse to them does apply not just to the negotiated procedure provided for in Article 32 of the Public Sector Directive but also to the use of both the competitive procedure with negotiations and the competitive dialogue. This is indirectly confirmed by Article 84(1)(e) of the directive. It provides that among the information that contracting authorities must include in the written report they have to draw up for every contract they award are the circumstances which under Article 26 justify the use of the two procedures. This provision is drafted in the same way as the following lit. (f), which applies to negotiated procedures without prior publication. In the end the general principles of transparency and equal treatment require contracting authorities to give the reasons for choosing a procedure which seems to give “fewer guarantees of competition”.72 36 Having established a duty to give reasons leaves entirely open the question of how detailed those reasons have to be which in turn begs the further question of how hard the national courts – and the Court of Justice itself – are supposed to look into those reasons 67 Case C-26/03 Stadt Halle and RPL Lochau [2005] ECR I-1, paragraph 46; Joined Cases C-20/01 and C-28/01 Commission v Germany [2003] ECR I-3609, paragraph 58, was referred to; see also e.g. Case C-275/08 Commission v Germany [2009] ECR I-168, paragraphs 54 f. 68 A. Sanchez-Graells, ‘Truly Competitive Public Procurement as a Europe 2020 Lever: What Role for the Principle of Competition in Moderating Horizontal Policies?’, in: 2016 European Public Law 377 et seq. 69 But see A. Sanchez-Graells, ‘Assessing the public administration's intention in EU economic law: Chasing ghosts or dressing windows?’ in Cambridge Yearbook of European Legal Studies, Vol. 18, 2016, p. 93 et seq.; and A. Sanchez-Graells, ‘A deformed principle of competition? The subjective drafting of Article 18(1) of Directive 2014/24’, in: Olykke/Sanchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules, 2016. 70 See, also for a discussion of the case law, Bovis, EU Public Procurement Law, 2012, p. 399 et seq. 71 See Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/ Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 146, arguing that the test should be ‘subjective’, meaning that this “should not depend on any external unit of measurement or comparison, i.e. what a reasonable contracting authority would do in that situation”. 72 Torricelli, Utilities Procurement, in: Trybus/Caranta/Edelstam (eds) 2014, 243.

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and thus indirectly at the choice made by the contracting authority. As it is well know, Article 2(1) (b) of Directive 89/665/EEC, the first remedies directive, as amended by Directive 2007/66/EC, while providing that national courts must be empowered to “either set aside or ensure the setting aside of decisions taken unlawfully” falls short of setting the standard of legality review. This standard varies from country to country, meaning that in some jurisdictions contracting authorities will be given a freer rein in opting for either the competitive procedure with negotiations or the competitive dialogue. 73 Only the Court of Justice, possibly prodded by the Commission, could bring some convergence by laying down minimal judicial standards conforming to the principle of effective judicial protection.74 Otherwise we will end up with five ‘general’ procedures, three of them only requiring whatever reasons given to pay lip service to their supposed exceptionality. Under Article 26(4)(b) of the Public Sector Directive the competitive procedure with negotiations or the competitive dialogue may also be used in case a contracting authority only received irregular or unacceptable tenders in a previous open or restricted procedure. As it is made clear by Recital 44, the aim of negotiations is to obtain regular and acceptable tenders. This replicates one of the situations in which, under Article 30(1) of Directive 2004/18/EC, contracting authorities were authorised to apply a negotiated procedure with prior publication. It is questionable whether the competitive dialogue, which is a fairly complex procedure, is well suited in this situation. From Article 30(1) of Directive 2004/18/EC also comes the additional provision that contracting authorities are dispensed from publishing a contract notice if they decide to include in the procedure all of, and only, the tenderers which satisfy the criteria for qualitative selection and which, during the prior procedure, submitted tenders in line with the formal requirements of the procurement procedure. Considering the situations in which tenders are irregular or inacceptable, this possibility will be quite seldom open, and more specifically in case of abnormally low tenders and of tenders which were too expensive. Tenders which do not comply with the procurement documents or were received late cannot be said to have been submitted in accordance with the formal requirement.75 The other situations all entail the disqualification of the tenderer and, as it has been rightly remarked, “it appears unlikely that such candidate will be able to secure such requirements in short order”.76 What is new is the definition of ‘irregular’ and ‘unacceptable’ tenders. It was indeed unclear in the past how these notions were different from that of ‘unsuitable’ which, along with others, allowed contracting authorities to start a negotiated procedure without publication of a contract notice under Article 31(1)(a) of Directive 2004/18/EC (now replicated in Article 32(2)(a) of the new Public Sector Directive). It is doubtful whether the present provision has been drafted well enough to dispel all questions. Article 26(4)(b) lists four situations in which tenders are deemed irregular, namely tenders which do not comply with the procurement documents, which were received late, where there is evidence of collusion or corruption, or which have been found by the

73 Please refer to R. Caranta, ‘Many Different Paths, but Are They All Leading to Effectiveness?’, in: S. Treumer/F. Lichère (eds), Enforcement of the EU Public Procurement Rules, Copenhagen, DJØF, 2011, pp. 84 ff. 74 See R. Caranta, ‘Remedies in EU Public Contract Law: The Proceduralisation of EU Public Procurement Legislation’, in: Review of European Administrative Law, 2015, 75 et seq. 75 See also Semple, A Practical Guide to Public Procurement 2015 p. 69. 76 Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 147.

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contracting authority to be abnormally low. Concerning the last situation, it obviously referred to cases in which the tender was not satisfactorily explained under Article 69. 41 Tenders are deemed to be unacceptable in two further situations, namely tenders submitted by tenderers that do not have the required qualifications, and tenders whose price exceeds the budget indicated by the contracting authority. Concerning the first situation, the provision has to be reconciled with Article 32(2)(a) which allows recourse to a negotiated procedure without prior publication inter alia in case of unsuitable tenders or requests for participation. Article 32(2)(a) provides that a request for participation shall be considered not to be suitable where the economic operator concerned is to be or may be excluded pursuant to Article 57 or does not meet the selection criteria set out by the contracting authority pursuant to Article 58 (see Public Sector Directive, Art. 57 and 58).77 Reference to both Article 57 and 58 covers very much all cases in which a tenderer does not have the required qualifications. Basically, when referring to the tenderers’ qualifications Article 26(4)(b) and Article 32(2)(a) cover the same ground. It is true that the latter specifically refers to the ‘request for participation’ and is therefore specifically applicable to restricted procedures. The former would then be applicable to open procedures. Why the two should be treated differently is hard to say. Similar difficulties arise from the fact that ‘evidence of collusion or corruption’ is one of the situations in which a tender can be considered irregular under Article 26(4)(b) but it also makes the request for participation not suitable because this is one instance of possible exclusion under Article 57(4)(d). 42 Beside the troubling overlap between the different categories, the main point is whether the circumstances listed there are the only hypothesis of irregular and unacceptable tenders. While the fact that they are introduced by ‘in particular’ would seem to open up to further instances, the exceptional character of the negotiated procedure points the other way.

26.5. Call for competition A call for competition is what open and restricted procedures, competitive procedure with negotiations and competitive dialogue all have in common (with the situation provided for in Article 26(4)(b) as a possible exception). Along with other tools of publicity the contract notice is regulated in an ad hoc section of the directive on ‘publication and transparency’. See the comment to Article 49. 44 The margin of manoeuvre left open by the WTO – GPA are exploited by the second subparagraph of Article 26(5). As regards the GPA see the comment to Article 25. When using restricted procedures or competitive procedure with negotiations sub-central contracting authorities may forgo the publication of a contract notice if they make the call for competition by means of a prior information notice.78 Article 48(2) details the information that has to be included in the prior information notice when it is used to advertise restricted procedures or competitive procedure with negotiations to be awarded by sub-central contracting authorities (see Public Sector Directive Art. 48 para. 2). 45 Article 26(5) additionally provides that in case of restricted procedures or competitive procedure with negotiations to be awarded by sub-central contracting authorities the economic operators having expressed their interest after the publication of the prior information notice are asked to confirm their interest in writing (see Public Sector Directive Art. 54). Under Article 2(1)(18): 43

77 See also the contributions collected by Burgi/Trybus/Treumer (eds), Qualification, Selection, and Exclusion in EU Procurement, 2016. 78 Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 224.

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“‘written’ or ‘in writing’ means any expression consisting of words or figures which can be read, reproduced and subsequently communicated, including information transmitted and stored by electronic means”.

26.6. The exceptional nature of the negotiated procedure Article 26(6) reaffirms in strong words the exceptional nature of the negotiated pro- 46 cedure without prior publication of a contract notice.79 Recital 50 makes it clear that: “In view of the detrimental effects on competition, negotiated procedures without prior publication of a contract notice should be used only in very exceptional circumstances”.

The negotiated procedure without prior publication is therefore reserved to ‘specific cases and circumstances’ which are ‘expressly’ referred to in Article 32. The reason why EU law is so radically opposed to negotiated procedures without prior publication of a contract notice is made clear by Recital 50, according to which it has “detrimental effects on competition”. The same recital stresses again that it “should be used only in very exceptional circumstances”. See the comment to Article 32. The exceptional character of the negotiated procedure has been constantly reaffirmed 47 in the case law. As Advocate General Mazák recalled with reference to the provisions of Directive 92/50/EEC, the first service procurement directive, “The structure of Article 11 of Directive 92/50 shows clearly that contracting authorities are to award their service contracts using the open procedure or the restricted procedure, apart from in the cases set out in paragraphs 2 and 3 of that article, where contracting authorities may award their public service contracts either by negotiated procedure, with prior publication of a contract notice […] or a negotiated procedure without prior publication of a contract notice”.80

The case law is consistent in holding that procedures which are not competitive or transparent are an exception to the general principle of non-discrimination enshrined in what has become the TFEU. For instance, and again concerning Article 11 of Directive 92/50/EEC, it was held that in so far as it authorises “derogations from the rules intended to ensure the effectiveness of the rights conferred by the Treaty in relation to public service contracts”, it “must be interpreted strictly and [...] the burden of proving the existence of exceptional circumstances justifying a derogation lies on the person seeking to rely on those circumstances”.81 A sentence added to Article 26(6) during the legislative process expressly forbids the 48 Member States to add new cases to those listed in Article 32. This precision, while not adding anything to the rule, follows from the case law and in particular from a judgment in an infringement procedure against Spain which was accused by the Commission of having added some grounds authorising the use of the negotiated procedure without prior call for tenders.82 The Court of Justice held that,83 “(T)o prevent the directives at issue being deprived of their effectiveness, the Member States cannot, therefore, provide for the use of the negotiated procedure in cases not provided for in Directives 79 See Gonzáles Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), 2014, p. 69 et seq.; Treumer, ‘Flexible Procedures or Ban on Negotiations? Will More Negotiation Limit Access to the Procurement Market?’ in: Ølykke/Risvig/Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, 2012, p. 136 et seq. 80 Case C‑480/06 Commission v Germany [2009] ECR I-04747, paragraph 8. 81 Joined Cases C‑20/01 and C‑28/01 Commission v Germany [2003] ECR I‑3609, paragraph 58; see also Case C-250/07 Commission v Greece [2009] ECR I‑4369, paragraph 34; Case C‑275/08 Commission v Germany [2009] ECR I‑168, paragraphs 54 f. 82 Case C‑84/03 Commission v Spain [2005] ECR I-139; the case is discussed by Bovis, EU Public Procurement Law, 2012, p. 402 et seq. 83 Paragraph 48.

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93/36 and 93/37, or add new conditions to the cases expressly provided for by those directives which make that procedure easier to use”.

The Court went on holding that Spain had breached the directives then in force by providing that a) a change in price not higher that 10% was not a substantial change and therefore did not preclude the contracting authority from awarding a contract through negotiated procedure after unsuccessful previous open and restricted procedures, b) a negotiated procedure was allowed to procure goods whose uniformity had been held necessary for their common use by the administration.84

Article 27 Open procedure 1. In open procedures, any interested economic operator may submit a tender in response to a call for competition. The minimum time limit for the receipt of tenders shall be 35 days from the date on which the contract notice was sent. The tender shall be accompanied by the information for qualitative selection that is requested by the contracting authority. 2. Where contracting authorities have published a prior information notice which was not itself used as a means of calling for competition, the minimum time limit for the receipt of tenders, as laid down in the second subparagraph of paragraph 1 of this Article, may be shortened to 15 days, provided that all of the following conditions are fulfilled: (a) the prior information notice included all the information required for the contract notice in section I of part B of Annex V, in so far as that information was available at the time the prior information notice was published; (b) the prior information notice was sent for publication between 35 days and 12 months before the date on which the contract notice was sent. 3. Where a state of urgency duly substantiated by the contracting authority renders impracticable the time limit laid down in the second subparagraph of paragraph 1, it may fix a time limit which shall be not less than 15 days from the date on which the contract notice was sent. 4. The contracting authority may reduce by five days the time limit for receipt of tenders set out in the second subparagraph of paragraph 1 of this Article where it accepts that tenders may be submitted by electronic means in accordance with the first subparagraph of Article 22(1), and Article 22(5) and (6). Literature: Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014; González Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014; Lichère, ‘New Award Procedures, in’: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014; Semple, A Practical Guide to Public Procurement, 2015; Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/ Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 136 ff.

1

Directive 2004/18/EC did not have a provision dedicated to detail the notion of open procedure and the rules applicable to it. These were rather scattered in different provisions starting with the definition which was to be found in Article 1.

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27.1. The basics of open procedures The open procedure is the one allowing for maximum competition. Indeed under Ar- 2 ticle 27(1), which replicates the definition once found in Article 1(1)(11)(a) of Directive 2004/18/EC, “all any interested economic operators may submit a tender in response to a call for competition”. Under Article 56(2) contracting authorities may decide to choose the best tender before checking the qualification (so-called post-qualification). Postqualification has been criticised arguing that contracting authorities may be expected to go out of their way not to exclude the economic operator having submitted the best tender.1 This is not the experience in Italy, where post qualification was already widely used, possibly due to a strong tendency to litigate issues of qualification.2 The minimum time limit for the receipt of tenders has been lowered to 35 days com- 3 pared to the 52 days which were provided for in Article 38(2) of Directive 2004/18/EC and the 40 days which were proposed by the Commission.3 The generalised use of eprocurement solutions and the specific provisions of Article 53 provided a good reason for shortening the deadline. As it will be seen, under Article 27(4), if tenders may be submitted electronically, the time limit may be further reduced. At the same time the change responds to the plea from contracting authorities for faster and more efficient procedures to fight the economic crisis. The time limit runs from the day on which the contract notice was sent to the Publication Office of the EU (see Public Sector Directive Article 51 para. 2). This is a minimum time limit. In line with the proportionality principle Article 47 (1) provides that when fixing the time limits “contracting authorities shall take account of the complexity of the contract and the time required for drawing up tenders”. This is very much so since very short deadlines, while in principle in line with the general principle of sound or good administration, may limit the competition, especially to the detriment of SMEs.4 Foreign firms might be affected too because of the language gap which normally exists.5 On the other hand the open procedure is most suitable for standardised off-the-shelf items and in this case preparing (and evaluating) tenders is generally not too time consuming.6 The tender has to be submitted along with all the relevant information for qualitative 4 selection. Contrary to what is the case with regard to other award procedures the open procedure cumulates in just one step different phases of the selection and of the evaluation of the tenders or award, so that the tenderer has to submit all documents at the same time. The question whether Article 27 does or does not allow authorises contracting authorities to establish in the documents governing an open tendering procedure award criteria which apply in successive elimination stages for tenders which do not exceed a predetermined minimum score threshold, including when the mechanism is op1 P. Telles/L.R.A. Butler, Public Procurement Award Procedures in Directive 2014/24/EU, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 139 et seq. 2 M. Comba, ‘Qualification, Selection, and Exclusion of Economic Operators (Tenderers and Candidates) in Italy’, in: Burgi/Trybus/Treumer (eds), Qualification, Selection, and Exclusion in EU Procurement, 2016, p. 86. 3 See also S. Arrowsmith, The Law of Public and Utilities Procurement, 3 rd ed., 2014, p. 667 et seq. 4 The point is rightly stressed by Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 138; see also M. Burnett/M. Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, 2nd ed. 2015, p. 223. 5 See A. Sánchez Graells, ‘Are the Procurement Rules a Barrier for Cross-border Trade within the European Market? A view on proposals to lower that barrier and spur growth’, in: Ølykke, Risvig and Tvarnø (eds) EU Procurement Directives – modernisation growth & innovation, 2012, 130 et seq. 6 See, also for some data, A. Semple, A Practical Guide to Public Procurement, 2015, p. 73.

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erated in such a way that in the last stage there are not sufficient tenders to ensure genuine competition has been recently raised.7

27.2. Fast track open procedure 5

The minimum time for submitting the tender may be further reduced to 15 days (down from 20 days in the proposal of the Commission) when a prior information notice was published. Through a prior information notice contracting authorities may make known their plans as to future procurements (see Public Sector Directive Art. 48). The time reduction is allowed upon two conditions being met. The prior information notice must have included the details which identify the contracting authority and, as far as possible at the time of publication, a number of other pieces of information listed in Annex 5 part B sec. I, such as the CPV codes and a brief description of the procurement: nature and extent of works or services, nature and quantity or value of supplies. Moreover, the prior information notice has to have been sent for publication between 35 days and 12 months before the date on which the contract notice was sent.

27.3. State of urgency 6

The standard 35 days minimum time limit is drastically reduced to 15 days (down from the 20 days time limit set in the proposal of the Commission) where a state of urgency duly substantiated by the contracting authority renders the standard time limit impracticable. This possibility was formerly limited to restricted procedures under Directive 2004/18/EC. ‘Duly substantiated’ implies a duty on the part of the contracting authorities to give reasons. Unlike the situation with regard to extreme urgency which, under Article 32(2)(c) allows recourse to a negotiated procedure without prior publication of a contract notice, here the state of urgency may well “be attributable to the contracting authority” or at least due to events foreseeable by the same contracting authority. 8 In the end, the provision leaves a considerable degree of discretion and subjective decisionmaking to contracting authorities.9 Beside the shortening of the period to tender the procedure will in most cases be expedited by the fact that a more limited number of economic operators will normally be capable of answering at such very short notice.

27.4. E-tenders 7

The standard 35 days minimum time limit may also be reduced by 5 days when the contracting authority accepts that tenders may be submitted by electronic means in accordance with Article 22. This is a further instance of how e-procurement can contribute to expedite public procurement procedures.

Article 28 Restricted procedure 1. In restricted procedures, any economic operator may submit a request to participate in response to a call for competition containing the information set out in 7 Request for a preliminary ruling from the Órgano Administrativo de Recursos Contractuales de la Comunidad Autónoma de Euskadi (Spain) lodged on 28 October 2016: Case C-546/16, Case C-546/16, Montte SL OJ 2014 L 94, p. 65. 8 See also Recital 46. 9 See Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 137.

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2.

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Annex V parts B or C as the case may be by providing the information for qualitative selection that is requested by the contracting authority. The minimum time limit for receipt of requests to participate shall be 30 days from the date on which the contract notice or, where a prior information notice is used as a means of calling for competition, the invitation to confirm interest was sent. Only those economic operators invited to do so by the contracting authority following its assessment of the information provided may submit a tender. Contracting authorities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 65. The minimum time limit for the receipt of tenders shall be 30 days from the date on which the invitation to tender was sent. Where contracting authorities have published a prior information notice which was not itself used as a means of calling for competition, the minimum time limit for the receipt of tenders as laid down in the second subparagraph of paragraph 2 of this Article may be shortened to 10 days, provided that all of the following conditions are fulfilled: (a) the prior information notice included all the information required in section I of part B of Annex V, in so far as that information was available at the time the prior information notice was published; (b) the prior information notice was sent for publication between 35 days and 12 months before the date on which the contract notice was sent. Member States may provide that all or specific categories of sub-central contracting authorities may set the time limit for the receipt of tenders by mutual agreement between the contracting authority and the selected candidates, provided that all selected candidates have the same time to prepare and submit their tenders. In the absence of agreement on the time limit for the receipt of tenders, the time limit shall be at least 10 days from the date on which the invitation to tender was sent. The time limit for receipt of tenders provided for in paragraph 2 of this Article may be reduced by five days where the contracting authority accepts that tenders may be submitted by electronic means in conformity with Article 22(1), (5) and (6). Where a state of urgency duly substantiated by the contracting authorities renders impracticable the time limits laid down in this Article, they may fix: (a) a time limit for the receipt of requests to participate which shall not be less than 15 days from the date on which the contract notice was sent; (b) a time limit for the receipt of tenders which shall not be less than 10 days from the date on which the invitation to tender was sent.

Literature: Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014; González Garcia, ‘’Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014; Lichère, New Award Procedures, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014; Semple, A Practical Guide to Public Procurement, 2015; Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/ Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 140 ff.

Directive 2004/18/EC did not have a provision detailing the notion of restricted pro- 1 cedure and the rules applicable to it. These were rather scattered in different provisions starting with the definition which was to be found in Article 1.

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28.1. The basics of restricted procedures The restricted procedure is articulated into stages in that the selection of the participants and the evaluation of the tenders are clearly separated. This means that this procedures on average takes more time than an open procedure.1 Indeed under Article 28(1) and (2) combined (which to a large extent follows the definition once found in Article 1(1)(11)(b) of Directive 2004/18/EC), “any economic operator may submit a request to participate in response to a call for competition” but “only those economic operators invited to do so by the contracting authority following its assessment of the information provided may submit a tender”. Unlike the open procedure the restricted one does not allow for maximum competition. The idea is that the minimum number of candidates (five) provided in Article 65(2) is normally sufficient to guarantee an acceptable level of competition.2 The contracting authority may decide to continue the procedure even if the number of suitable candidates falls below the limit.3 3 The double phased structure of the restricted procedures means that the law must first of all set a minimum time for submitting a request to participate. Under Article 28(1) the minimum time limit for the receipt of requests to participate is 30 days (the proposal of the Commission had 35 days). Under Article 38(3)(a) of Directive 2004/18/EC it was 37 days. The period runs either from the date on which the contract notice was sent to the Publication Office of the EU (see the comment to Article 51) or, when a prior information notice was used as a means of calling for competition, from the date the invitation to confirm interest was sent to the economic operators. This is a minimum time limit. In line with the proportionality principle Article 47(1) provides that when fixing the time limits “contracting authorities shall take account of the complexity of the contract and the time required for drawing up tenders”.4 2

28.2. Selection of candidates In regulating the selection (or, according to a different terminology, the pre-qualification) phase Article 28(2) refers to the power of contracting authorities to limit the number of candidates invited to submit the tender by setting a minimum and possibly a maximum number. The selection has to comply with Article 65, which stipulates that it must be based on “objective and non-discriminatory criteria or rules”.5 The contracting authority may decide to continue the procedure even if the number of suitable candidates falls below the limit.6 What it cannot do is to invite economic operators who did not ask to be invited7 (see Public Sector Directive Art. 65).8 5 The minimum time limit for the receipt of tenders is 30 days, down from 40 under Article 38(3)(b) of Directive 2004/18/EC. The time limit runs from the date on which 4

A. Semple, A Practical Guide to Public Procurement, 2015, p. 74. See also J. Gonzáles Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), 2014, p. 67. 3 Which was already possible according to the case law: see Case C-138/08, Hochtief AG [2009] ECR I-9889, paragraphs 37 ff. 4 See also M. Burnett/M. Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, 2nd ed. 2015, p. 223. 5 See also S. Arrowsmith, The Law of Public and Utilities Procurement, 3 rd ed. 2014, p. 691 (mistakenly referring to Article 44(3)). 6 Which was already possible according to the case law: see Case C-138/08, Hochtief AG [2009] ECR I-9889, paragraphs 37 ff. 7 See Arrowsmith, The Law of Public and Utilities Procurement, 3 rd ed. 2014, p. 681. 8 See also Gonzáles Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), 2014, p. 68. 1

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the invitation to tender was sent. Under Article 29(5) the time limit may be reduced by five days when the tenders may be submitted by electronic means.

28.3. Fast track restricted procedure The minimum time for submitting the tender may be further reduced to 10 days 6 when a prior information notice was published. Through a prior information notice contracting authorities may make known their plans as to future procurements 9 (see Public Sector Directive Art. 48).10 The time reduction is subject to two conditions. The prior information notice must have included the details which identify the contracting authority and, as far as possible at the time of publication, a number of other information listed in Annex 5 part B sec. I, such as the CPV codes and a brief description of the procurement: nature and extent of works or services, nature and quantity or value of supplies. Moreover, the prior information notice must have been sent for publication between 35 days and 12 months before the date on which the contract notice was sent. The time limit might however be too short considering that the restricted procedure is normally used for more complex contracts.11

28.4. Fast track restricted procedure for sub-central contracting authorities Using the additional flexibility allowed by the WTO-GPA for public procurement by 7 sub-central contracting authorities, Article 28(4) empowers the Member States to provide for an additional fast track restricted procedure. It is to be stressed that in the EU this regime is optional, and each Member State will have to decide whether or not to adopt it when implementing the new Public Sector Directive and whether or not to leave it as an option available to all or only some sub-central contracting authorities. In the proposal of the Commission it was rather up to each sub-central contracting authority to decide whether or not to avail itself of this possibility. The time limit for submitting the tender must either be agreed upon between the sub- 8 central contracting authorities and all the selected candidates or set by the same contracting authorities. An intermediate system would have the contracting authority to propose a time limit to be considered agreed if not expressly disagreed.12 In case the time limit is set by the contracting authority it must be at least 10 days (down from the 15 days time limit set in the proposal of the Commission). By implication, the parties might set a shorter time limit. In practice the contracting authority will send a proposed deadline to the selected candidates along with the letter of invitation, giving them a short time to react and setting the time limit in case no agreement is reached. The whole process has to be very contracted, since the standard time limit of 30 days is already short and does not leave room for much negotiation. In line with the EU general principle on equal treatment, all selected candidates will have to have the same time to prepare and submit their tenders, meaning that all communication will have to be dispatched simultaneously to all of them.

See Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014, p. 703 et seq. See also Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014, p. 671 et seq. 11 P. Telles/L.R.A. Butler, Public Procurement Award Procedures in Directive 2014/24/EU, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 141 where reference is also made to the peculiar situation of SMEs. 12 Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 141-142. 9

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28.5. State of urgency The standard minimum time limits are drastically reduced where a state of urgency duly substantiated by the contracting authority renders the standard time limit impracticable. ‘Duly substantiated’ implies a duty to give reasons on the part of the contracting authorities. The minimum time limit for the receipt of the requests to participate is shortened to 15 days, while the minimum time limit for the receipt of the tenders is shortened to 10 days. 10 In contrast to the situation of extreme urgency which, under Article 32 (2) (c) allows for recourse to a negotiated procedure without prior publication of a contract notice, here the state of urgency may well “be attributable to the contracting authority” or at least due to events foreseeable by the same contracting authority.13 Beside the shortening of the time limits themselves, the entire procedure will often be expedited due to the fact that a more limited number of economic operators will normally be capable even to consider their interest to participate at such very short notice, thus making the selection of the candidates much faster. 9

Article 29 Competitive procedure with negotiation 1. In competitive procedures with negotiation, any economic operator may submit a request to participate in response to a call for competition containing the information set out in Annex V parts B and C by providing the information for qualitative selection that is requested by the contracting authority. In the procurement documents, contracting authorities shall identify the subjectmatter of the procurement by providing a description of their needs and the characteristics required of the supplies, works or services to be procured and specify the contract award criteria. They shall also indicate which elements of the description define the minimum requirements to be met by all tenders. The information provided shall be sufficiently precise to enable economic operators to identify the nature and scope of the procurement and decide whether to request to participate in the procedure. The minimum time limit for receipt of requests to participate shall be 30 days from the date on which the contract notice or, where a prior information notice is used as a means of calling for competition, the invitation to confirm interest was sent. The minimum time limit for the receipt of initial tenders shall be 30 days from the date on which the invitation was sent. Article 28(3) to (6) shall apply. 2. Only those economic operators invited by the contracting authority following its assessment of the information provided may submit an initial tender which shall be the basis for the subsequent negotiations. Contracting authorities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 65. 3. Unless otherwise provided for in paragraph 4, contracting authorities shall negotiate with tenderers the initial and all subsequent tenders submitted by them, except for the final tenders within the meaning of paragraph 7, to improve the content thereof. The minimum requirements and the award criteria shall not be subject to negotiations. 13

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4. Contracting authorities may award contracts on the basis of the initial tenders without negotiation where they have indicated, in the contract notice or in the invitation to confirm interest, that they reserve the possibility of doing so. 5. During the negotiations, contracting authorities shall ensure the equal treatment of all tenderers. To that end, they shall not provide information in a discriminatory manner which may give some tenderers an advantage over others. They shall inform all tenderers, whose tenders have not been eliminated pursuant to paragraph 6, in writing of any changes to the technical specifications or other procurement documents, other than those setting out the minimum requirements. Following these changes, contracting authorities shall provide sufficient time for tenderers to modify and re-submit amended tenders, as appropriate. In accordance with Article 21, contracting authorities shall not reveal to the other participants confidential information communicated by a candidate or a tenderer participating in the negotiations without its agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. 6. Competitive procedures with negotiation may take place in successive stages in order to reduce the number of tenders to be negotiated by applying the award criteria specified in the contract notice, in the invitation to confirm interest or in another procurement document. In the contract notice, the invitation to confirm interest or in another procurement document, the contracting authority shall indicate whether it will use that option. 7. Where the contracting authority intends to conclude the negotiations, it shall inform the remaining tenderers and set a common deadline to submit any new or revised tenders. It shall verify that the final tenders are in conformity with the minimum requirements and comply with Article 56(1), assess the final tenders on the basis of the award criteria and award the contract in accordance with Articles 66 to 69. Literature: Arrowsmith/Treumer, Competitive Dialogue in EU Procurement, 2012; Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, 2nd ed. 2015; Burnett, The New Rules for Competitive Dialogue and the Competitive Procedure with Negotiation in Directive 2014/24 – What Might They Mean for PPP?, in: EPPPL 2/2015 62; Davey, Procedures involving negotiations in the new Public Procurement Directive: key reforms to the grounds for use and the procedural rules, in: PPLR 2014, p. 103 et seq.; Lichère, Quid de la place nouvelle des procedures négociées et du dialogue competitive?, in: Bulletin Juridique des Contrats Publics 2014, p. 164 et seq.; Semple, A Practical Guide to Public Procurement, 2015; Telles/Butler, Public Procurement Award Procedures in Directive 2014/24/EU, in: Lichère/ Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 153 ff; Treumer, Flexible Procedures or Ban on Negotiations? Will More Negotiation Limit Access to the Procurement Market?, in: Ølykke/Risvig/Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, 2012, 135.

Evolving the negotiated procedure with prior publication of a contract notice into the 1 competitive procedure with negotiation was one of the most important developments in the making of Directive 2014/24/EU.1 EU law was traditionally uneasy with negotiations, seen as a Trojan horse through which contracting authorities might be tempted to reintroduce national preferences into a system geared at opening up national public pro1 R. Caranta, The changes to the public contract directives and the story they tell about how EU law works, in: Common Market Law Review 2015, p. 451 et seq. The differences between the old and the new procedures are minimised by P. Telles/L.R.A. Butler, Public Procurement Award Procedures in Directive 2014/24/EU, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p.153.

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curement market to EU-wide competition.2 So much so that the Court of Justice held recently that:3 “The principle of equal treatment and the obligation of transparency preclude any negotiation between the contracting authority and a tenderer during a public procurement procedure”.

In the end the suspicion with regard to negotiations had, however, to give way to the strong call for flexibility coming from contracting authorities. 4 The Commission added a positive spin to the paradigm shift and Recital 42 now claims that a greater use of procedures which provides for negotiations “is also likely to increase cross-border trade, as the evaluation has shown that contracts awarded by negotiated procedure with prior publication have a particularly high success rate of cross-border tenders”.

This does not mean that the competitive procedure with negotiation has been turned in a standard procedure on the same footing as the open and the restricted procedure. Some of the situations which allow recourse to the competitive procedure with negotiation are, however, quite open textured and a wide application of this procedure in some jurisdictions is to be expected. See the comment to Article 26(4). 2 To compensate for the risks of abuse, the regulation of the procedure has been much strengthened.5 According to Recital 45 “The competitive procedure with negotiation should be accompanied by adequate safeguards ensuring observance of the principles of equal treatment and transparency”.

This was mainly done by requiring contracting authorities to set minimum standards and award criteria which are not to be changed during the procedure,6 by spelling down to a much higher degree of details the rules flowing from the principle of equal treatment, and by providing for competition on final tenders.7 The precedent holding that Member States are under a duty to expressly include in their implementing legislation the safeguards of equal treatment in negotiated procedures holds good with reference to these safeguards as well.8

2 See critically K. Krüger, Ban-on-Negotiations in Tender Procedures: Undermining the Best Value for Money, in: K.V. Thai (ed.), International Handbook of Public Procurement, 2009, p. 643 et seq.; see also Caranta, The changes to the public contract directives and the story they tell about how EU law works, in: Common Market Law Review 2015, p. 451. 3 Case C‑336/12 Manova, ECLI:EU:C:2013:647, paragraph 31. 4 See Semple, A Practical Guide to Public Procurement, 2015 p. 75; M. Burnett, The New Rules for Competitive Dialogue and the Competitive Procedure with Negotiation in Directive 2014/24 – What Might They Mean for PPP?, 2015 p. 63 et seq.; F. Lichère, Quid de la place nouvelle des procedures négociées et du dialogue competitive?, in: Bulletin Juridique des Contrats Publics 2014, p. 164; S. Treumer, Flexible Procedures or Ban on Negotiations? Will More Negotiation Limit Access to the Procurement Market? in: G.S. Ølykke/C. Risvig Hansen/C.D. Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, 2012, p. 138 et seq. 5 On the need to strengthen the safeguards see Treumer, ‘Flexible Procedures or Ban on Negotiations? Will More Negotiation Limit Access to the Procurement Market?’ in: Ølykke/Risvig/Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, 2012, p. 138 and 143. 6 A. Semple, A Practical Guide to Public Procurement, 2015, p. 75. 7 See also A. Tokár, ‘Institutional Report’ in: U. Neergaard/C. Jackson/G.S. Ølykke (eds), Public Procurement Law: Limitations, Opportunities and Paradoxes. The XXVI FIDE Congress in Copenhagen, 2014 Congress Publications Vol. 3, 2014, p. 216 et seq. 8 Case C-292/07 Commission v Belgium [2009] ECR I-59, paragraphs 105 et seqq.

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29.1. The basics of competitive procedure with negotiations The competitive procedure with negotiation is articulated into a number of stages. The selection of the participants is clearly separated from the negotiations and the evaluation of the final tenders. Moreover, under Article 29(6) the negotiations may take place in different stages to reduce the number of tenders to be negotiated. Answering a call for competition which, with dubious regulatory overkill, has to contain the information listed in both part B and C of Annex 5 (listing the information to be present in the prior information notice and in the contract notice respectively), any economic operator has to submit the information required to allow the contracting authority to perform the qualitative selection. The selection process is regulated under Article 29(2) by reference to Article 65. Under Article 65(2) the contracting authority must indicate in the call for competition the objective and non-discriminatory criteria or rules it intends to apply to the selection process.9 Under Article 65(3) in the competitive procedure with negotiation the minimum number of candidates shall be three, provided that that number is sufficient to ensure genuine competition. The contracting authority may decide to continue the procedure even if the number of suitable candidates falls below the limit10 (see Public Sector Directive Art. 65). A very relevant piece of information to be included in the call for competition concerns the minimum requirements for the goods, services or works to be procured. More specifically, the contracting authority must “identify the subject-matter of the procurement” by providing a description of both their needs and the characteristics required. 11 The description must be sufficiently precise to allow the economic operators potentially interested in the procedure to decide whether to tender or not. As it was often stressed by the Court of Justice, this is a bare minimum safeguard for non-discrimination and transparency. As such it was recalled in an infringement procedure against France because of very lax provisions on the marchés de définition.12 As it is too often the case with the new Public Sector Directive, the provision reiterates, here, a rule that is applicable to all procedures and as such is spelt out in Article 42(3)(a). The reference to the ‘needs’ means that the technical specifications in competitive procedures with negotiations have to be drafted in terms of performance or functional requirements according to Article 42(3)(a). The preference for technical specifications drafted in terms of performance or functional requirements makes sense considering that under Article 26(4)(a) the use of the competitive procedure with negotiations is allowed in situations where, basically, the needs of the contracting authority cannot be satisfied by off-the-shelf products or services and in any case the technical specifications cannot be established with sufficient precision by the contracting authority with reference to an existing standard.13 It seems that in some circumstances it will be open to contracting authorities to draft technical specifications in terms of performance or functional requirements with reference to the technical specifications conforming to standards as a means of presuming conformity with such performance or functional requirements under Article 42(3)(c). The (partial) reference to standards under Article 42(3)(c) will more often be used in 9 See, also arguing that this will limit the chances of SMEs, Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 155. 10 Which was already possible according to the case law: see Case C-138/08, Hochtief AG [2009] ECR I-9889, paragraphs 37 et seqq. 11 See also S. Arrowsmith, The Law of Public and Utilities Procurement, 3 rd ed. 2014, p. 982. 12 Case C‑299/08 Commission v France [2009] ECR I‑11587, paragraphs 41 et seqq. 13 See also Recital 43.

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competitive procedures with negotiation according to Article 26 (4)(b) when only irregular or unacceptable tenders were received in response to an open or a restricted procedure. 8 Having specified the ‘subject-matter of the procurement’ the contracting authorities must then “indicate which elements of the description define the minimum requirements to be met by all tenders”. Recital 45 clarifies that “the minimum requirements to be set by the contracting authority are those conditions and characteristics (particularly physical, functional and legal) that any tender should meet or possess in order to allow the contracting authority to award the contract in accordance with the chosen award criteria”.

As already recalled, the specification of the ‘minimum’ requirements right at the outset of the procedure is a safeguard for the equal treatment of all economic operators 14 So much so that under Article 29(3) the minimum requirements are not negotiable while under Article 29(5) they cannot be changed by the contracting authority. 9 For the same reasons contract award criteria – and their weightings – have to be specified along with the subject-matter of the procurement right upfront in the call for competition. According to Recital 45: “Award criteria and their weighting should remain stable throughout the entire procedure and should not be subject to negotiations, in order to guarantee equal treatment of all economic operators”.

It is submitted that it is particularly appropriate that the award criteria are excluded from negotiations because they decide the outcome of the competition. Different award criteria could have led to other economic operators being interested in submitting their candidature. Moreover, in negotiating the award criteria each candidate would try to bend the rules of the game to its own advantage15 and the contracting authority might be tempted to tweak them to the advantage or to the detriment – with discrimination being the end result in both cases – of some candidate(s). The case law is indeed firm in holding that16 “the purpose of the requirement to inform tenderers in advance of the award criteria and, where possible, of their relative weighting, is to ensure that the principles of equal treatment and transparency are complied with”.

Altering the weighting of the award criteria during the procedure would be inconsistent with the principle of equal treatment and the consequent obligation of transparency.17 10 The minimum time limit for the receipt of a request to participate is the same – 30 days – that it is provided for restricted procedures under Article 28(1). The same minimum time limit also applies for the receipt of the (initial) tenders. The difference with regard to the provision in Article 28(2) is that with the competitive procedure with negotiation the tender is only ‘initial’. This means that the initial tender is normally just the basis upon which negotiations may start rather than being the only one to be evalu14

41 ff.

See also Recital 45; see also Case C‑299/08 Commission v France [2009] ECR I‑11587, paragraphs

15 J. Davey, Procedures involving negotiations in the new Public Procurement Directive: key reforms to the grounds for use and the procedural rules, in: PPLR 2014, p. 108; see however the less strict approach preferred by M. Burnett/M. Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, 2nd ed. 2015, p. 220 et seq. 16 Case C-226/09 Commission v. Ireland [2010] ECR I-11807, paragraph 42, referring to Case C‑470/99 Universale-Bau and Others [2002] ECR I‑11617, paragraph 98, and Case C‑331/04 ATI EAC and Viaggi di Maio and Others [2005] ECR I‑10109, paragraphs 22 to 24. 17 Case C-226/09 Commission v. Ireland [2010] ECR I-11807, paragraph 66; see also Case C-532/96 Lianakis [2008] ECR I-251, paragraphs 36 et seqq.

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ated against the award criteria (unless under Article 29(4) the contracting authority has reserved the right to award the contract based on initial tenders).18 Beside this very important difference, Article 29(1) very much resembles the rules on time limits laid down in Article 28, so much so that it provides that Articles 28(3) to (6) also apply to the competitive procedure with negotiation.

29.2. Selection of candidates In regulating the selection (or, according to a different terminology, the pre-qualifica- 11 tion) phase Article 29(2) refers to the power of contracting authorities to limit the number of candidates invited to submit the initial tender subject to negotiations by setting a minimum, which under Article 65(2) must be at least three, and possibly a maximum number. In any event the number of candidates invited shall be sufficient to ensure genuine competition. The selection has to comply with Article 65, which stipulates that it must be based on “objective and non-discriminatory criteria or rules” (see Public Sector Directive Art. 65).19

29.3. Negotiations Unless Article 29(4) applies, negotiations are the raison d’être of the new procedure. 12 The negotiations are meant to incrementally improve the content of the tenders, starting from the initial tender submitted by the candidates and going on until the contracting authority decides to conclude the negotiations and calls for the final tenders.20 To safeguard the equal treatment of both the candidates and of those who might have 13 been interested in submitting their candidature for the award of a radically different contract or a contract to be awarded according to different award criteria both the minimum requirements and the award criteria are not subject to negotiations (see also the comment to Article 29(1)). This provision affirms the Nordecon doctrine spelt out with reference to negotiated procedures with prior publication.21 The Estonian Supreme Court had asked the Court of Justice whether Article 30(2) of Directive 2004/18/EC allows the contracting authority to negotiate tenders that do not comply with the mandatory requirements laid down in the technical specifications. Based on the general principles of equal treatment, non-discrimination and transparency the Court of Justice held that even though in the context of a negotiated procedure the contracting authority has the power to negotiate, it is still bound to see to it that those requirements of the contract that it has made mandatory are complied with. Indeed:22 “allowing a tender that does not comply with the mandatory requirements to be admissible with a view to negotiations would entail the fixing of mandatory conditions in the call for tenders being deprived of useful effect and would not allow the contracting authority to negotiate with the tenderers on a basis, made up of those conditions, common to those tenderers and would not, therefore, allow it to treat them equally”.

18 Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 155. 19 See also the contributions collected by Burgi/Trybus/Treumer (eds), Qualification, Selection, and Exclusion in EU Procurement, 2016. 20 See also Recital 45. 21 Case C-561/12 Nordecon ECLI:EU:C:2013:793; see Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 157. 22 Paragraph 38; see also Case C‑336/12 Manova ECLI:EU:C:2013:647, paragraph 31.

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This provided, negotiations may concern all characteristics of the purchased works, supplies and services including for instance, according to Recital 45, “quality, quantities, commercial clauses as well as social, environmental and innovative aspects”.

29.4. Award to the best initial tender 14

To prod the candidates to submit right from the outset of the procedure tenders which already offer an optimal or near optimal balance of price and quality, Article 29(4) provides that, when it has so announced in the call for competition, the contracting authority may decide to forgo the negotiations and award the contract on the basis of the initial tenders which have been submitted. When an optimal or near optimal initial tender has been submitted it might be a waste of time and resources to enter into negotiations. Indeed one of the risks of negotiations is the creation of a ‘bazaar’ pattern, with initial tenders wide off the mark and lot of time and resources spent on just getting some meaningful tenders.23

29.5. Equal treatment during the negotiations Equal treatment and non-discrimination are fundamental principles of EU public procurement law – and to a large extent of EU law tout court – and as such they are treated in Article 18 of the new Public Sector Directive alongside the principle of transparency and proportionality.24 All of the phases of the procurement procedure and all the procurement decisions must conform to these principles.25 Because of the multiple occasions of dialogue between the contracting authority and the candidates that negotiations provide, the competitive procedure with negotiation entails increased risks of discrimination.26 This is why Article 29(5) specifically stresses that contracting authorities shall ensure the equal treatment of all candidates during the negotiations. A number of more specific rules which were not spelt out in the previous Public Sector Directive buttress today the principle with specific reference to the conduct of the competitive procedure with negotiations.27 16 The most obvious way of distorting the competition favouring one participant is through privileged access to information. Here Article 29(5) replicates the formula already used in Article 30(3) of Directive 2004/18/EC, forbidding contracting authorities to provide information in a discriminatory manner which may give some tenderers an advantage over others.28 Moreover, contracting authorities must inform in writing at one and the same time all tenderers of any changes to the technical specifications or other procurement documents. Under Article 2(1)(18): 15

23 See Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 156; in some situations one could, however, question whether the choice of the procedure was adequate Davey, ‘Procedures involving negotiations in the new Public Procurement Directive: key reforms to the grounds for use and the procedural rules’ PPLR 2014, p. 108. 24 See C. Bovis, The Principles of public procurement regulation, in: C. Bovis (ed), Research Handbook of EU Public Procurement Law, 2016, p. 35 et seq.; specifically on the proportionality principle as applied to public procurement law see Semple, A Practical Guide to Public Procurement, 2015, p. 51 et seq. 25 See J. Gonzáles Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), 2014, p. 62 et seq. 26 See A. Ménéménis, ‘Code des marchés publics 2006: quelques points forts’, in: Act. Jur. Dr. Adm., 2006, p. 1763; see also Recital 45. 27 Davey, ‘Procedures involving negotiations in the new Public Procurement Directive: key reforms to the grounds for use and the procedural rules’ PPLR 2014, p. 107 et seq. 28 See Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 69 et seq., and 144.

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“‘written’ or ‘in writing’ means any expression consisting of words or figures which can be read, reproduced and subsequently communicated, including information transmitted and stored by electronic means”.

A specific issue concerns confidential information which is in general regulated in Article 21 on confidentiality of the information provided by tenderers and candidates. Referring to Article 21, Article 29(5) specifically forbids contracting authorities to reveal to other participants confidential information communicated by a participant in the negotiations without the agreement of the latter. Moreover, such agreement may not take the form of a general waiver but shall rather be given “with reference to the intended communication of specific information”. This approach makes perfect sense since tenders are on the table along all the stages of the procedure.29 Again to safeguard equal treatment, when changing the technical specifications or 17 other procurement documents contracting authorities must provide the participants sufficient time to modify and resubmit amended tenders. ‘Sufficient’ must be understood in the sense that the time given is proportionate to the nature and magnitude of the change to the description of the subject-matter of the contract, always keeping in mind that the minimum requirements cannot be altered. Finally, in order to ensure transparency and traceability of the process Recital 45 indi- 18 cates that “all stages should be duly documented. Furthermore, all tenders throughout the procedure should be submitted in writing”. One could well question why what appears on its face to be a rule of the procedure was confined to the recitals instead of being spelt out in Article 29 as it should have been.

29.6. Different stages of negotiations Article 29(6) provides that the negotiations may take place in different stages to re- 19 duce the number of tenders to be negotiated if the contracting authority has so indicated in the contract documents. To do so, the award criteria are applied to the initial tenders and then to successive tenders and so on. The process is somewhat cumbersome and even more so when the award criteria chosen are very articulated. Recital 41 of Directive 2004/18/EC justified the possible reduction referring to “the flexibility which may be required and the high level of costs associated with such methods of procurement”. Even if the indication has been omitted in the new directive it makes common sense. The reduction should be foreseen with reference to complex procurements. Article 66 of the Public Sector Directive makes it clear that the reduction of the num- 20 ber of participants cannot be abused to eliminate competition: “In the final stage, the number arrived at shall make for genuine competition in so far as there are enough tenders, solutions or qualified candidates”.

Moreover such a reduction will be tantamount to exclusion, and the safeguards will have to be corresponding, including under Article 55(2).

29.7. Competition on the final tender One could be tempted to see the competitive procedure with negotiation as a negoti- 21 ated procedure under another – and possibly more palatable – name. It is not really so, because in its final phase it changes again into a competitive mode. Negotiations are not the end of the matter. When the contracting authority, being satisfied that further nego29 Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 158.

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tiations are not conducive to additional improvement of the tenders,30 concludes the negotiations, it shall simultaneously inform the tenderers which have not been excluded in previous stages of the negotiations and set a common deadline to submit any new or revised tenders. The contract will be awarded to the best tender chosen in application of the award criteria set at the start of the procedure.31 22 Article 29 has no clause comparable to Article 30(7) allowing further negotiation with the participant having submitted the best tender in a dialogue procedure.32 A final tender, once chosen as the one presenting the best price-quality ratio in accordance with Article 67, cannot be negotiated further.33

Article 30 Competitive dialogue 1. In competitive dialogues, any economic operator may submit a request to participate in response to a contract notice by providing the information for qualitative selection that is requested by the contracting authority. The minimum time limit for receipt of requests to participate shall be 30 days from the date on which the contract notice was sent. Only those economic operators invited by the contracting authority following the assessment of the information provided may participate in the dialogue. Contracting authorities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 65. The contract shall be awarded on the sole basis of the award criterion of the best price-quality ratio in accordance with Article 67(2). 2. Contracting authorities shall set out their needs and requirements in the contract notice and they shall define these needs and requirements in that notice and/or in a descriptive document. At the same time and in the same documents, they shall also set out and define the chosen award criteria and set out an indicative timeframe. 3. Contracting authorities shall open, with the participants selected in accordance with the relevant provisions of Articles 56 to 66, a dialogue the aim of which shall be to identify and define the means best suited to satisfying their needs. They may discuss all aspects of the procurement with the chosen participants during this dialogue. During the dialogue, contracting authorities shall ensure equality of treatment among all participants. To that end, they shall not provide information in a discriminatory manner which may give some participants an advantage over others. In accordance with Article 21, contracting authorities shall not reveal to the other participants solutions proposed or other confidential information communicated by a candidate or tenderer participating in the dialogue without its agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. See also Recital 45. Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 222. 32 This being a main difference between the two procedures Semple, A Practical Guide to Public Procurement, 2015 p. 76. 33 Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 171; the rational for the distinction may be challenged on the assumption that the two procedures are convergent: Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 158 et seq. 30 31

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4. Competitive dialogues may take place in successive stages in order to reduce the number of solutions to be discussed during the dialogue stage by applying the award criteria laid down in the contract notice or in the descriptive document. In the contract notice or the descriptive document, the contracting authority shall indicate whether it will use that option. 5. The contracting authority shall continue the dialogue until it can identify the solution or solutions which are capable of meeting its needs. 6. Having declared that the dialogue is concluded and having so informed the remaining participants, contracting authorities shall ask each of them to submit their final tenders on the basis of the solution or solutions presented and specified during the dialogue. Those tenders shall contain all the elements required and necessary for the performance of the project. Those tenders may be clarified, specified and optimised at the request of the contracting authority. However, such clarification, specification, optimisation or additional information may not involve changes to the essential aspects of the tender or of the public procurement, including the needs and requirements set out in the contract notice or in the descriptive document, where variations to those aspects, needs and requirements are likely to distort competition or have a discriminatory effect. 7. Contracting authorities shall assess the tenders received on the basis of the award criteria laid down in the contract notice or in the descriptive document. At the request of the contracting authority, negotiations with the tenderer identified as having submitted the tender presenting the best price-quality ratio in accordance with Article 67 may be carried out to confirm financial commitments or other terms contained in the tender by finalising the terms of the contract provided this does not have the effect of materially modifying essential aspects of the tender or of the public procurement, including the needs and requirements set out in the contract notice or in the descriptive document and does not risk distorting competition or causing discrimination. 8. Contracting authorities may specify prizes or payments to the participants in the dialogue. Literature: Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014; Arrowsmith/Treumer (eds), Competitive Dialogue in EU Procurement, 2012; Bovis, EU Public Procurement Law, 2 nd ed. 2012; Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, 2 nd ed. 2015; Burnett, ‘The New Rules for Competitive Dialogue and the Competitive Procedure with Negotiation in Directive 2014/24 – What Might They Mean for PPP?’, in: EPPPL 2/2015 62; Davey, ‘Procedures involving negotiations in the new Public Procurement Directive: key reforms to the grounds for use and the procedural rules’, in: PPLR 2014, p. 103 et seq.; Lichère, ‘New Award Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014; Lichère, ‘Quid de la place nouvelle des procedures négociées et du dialogue competitive?’, in: Bulletin Juridique des Contrats Publics 2014, p. 164 et seq.; Semple, A Practical Guide to Public Procurement, 2015; Telles, Competitive Dialogue: ‘Should Rules be Fine-tuned to Facilitate Innovation?’, in: Ølykke/Risvig/Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, 2012, p. 221; Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p.143 ff.

The competitive dialogue procedure was introduced in 2004 to allow some measure 1 of flexibility in the award of contracts,1 especially complex ones such as PPPs.2 As it was 1 A. Semple, ‘A Practical Guide to Public Procurement, 2015, p. 76 et seq.; F. Lichère, New Award Procedures’, in: M. Trybus/R. Caranta/G. Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014, p. 82 et seq.

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aptly remarked, these contracts “are significant not only because of the high level of government expenditure which is often involved, but also because of their importance in securing effective public services and infrastructures”.3 2 Given the suspicion towards negotiations at the roots of EU public procurement law, recourse to competitive dialogue was limited to special – if somewhat vaguely described – cases, namely ‘particularly complex contracts’.4 The gist of the notion of competitive dialogue was linked to the fact that it was objectively impossible for a diligent contracting authority to precisely draft technical specifications for such a contract. 5 This was often the case with PPPs.6 The vagueness of the ground could not make a special procedure into a general one, but there was much scholarly discussion on this.7 As Advocate general Mazák opined, “the competitive dialogue may be considered to constitute a special or exceptional procedure”.8 3 The conditions that justify the recourse to the competitive dialogue have been much relaxed in the new Public Sector Directive,9 which in principle should do away with the quite rigid case law which has been developed in some Member States like France.10 Article 26(4) lays down the same conditions for having recourse to both the competitive procedure with negotiation and to the competitive dialogue. However, it is submitted that, given the differences between the two procedures, the competitive dialogue is (still) best suited to more complex contracts, including PPP11 (see Public Sector Directive Art. 26 para. 4). This does not mean that nothing has changed. The reference to ‘particularly complex contracts’, while entailing margins of uncertainty, conveyed the idea of a very exceptional procedure exposing contracting authorities opting for it to judicial challenges. The same cannot be said of the present wording of Article 26(4) which, while still fuzzy, clearly allows for a wider recourse to the competitive dialogue. 4 A big change from the approach followed in Directive 2004/18/EC12 is that now Member States are no more given the choice as to whether or not provide for a competitive dialogue procedure when implementing the directive in domestic law.13 As with ev2 M. Andrecka, ‘Innovative public-partnerships’, in: C. Bovis (ed), Research Handbook of EU Public Procurement Law, 2016, p. 257; M. Burnett/M. Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, 2nd ed. 2015, p. 25. 3 S. Arrowsmith/S. Treumer, ‘Competitive dialogue in EU law: a critical review’, in: S. Arrowsmith/S. Treumer (eds), Competitive Dialogue in EU Procurement, 2012, p. 3. 4 See Lichère, ‘New Award Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014, p. 85 et seq.; see also C. Bovis, EU Public Procurement Law, 2 nd ed. 2012; p. 398, 97 et seq.; K. Krüger, ‘Ban-on-Negotiations in Tender Procedures: Undermining the Best Value for Money’, in: K.V. Thai (ed), International Handbook of Public Procurement, 2009, p. 646 et seq. 5 See the Explanatory note of the Commission ‘Competitive Dialogue – Classic Directive, CC/ 2005/04_rev 1 of 5.10.2005, point 2.1. 6 M. Burnett, The New Rules for Competitive Dialogue and the Competitive Procedure with Negotiation in Directive 2014/24 – What Might They Mean for PPP?, 2015 p. 65. 7 See for references P. Telles/L.R.A. Butler, ‘Public Procurement Award Procedures in Directive 2014/24/ EU’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 144, note 54. 8 In Case C‑299/08 Commission v France [2009] ECR I‑11587, paragraph 16 of the opinion; he referred to P. Trepte, Public Procurement in the EU. A Practioner’s Guide, 2nd ed., Oxford, OUP, p. 427, fn. 187. 9 F. Lichère, ‘Quid de la place nouvelle des procedures négociées et du dialogue competitive?’, in: Bulletin Juridique des Contrats Publics 2014, p. 166. 10 E.g. CAA Lyon, 2 janvier 2014, Conseil régional de l’ordre des architects d’Auvergne, n° 12LY0827; the court considered as not particularly complex a contract to build and operate a swimming pool which included innovative heating solutions. 11 Lichère, ‘New Award Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014, p. 94. 12 See Recital 16 of Directive 2004/18/EC. 13 Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 206.

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ery procedure envisaged in the new Public Sector Directive, Member States have to provide for competitive dialogue in their domestic legal order in a full tool box where contracting authorities may pick the tool they see as more appropriate to their circumstances (see Public Sector Directive Art. 26 para. 1).

30.1. The basics of competitive dialogue The competitive dialogue is articulated into a number of stages. The selection of the participants is clearly separated from the negotiations and the evaluation of the final tenders. Moreover, under Article 30(4) the dialogue may take place in different stages in order to reduce the number of tenders to be assessed. As it was remarked, “In its procedural rules competitive dialogue lies […] somewhere between the relatively unstructured negotiated procedure and the rigid open and restricted procedures”.14 In answer to the publication of a contract notice, each economic operator has to submit the information required to allow the contracting authority to perform the qualitative selection according to Articles 56 to 66. The minimum time limit for receipt of requests to participate is 30 days from the date on which the contract notice was sent to the Publication Office of the EU (see Public Sector Directive Art. 51 para. 2). This is a minimum time limit. In line with the proportionality principle Article 47 (1) provides that when fixing the time limits “contracting authorities shall take account of the complexity of the contract”. Given that the competitive dialogue seems particularly suited to the award of complex contracts, 30 days will often not be enough.15 The contracting authority may limit the number of economic operators invited to the dialogue on the basis of the information provided by the economic operators having asked to take part into the procedure. More specifically, under Article 65(2) the contracting authority must indicate in the call for competition the objective and non-discriminatory criteria or rules they intend to apply to the selection process. Under Article 65(3) in the competitive dialogue the minimum number of candidates shall be three, provided that that number is sufficient to ensure genuine competition. The contracting authority may decide to continue the procedure even if the number of suitable candidates falls below the limit.16 Given that the competitive dialogue had to be used for the award of ‘particularly complex contracts’ Article 29(1) of Directive 2004/18/EC provided that only the most economically advantageous tender award criterion could be used. The alternative criterion of the lowest price was thus ruled out. In a different context in which, however, it is submitted that the competitive dialogue is still the preferred option for fairly complex contracts, Article 30(1) of the new Public Sector Directive reaffirms the old rule adapted to the changed terminology of contract award criteria. The contract has to be awarded to the tender presenting the best price-quality ratio, thus excluding the lowest price again. 17

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30.2. Setting the rules of the competition Equal treatment and fair competition in the award of public contracts require the pri- 9 or publication of as precise as possible information as to what the contracting authority wants to buy. Also the award criteria must be set before-hand. It has to be noted that S. Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014, p. 862. Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 223. 16 Which was already possible according to the case law: see Case C-138/08 Hochtief AG [2009] ECR I-9889, paragraphs 37 ff. 17 Burnett, ‘The New Rules for Competitive Dialogue and the Competitive Procedure with Negotiation in Directive 2014/24 – What Might They Mean for PPP?’, in: EPPPL 2/2015 p. 65. 14

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award criteria too convey information as to the contracting authority’s preferences, which are expressed in their weighting or at least ranking.18 For instance through award criteria it is possible to understand the extent to which price or running costs are relevant, or the degree to which the contracting authority is pursuing sustainability.19 The rules on the competitive dialogue have to coordinate these needs with the additional flexibility needed for the award of contracts which are normally fairly complex.20 10 Article 29(2) of Directive 2004/18/EC provided that: “2. Contracting authorities shall publish a contract notice setting out their needs and requirements, which they shall define in that notice and/or in a descriptive document”.

Article 30(2) of the new Public Sector Directive has somewhat changed the order of the words, but the notion is the same. What the contracting authority has to set out and define at the start of the procedure are the “needs and requirements”. The level of definition is somewhat less specific when compared with what is provided for under Article 29(1) with reference to the competitive procedure with negotiations. 21 Article 29(1) requires contracting authorities to advertise “a description of their needs and the characteristics”. Needs are needs in both procedures. The distinction lies between ‘requirements’ and ‘characteristics’. The notion of requirements seems closer to ‘needs’, while ‘characteristics’ clearly refers to the subject-matter of the contract, to the goods or services sought by the contracting authority. The fundamental difference between the competitive procedure with negotiations and the competitive dialogue is, however, that in the latter there is no need to define the ‘minimum requirements’. The scope for dialogue is therefore much wider than the scope for negotiation. Article 30 does not reiterate the provision in Article 29(1) for the competitive procedure with negotiations according to which:22 “The information provided shall be sufficiently precise to enable economic operators to identify the nature and scope of the procurement and decide whether to request to participate in the procedure”.

This, however, corresponds to a very basic requirement flowing from the principles of non-discrimination and transparency as spelt out in the case law and therefore should apply to competitive dialogue as well.23 The omission seems therefore rather due to poor drafting, Article 29 having been drafting anew while Article 30 has been simply tampered with.24 11 Unlike Article 29(2) of Directive 2004/18/EC, which stopped after providing that “needs and requirement” have to be set out and defined, Article 30(2) of the new Public Sector Directive also provides that the award criteria are to be set out and defined in the contract notice and/or in a descriptive document. A somewhat similar rule was already implied in Article 29(4) and (7) of Directive 2004/18/EC and is still found in the corresponding provisions of Article 30(4) and (7) of the new Public Sector Directive. Having 18 On the contrary, technical specifications simply set minimal requirements to be met by all tenders R. Caranta, ‘Award criteria under EU law (old and new)’, in: M. Comba/S. Treumer (eds), Award of Contracts in EU Procurements, 2013, p. 23. 19 See D.C. Dragos/B. Neaumtu, ‘Sustainable public procurement in the EU: experiences and prospects’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 318 et seq. 20 Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 221. 21 Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 221. This is the main difference between the two procedures according to A. Semple, A Practical Guide to Public Procurement, 2015, p. 75 et seq. 22 See also Recital 45. 23 Case C‑299/08, Commission v France [2009] ECR I‑11587, paragraphs 41 ff. 24 See also Article 42(3)(a).

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spelt it out right at the beginning could be read as an indication that award criteria can neither be changed nor specified during the procedure. However, Article 30(4) and (7) refer to quite different situations. Under the former, ‘solutions’ are selected or excluded, under the latter ‘tenders’ are evaluated. Obviously evaluating tenders requires a much finer set of criteria.25 Maybe less obviously, but still very relevant, too detailed and articulated criteria could be ill suited to select ‘solutions’, and lead to possible litigation. Therefore, the approach to be preferred seems to be that the award criteria set out 12 and defined at the start of the procedure may be better articulated and specified by the contracting authority during the procedure.26 Thus, the change in the wording of the provision will not rule out, in general, the applicability of what has become Article 67(4) last phrase. With reference to the previous Public Sector Directive the Commission remarked,27 “Given that recourse to competitive dialogue presupposes that the contract is ‘particularly complex’, it seems almost tautological that the conditions for not weighting the award criteria should therefore be met when the contract is awarded by this award procedure – contracting authorities may instead limit themselves to mentioning the criteria in decreasing order of importance”.

It is true that the recourse to the competitive dialogue is no longer restricted to particularly complex contracts, but neither may it be used to purchase off-the-shelf goods or services. However, the degree of complexity will be the yardstick to determine the level of precision required in the contract notice. This approach is also consistent with the case law. In Lianakis the Court of Justice held that:28 “a contracting authority cannot apply weighting rules or sub-criteria in respect of the award criteria which it has not previously brought to the tenderers’ attention”.

On this basis it is assumed that the contracting authority will have to specify the award criteria at the latest when asking for tenders under Article 30(6). The conclusion might also be further supported by the divergent texts of Article 29(3), which expressly forbids negotiating award criteria, and Article 30, which does not.29 Finally, Article 30(2) provides that the contracting authority shall set out an indica- 13 tive timeframe for the procedure. Considering that taking part in a competitive dialogue entails high costs for the candidates in terms of manpower and other resources, the provision intends to give them some indication of the level of effort required.30 To cut implementation times in the interest of both the contracting authorities and the candidates the European Parliament would rather have acted at the organisational level, requiring contracting authorities to appoint a project leader. This amendment was moved to the recitals during the final test of the new directive.31

25 See, referring to the old directive, the Explanatory note of the Commission ‘Competitive Dialogue – Classic Directive, CC/2005/04_rev 1 of 5.10.2005, point 3.2.1. 26 Please refer to Caranta, Award criteria under EU law, p. 32 et seq.; see also Lichère, ‘New Award Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014, pp. 92 et seq.; with reference to Article 29 of Directive 2004/18/EC contrast the opinions of Arrowsmith/Treumer, Competitive Dialogue in EU Procurement, 2012, p. 88 et seq. 27 See, referring to the old directive, the Explanatory note of the Commission ‘Competitive Dialogue – Classic Directive, CC/2005/04_rev 1 of 5.10.2005, point 3.1. 28 Case C-532/96, Lianakis [2008] ECR I-251, paragraph 38. 29 The difference is pointed out by J. Davey, ‘Procedures involving negotiations in the new Public Procurement Directive: key reforms to the grounds for use and the procedural rules’, in: PPLR 2014, p. 108. 30 The provision of a deadline would have been preferable according to Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 152 et seq. 31 Recital 42.

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30.3. The dialogue and equal treatment The dialogue phase with those candidates which have been pre-qualified under Article 56 to 66 aims at identifying and defining the means best suited to satisfy the needs of the contracting authority. 32 Dialogue implies less constrains than negotiations. There are neither ‘minimum requirements’ nor an initial tender as it is the case with the competitive procedure with negotiations under Article 29.33 So much so that contracting authorities may discuss all aspects of the procurement. Unlike in Article 29(3) there is no indication that the award criteria cannot be discussed. While this does not seem advisable, since each participant could try and hijack such a discussion in order to favour his/her solution, it is an indication that the contracting authority may well want to discuss award criteria in the dialogue phase to understand the possibly different price/quality mix of the different solutions under discussion.34 15 The extraordinary flexibility of the competitive dialogue makes the general principles even more relevant to guide the hand of contracting authorities.35 Equal treatment and non-discrimination are fundamental principles of EU public procurement law – and to a large extent of EU law tout court – and as such they are treated in Article 18 of the new Public Sector Directive alongside the principle of transparency and proportionality.36 All of the phases of the procurement procedure and all procurement decisions must conform to these principles.37 Because of the multiple occasions of dialogue between the contracting authority and the candidates that the competitive dialogue provides, Article 30(3) specifically stresses that contracting authorities shall ensure the equal treatment of all candidates during the dialogue. 16 In this context, Article 30(3) forbids contracting authorities to provide information in a discriminatory manner which may give some tenderers an advantage over others. A specific issue concerns confidential information which is in general regulated in Article 21 regarding confidentiality of the information provided by tenderers and candidates. Referring to that provision, Article 30(3) specifically forbids contracting authorities to reveal to the other participants confidential information communicated by a participant in the negotiations without the agreement of the latter. Moreover, such agreement may not take the form of a general waiver but shall rather be given “with reference to the intended communication of specific information”. The provision is expected to reinforce the protection against ‘cherry-picking’, that is the use by on participant of the ideas and solutions of another one.38 This has been rightly criticised since it is inconsistent with 14

Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 117 et seq. This is rightly stressed by Lichère, ‘Quid de la place nouvelle des procedures négociées et du dialogue competitive?’, in: Bulletin Juridique des Contrats Publics 2014, p. 168. 34 See also, with reference to the vaguer regime of Directive 2004/18/EC, the analysis by Lichère, ‘New Award Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014, p. 92. 35 See also Arrowsmith, The Law of Public and Utilities Procurement, 3 rd ed. 2014, p. 883 et seq. 36 These principles are analysed in depth by Semple, A Practical Guide to Public Procurement, 2015, p. 35 et seq.; C. Bovis, ‘The principles of public procurement regulation’, in: C. Bovis (ed.), Research Handbook of EU Public Procurement Law, 2016, p. 35 et seq. 37 J. Gonzáles Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), 2014, p. 62 et seq.; see more generally R. Caranta, ‘Transparence et concurrence’, in: R. Noguellou/U. Stelkens (eds), Droit comparé des contrats publics. Comparative Law on Public Contracts, Bruylant, 2010, p. 159 et seq.; Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014, p. 613 et seq. 38 Semple, A Practical Guide to Public Procurement, 2015 p. 79 et seq. Different approaches the issue of confidentially are well analysed by P. Telles, ‘Competitive Dialogue: Should Rules be Fine-tuned to Facilitate Innovation?’, in: G.S. Ølykke/C. Risvig Hansen/C.D. Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, 2012, spec. p. 227 et seq. 32

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the practice of contracting authorities using competitive dialogue to ‘crowd source’ the tender specifications and can seriously curtail competition at the award stage.39 Finally, the requirements of transparency and traceability spelt out in Recital 45 ac- 17 cording to which “all stages should be duly documented. Furthermore, all tenders throughout the procedure should be submitted in writing” are obviously applicable to the competitive dialogue as well.

30.4. Different stages of the competitive dialogue Article 30(4) provides that the dialogue may take place in different stages to reduce 18 the number of solutions to be discussed during the dialogue stage if the contracting authority has so indicated in the contract documents. Recital 41 of Directive 2004/18/EC justified the possible reduction referring to “the flexibility which may be required and the high level of costs associated with such methods of procurement”. Even if the indication has been omitted in the new directive it makes plain common sense. Foreseeing this reduction seems particularly necessary in competitive dialogue procedures because the somewhat generic initial indication of ‘needs and requirements’ puts the contracting authority in the position to weed out solutions as soon as they do not look promising enough anymore and to focus on the stronger ones. At its best, the competitive dialogue is a very Darwinian mechanism. To reduce the number of solutions to be discussed, the award criteria set out and de- 19 fined in the initial phase of the procedure are applied. Since in the dialogue phase no tender is submitted it would seem that the award criteria cannot be particularly developed at this stage (which implies that they can be refined later in the procedure; see Public Sector Directive Art. 30 para. 1). Article 66 of the Public Sector Directive makes it clear that the reduction of the num- 20 ber of participants cannot be abused to eliminate competition: “In the final stage, the number arrived at shall make for genuine competition in so far as there are enough tenders, solutions or qualified candidates”.

Moreover, as it has been rightly remarked, discarding solutions “generates effects that are not dissimilar from an exclusion of the candidate and, consequently, that decision should be subjected to the same procedural guarantees”.40

30.5. The conclusion of the dialogue phase Whether it is structured in stages or not, the dialogue phase is concluded when the 21 contracting authority is able to identify among the solutions proposed by the participants one or more which are capable of meeting its needs.41

30.6. The tender phase The competitive dialogue is made of dialogue and competition. Once the dialogue 22 phase is over, the competition is supposed to begin in earnest (but that or those participant(s) having proposed the solution(s) retained by the contracting authority will enjoy 39 Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 148. 40 A. Sanchez Graells, ‘Exclusion, Qualitative Selection and Short-listing in the New Public Sector Procurement Directive 2014/24’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 126; see also Arrowsmith, The Law of Public and Utilities Procurement, 3 rd ed. 2014, p. 912 et seq. 41 Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 159 et seq.

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a big competitive advantage).42 The remaining participants are asked to submit their final tenders on the basis of the solution or solutions presented and specified during the dialogue. Under Article 30(6), those tenders shall contain all the elements required and necessary for the performance of the project.43 23 However, the adaptability which is an inherent characteristic of competitive dialogue also resurfaces in the tender phase. Trying to strike an uneasy compromise between adaptability and fair competition, Article 30(6) (as changed at the insistence of the European Parliament) on the one hand provides that tenders may be clarified, specified and optimised at the request of the contracting authority.44 On the other hand, it stresses that: “such clarification, specification, optimisation or additional information may not involve changes to the essential aspects of the tender or of the public procurement, including the needs and requirements set out in the contract notice or in the descriptive document, where variations to those aspects, needs and requirements are likely to distort competition or have a discriminatory effect”.

While pointing to a limited margin of manoeuvre for contracting authorities, this provision requires as fine an exercise in tightrope walking as any.45 Everything turns around the adjective ‘essential’. This word denotes properties that an object must have to fall under a given definition.46 ‘Essential’ is therefore logically distinct from ‘accidental’. Which is fine in logic. In public procurement it is not so easy, even if some lawyers like to play with these words.47 The relevant test seems to be whether an hypothetic participant would have submitted a different tender if he/she had know that such a change to the aspects, needs or requirements would have been considered acceptable by the contracting authority.48 That is obviously a very hypothetical test. Even taking into account the particular flexibility inherent in the competitive dialogue, allowing (some) changes to the ‘needs and requirements’ will by definition distort the competition. Under Article 30(2) ‘needs and requirements’ are the flimsy pieces of information to which the contracting authority is expected to give publicity at the start of the procedure. Changing them cannot but distort the competition. 24 Little comfort as to when and to what extent ‘clarifications’ are acceptable and allowed can be found in the case law. Addressing in SAG ELV Slovensko the issue of ‘clarifications’ in its more general terms rather than with specific reference to competitive di42 See critically Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 149. 43 Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 164 et seq. 44 See Arrowsmith, The Law of Public and Utilities Procurement, 3 rd ed. 2014, p. 920 et seq. and 938 ff.; Burnett, ‘The New Rules for Competitive Dialogue and the Competitive Procedure with Negotiation in Directive 2014/24 – What Might They Mean for PPP?’, in: EPPPL 2/2015, p. 66. 45 Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 164 et seq. See also, referring to the old directive, the Explanatory note of the Commission ‘Competitive Dialogue – Classic Directive, CC/2005/04_rev 1 of 5.10.2005, point 3.3. 46 Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 179 et seq. 47 ‘Essential’ plays a prominent role in Article 22(2); a good (and possibly better in English) substitute is ‘material’ and its derivates, as in Article 72(4); as for the interchangeability of the two, Recital 107; the two were already coupled in C-454/06, Pressetext [2008] ECR I-4401, paragraph 34: “amendments to the provisions of a public contract during the currency of the contract constitute a new award of a contract […] when they are materially different in character from the original contract and, therefore, such as to demonstrate the intention of the parties to renegotiate the essential terms of that contract”. 48 See by analogy C-454/06, Pressetext [2008] ECR I-4401, paragraph 35: “An amendment to a public contract during its currency may be regarded as being material when it introduces conditions which, had they been part of the initial award procedure, would have allowed for the admission of tenderers other than those initially admitted or would have allowed for the acceptance of a tender other than the one initially accepted”.

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alogue, the Court of Justice held that the general principles of non discrimination, transparency and so on do not rule out:49 “the correction or amplification of details of a tender where appropriate, on an exceptional basis, particularly when it is clear that they require mere clarification, or to correct obvious material errors, provided that such amendment does not in reality lead to the submission of a new tender”.

Article 30 (6) goes well beyond clarifications, and the limit should be, quoting again SAG ELV Slovensko, that the contracting authority must treat:50 “the various tenderers equally and fairly, in such a way that a request for clarification does not appear unduly to have favoured or disadvantaged the tenderer or tenderers to which the request was addressed, once the procedure for selection of tenders has been completed and in the light of its outcome”.

30.7. Award and clarification of tenders Having declared the dialogue closed and asked for the tenders on the solution or so- 25 lutions chosen, the contracting authorities shall assess the tenders received on the basis of the award criteria laid down in the contract notice or in the descriptive document, possibly specified on the basis of the know-how acquired during the dialogue phase (see Public Sector Directive Art. 30 para. (2). The extraordinary flexibility of the competitive dialogue surfaces again in a possible 26 round of negotiations between the tenderer identified as having submitted the tender presenting the best price-quality ratio and the contracting authority at the request of the latter.51 Using the word ‘negotiations’ the new Public Sector Directive may be seen as clarifying the scope of the powers of contracting authority when compared with Article 29(7) of Directive 2004/18/EEC which under given conditions allowed ‘clarifications’ to the preferred tenders. 52 These negotiations may be carried out to confirm financial commitments or other terms contained in the tender and lead to the finalisation of the terms of the contract. This obviously entails major risks of discrimination, in that it could allow a tenderer which won the competition by offering a cutthroat deal to beef up his/her profit margins.53 So much so that nothing similar is for instance foreseen with reference to the competitive procedure with negotiations. Here again scholastic logic comes to the rescue with the adjective ‘essential’ being 27 called to discriminate between ‘good’ and ‘bad’ or ‘allowed’ and ‘not allowed’ negotiations. Article 30(7) is indeed drafted very much along the lines of Article 30(6) with no more than stylistic differences, but adding to an already quite long directive.

49 Case C-599/10, SAG ELV Slovensko ECLI:EU:C:2012:191, paragraph 40; see also Case C‑336/12, Manova ECLI:EU:C:2013:647, paragraph 32. 50 Paragraph 41; this approach was affirmed in Case C‑336/12, Manova ECLI:EU:C:2013:647, paragraph 37 (the case concerned clarifications to the qualification documents rather than to the tender). 51 See also Burnett/Oder, Competitive Dialogue and Negotiated Procedures. A Practical Guide, p. 184 et seq. 52 See the discussion in Arrowsmith, The Law of Public and Utilities Procurement, 3 rd ed. 2014, p. 923; Burnett, ‘The New Rules for Competitive Dialogue and the Competitive Procedure with Negotiation in Directive 2014/24 – What Might They Mean for PPP?’, in: EPPPL 2/2015 p. 66; Lichère, ‘New Award Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014, p. 93 et seq.; Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 150 et seq. 53 See also Krüger, ‘Ban-on-Negotiations in Tender Procedures: Undermining the Best Value for Money’, in: K.V. Thai (ed), International Handbook of Public Procurement, 2009, p. 647 et seq.

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30.8. Prizes 28

Taking part in a competitive dialogue entails high costs for the candidates in terms of manpower and other resources. At the same time, just by taking part in the procedure they provide value in terms of experience and ideas. To prevent potential participants from being discouraged by the high up-front costs Article 30(8) empowers contracting authorities to offer prizes or payments to the participants in the dialogue.54 This may be linked to participation or to having provided the solution(s) being retained by the contracting authority. Unlike with what is provided under Article 31(2) for the innovation partnership, the possibility to offer prizes or payments rests entirely with the discretion of the contracting authority.55

Article 31 Innovation partnership 1. In innovation partnerships, any economic operator may submit a request to participate in response to a contract notice by providing the information for qualitative selection that is requested by the contracting authority. In the procurement documents, the contracting authority shall identify the need for an innovative product, service or works that cannot be met by purchasing products, services or works already available on the market. It shall indicate which elements of this description define the minimum requirements to be met by all tenders. The information provided shall be sufficiently precise to enable economic operators to identify the nature and scope of the required solution and decide whether to request to participate in the procedure. The contracting authority may decide to set up the innovation partnership with one partner or with several partners conducting separate research and development activities. The minimum time limit for receipt of requests to participate shall be 30 days from the date on which the contract notice is sent. Only those economic operators invited by the contracting authority following the assessment of the information provided may participate in the procedure. Contracting authorities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 65. The contracts shall be awarded on the sole basis of the award criterion of the best price-quality ratio in accordance with Article 67. 2. The innovation partnership shall aim at the development of an innovative product, service or works and the subsequent purchase of the resulting supplies, services or works, provided that they correspond to the performance levels and maximum costs agreed between the contracting authorities and the participants. The innovation partnership shall be structured in successive phases following the sequence of steps in the research and innovation process, which may include the manufacturing of the products, the provision of the services or the completion of the works. The innovation partnership shall set intermediate targets to be at-

54 See, also with reference to the French experience, Lichère, ‘New Award Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014, p. 93; this possibility has however been seldom used in other Member States: see Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 151. 55 See critically Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 151.

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3.

4.

5.

6.

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tained by the partners and provide for payment of the remuneration in appropriate instalments. Based on those targets, the contracting authority may decide after each phase to terminate the innovation partnership or, in the case of an innovation partnership with several partners, to reduce the number of partners by terminating individual contracts, provided that the contracting authority has indicated in the procurement documents those possibilities and the conditions for their use. Unless otherwise provided for in this Article, contracting authorities shall negotiate with tenderers the initial and all subsequent tenders submitted by them, except for the final tender, to improve the content thereof. The minimum requirements and the award criteria shall not be subject to negotiations. During the negotiations, contracting authorities shall ensure the equal treatment of all tenderers. To that end, they shall not provide information in a discriminatory manner which may give some tenderers an advantage over others. They shall inform all tenderers whose tenders have not been eliminated, pursuant to paragraph 5, in writing of any changes to the technical specifications or other procurement documents other than those setting out the minimum requirements. Following those changes, contracting authorities shall provide sufficient time for tenderers to modify and re-submit amended tenders, as appropriate. In accordance with Article 21, contracting authorities shall not reveal to the other participants confidential information communicated by a candidate or tenderer participating in the negotiations without its agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. Negotiations during innovation partnership procedures may take place in successive stages in order to reduce the number of tenders to be negotiated by applying the award criteria specified in the contract notice, in the invitation to confirm interest or in the procurement documents. In the contract notice, the invitation to confirm interest or in the procurement documents, the contracting authority shall indicate whether it will use that option. In selecting candidates, contracting authorities shall in particular apply criteria concerning the candidates’ capacity in the field of research and development and of developing and implementing innovative solutions. Only those economic operators invited by the contracting authority following its assessment of the requested information may submit research and innovation projects aimed at meeting the needs identified by the contracting authority that cannot be met by existing solutions. In the procurement documents, the contracting authority shall define the arrangements applicable to intellectual property rights. In the case of an innovation partnership with several partners, the contracting authority shall not, in accordance with Article 21, reveal to the other partners solutions proposed or other confidential information communicated by a partner in the framework of the partnership without that partner’s agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. The contracting authority shall ensure that the structure of the partnership and, in particular, the duration and value of the different phases reflect the degree of innovation of the proposed solution and the sequence of the research and innovation activities required for the development of an innovative solution not yet

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available on the market. The estimated value of supplies, services or works shall not be disproportionate in relation to the investment required for their development. Literature: Andrecka, ‘Innovative public-partnerships’, in: C. Bovis (ed.), Research Handbook of EU Public Procurement Law, 2016, p. 243 et seq.; Apostol, ‘Pre-commercial procurement in support of innovation: regulatory effectiveness?’, in: PPLR 2012, p. 213; Butler, ‘Innovation in Public Procurement: Towards the “Innovation Union”’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 337 et seqq.; Cerqueira Gomez, ‘The innovative innovation partnership under the 2014 Public Procurement Directive’, in: PPLR 2014, p. 211; Pantilimon Voda, ‘Innovative and sustainable procurement: framework, constraints and policies’, in: C. Bovis (ed), Research Handbook of EU Public Procurement Law, 2016, p. 215 ff.; Semple, A Practical Guide to Public Procurement, 2015; Steinicke, ‘The Public Procurement Rules and Innovation’, in: Ølykke/Risvig/Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, 2012, p. 259; Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 160 et seqq. 31.1. 31.2. 31.3. 31.4. 31.5. 31.6. 31.7.

The basics of the innovation partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The stages of the innovation partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equal treatment during the negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Different stages of negotiations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selecting the candidates and other miscellaneous provisions . . . . . . . . . . . . . . Preventing possible abuses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 12 16 18 22 25 29

The innovation partnership is one of the newest procedures introduced by Directive 2014/24/EU. According to the definition awkwardly found in Article 31(2) (rather than right at the beginning of the provision as one could have expected) it aims at the development of an innovative product, service or works as well as at its subsequent purchase. The idea is to establish a long-term partnership between a contracting authority and one or more economic operators in respect of – according to Recital 49 – very large projects or smaller innovative projects. The partnership should be structured in such a way as to provide the necessary ‘market-pull’, “incentivising the development of an innovative solution without foreclosing the market”.1 2 Innovation is defined in Article 2(1)(22) of the new Public Sector Directive: 1

“‘innovation’ means the implementation of a new or significantly improved product, service or process, including but not limited to production, building or construction processes, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations inter alia with the purpose of helping to solve societal challenges or to support the Europe 2020 strategy for smart, sustainable and inclusive growth”.

As it has rightly been pointed to, Article 31 seems to assume a somewhat different definition of innovation devoid of the purpose stated in Article 2 (1)(22) such as those linked to the Europe 2020 strategy. Even more mundane innovation such as for instance new ways or products to prevent ice from forming on roads in winter will be eligible under Article 312 (see also Public Sector Directive Art. 2 para. 1). 3 Innovation featured highly among the reasons militating for a reform of EU public procurement law.3 The green paper on “the modernisation of EU public procurement Recital 49. P. Cerqueira Gomez, ‘The innovative innovation partnership under the 2014 Public Procurement Directive’, in: PPLR 2014, p. 213 et seq.; see also M. Andrecka, ‘Innovative public-partnerships’, in: C. Bovis (ed.), Research Handbook of EU Public Procurement Law, 2016, p. 248 f.; L.R.A. Butler, ‘Innovation in Public Procurement: Towards the “Innovation Union”’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 347. 1

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policy Towards a more efficient European Procurement Market”4 indeed began with a reference to the Europe 2020 strategy for smart, sustainable and inclusive growth. 5 Public procurement is said to play a key role in the Europe 2020 strategy as one of the market-based instruments that should be used to achieve these objectives, for instance by improving framework conditions for business to innovate, making full use of demand side policy.6 An entire section of the Green paper focuses on innovation, but the word pops up quite frequently in its pages, including questions aimed at gauging whether the competitive dialogue could indeed be used to foster innovation7 or whether a new procedure should be devised.8 The Europe 2020 strategy is referred to right from Recital 2 of the new Public Sector 4 Directive.9 The entire theme is developed in Recital 47: “Public authorities should make the best strategic use of public procurement to spur innovation. Buying innovative products, works and services plays a key role in improving the efficiency and quality of public services while addressing major societal challenges”.

On this basis, Recital 49 introduces a new procedure to be used when a contracting authority decides to respond to: “a need for the development of an innovative product or service or innovative works and the subsequent purchase of the resulting supplies, services or works cannot be met by solutions already available on the market”.

Innovation has thus become part of a substantial drift towards strategic procurement which is a definitive characteristic of Directive 2014/24/EU.10 The real innovative character of the new procedure has been disputed11 but in any 5 case it has to be stressed that the innovation partnership is not the only tool contracting authorities have at their disposal should they decide to contribute to fostering innovation. Beside the competitive procedure with negotiation and competitive dialogue, Article 14 of the Public Sector Directive lays down a special regime for research and development services. Moreover, pre-commercial procurement is still an available option for the 3 See M. Steinicke, ‘The Public Procurement Rules and Innovation’, in: G.S. Ølykke/C. Risvig Hansen/ C.D. Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, 2012, p. 259 et seq. 4 COM(2011) 15 final. 5 COM(2010) 2020; see Cerqueira Gomez, ‘The innovative innovation partnership under the 2014 Public Procurement Directive’, in: PPLR 2014, p. 211. 6 O.S. Pantilimon Voda, ‘Innovative and sustainable procurement: framework, constraints and policies’, in: C. Bovis (ed), Research Handbook of EU Public Procurement Law, 2016, p. 215 et seq. 7 On this see the analysis by P. Telles, ‘Competitive Dialogue: Should Rules be Fine-tuned to Facilitate Innovation?’, in: G.S. Ølykke/C. Risvig Hansen/C.D. Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, 2012, spec. p. 226 et seq. 8 Questions 92 and 93. 9 The development of EU innovation policies is traced by Butler, ‘Innovation in Public Procurement: Towards the “Innovation Union”’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 338 et seq. 10 See C. Bovis, ‘Editorial’, in: EPPPL 2/2015 59 et seq.; Butler, ‘Innovation in Public Procurement: Towards the “Innovation Union”’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 345 et seq.; more generally on strategic procurement the works collected by B. Sjåfjell/A. Wiesbrock (eds), Sustainable Public Procurement under EU Law. New Perspectives on the State as Stakeholder, 2015; A. Semple, A Practical Guide to Public Procurement, 2015, p. 171 et seq.; D.C. Dragos/B. Neaumtu, ‘Sustainable public procurement in the EU: experiences and prospects’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 302 et seq.; Caranta, ‘General Report’, in: U. Neergaard/C. Jackson/G.S. Ølykke (eds), Public Procurement Law: Limitations, Opportunities and Paradoxes. The XXVI FIDE Congress in Copenhagen, 2014 Congress Publications Vol. 3, 2014, p. 150 et seq. 11 E.g. Cerqueira Gomez, ‘The innovative innovation partnership under the 2014 Public Procurement Directive’, in: PPLR 2014, p. 211.

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procurement of those research and development services which do not fall within the scope of the Public Sector Directive.12 The added value of the innovation partnership when compared to pre-commercial procurement is that under just one procedure the contracting authority may both stimulate research and development and purchase the resulting goods or services, thus more significantly stimulating innovation.13

31.1. The basics of the innovation partnership The innovation partnership is articulated into a number of phases and stages which greatly exceeds those of other award procedures. The reason is that the procedure mixes award and contract implementation components; moreover under Article 31(2) it shall be structured in successive phases following the sequence of the steps in the research and innovation process.14 In a nutshell, the selection of the participants is clearly separated from the negotiations and the evaluation of the final tenders. Moreover, under Article 31(5) the negotiations may take place in different stages in order to reduce the number of tenders to be assessed. Finally, the rules go well into the implementation phase of the procurement cycle. This in turn involves the development of innovative products, services or works and their subsequent purchase.15 As has been rightly remarked, “this is not a typical procedure but a partnership”.16 7 The peculiar structural complexity of the innovation partnership has spilled out much more than needed in the convoluted structure of Article 31. The entire provision moves back and forth all the time from the definition of the procedure – in Article 31(2) – to the award procedure – in Article 31(1) and 31(3) to (6) – to the implementation of the contract – in Article 31(2),(6) last part, and (7). The provision having been heavily redrafted on more than one occasion during the legislative process clearly did not contribute to its elegance.17 8 The procedure is started with the publication of a contract notice. The contracting authority shall spell out “the need for an innovative product, service or works that cannot be met by purchasing products, services or works already available on the market”. As it is the case under Article 29(1) with the competitive procedure with negotiations but not with the competitive dialogue, the contracting authority shall “indicate which elements of this description define the minimum requirements to be met by all tenders”. 6

12 See Recital 47; see the discussion as to the effectiveness of this instrument by A.R. Apostol, ‘Pre-commercial procurement in support of innovation: regulatory effectiveness’, in: PPLR 2012, p. 213 et seq.; Andrecka, ‘Innovative public-partnerships’, in: C. Bovis (ed.), Research Handbook of EU Public Procurement Law, p. 250 et seq.; Pantilimon Voda, ‘Innovative and sustainable procurement: framework, constraints and policies’, in: C. Bovis (ed), Research Handbook of EU Public Procurement Law, 2016, p. 226 et seq., and F. Clermont/F. Fionda, ‘A Modern Approach for Procuring Research and Innovation: The Pre-Commercial Public Procurement’, in EPPPL 2/2016, p. 88 et seq. 13 See Steinicke, ‘The Public Procurement Rules and Innovation’, in: Ølykke/Risvig/Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, p. 269; Butler, ‘Innovation in Public Procurement: Towards the “Innovation Union”’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 362; S. Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014, p. 1047. 14 See also Andrecka, ‘Innovative public-partnerships’, in: C. Bovis (ed.), Research Handbook of EU Public Procurement Law, p. 257 et seq. 15 Semple, A Practical Guide to Public Procurement, 2015 p. 81 et seq.; P. Telles/L.R.A. Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, spec. p. 161 and 169 f. 16 Cerqueira Gomez, ‘The innovative innovation partnership under the 2014 Public Procurement Directive’, in: PPLR 2014, p. 212. 17 Pantilimon Voda, ‘Innovative and sustainable procurement: framework, constraints and policies’, in: C. Bovis (ed), Research Handbook of EU Public Procurement Law, 2016, p. 234.

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The description must be sufficiently precise to allow the economic operators potentially interested in the procedure to decide whether or not to take part in it. This is a bare minimum safeguard for non-discrimination and transparency. As such it was, for instance, considered by the Court of Justice in an infringement procedure against France because very lax provisions on the marchés de définition.18 As it is too often the case with the new Public Sector Directive, the provision reiterates here a rule that is applicable to all procedures and as such is not just cloned from Article 29(1), but is also spelt out in Article 42(3)(a). What really sets the innovation partnership apart from other award procedures is 9 that the innovative partnership may be set up with several partners conducting separate research and development activities. This is supposed to lessen competition concerns. 19 Indeed, as Recital 49 points out: “In certain cases, setting up innovation partnerships with several partners could contribute to avoiding such effects”.

A difference with both the competitive procedure with negotiations and the competitive dialogue is that the contracting authority is not just negotiating or dialoguing with multiple candidates but it is actually signing contracts with (some of) them. Neither is this a case of framework contract – even if a framework contract could well be signed to lay down the general clauses applicable to the individual contracts – because there are no calls off to award contracts when the need arises, but a number of individual contracts which, in principle, are signed simultaneously (and possibly separately terminated under Article 31(2)). What is left unclear is whether all the contracts are to focus on the whole innovative product, service or works or, to the contrary, they may focus on some specific aspect of the research and development activity. One could, for instance, imagine one contract for developing a product and another one to test it. Since there is no legislative indication, Recital 49 just addressing one of the possible reasons for having several contracts, it seems reasonable to assume that both are possible. If the latter is the case, the possibility provided under Article 31(2) to terminate some of the individual contracts would normally not be open. Answering to the publication of the contract notice advertising the innovation part- 10 nership, every economic operator interested in taking part in the procedure has to submit the information required to allow the contracting authority to perform the qualitative selection (see Public Sector Directive Art. 56 to 66). The minimum time limit for receipt of requests to participate is 30 days from the date on which the contract notice was sent to the Publication Office of the EU (see Public Sector Directive Art. 51para. 2). This is a minimum time limit. In line with the proportionality principle Article 47(1) provides that when fixing the time limits “contracting authorities shall take account of the complexity of the contract”. Given that we are talking here about innovative products and services which could be possibly better developed by consortia of economic operators, 30 days will often not be enough. The contracts should be awarded on the sole basis of the best price- quality ratio as 11 regulated under Article 67. This criterion is rightly considered the most suitable for comparing tenders for innovative solutions.20 While a developed life-cycle costing methodology fully in line with Art. 68 of the Public Sector Directive would probably be

Case C‑299/08 Commission v France [2009] ECR I‑11587, paragraphs 41 et seqq. But see Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/ Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 163. 20 See Recital 49. 18

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seldom available, an award criterion including a full life-cycle analysis is obviously the preferred approach in awarding an innovation partnership.21

31.2. The stages of the innovation partnership The innovation partnership is not simply an award procedure. The award phase itself is regulated in Article 31(1) and (3) to (6). Article 31(2) and (7) focus on the stages that follow the conclusion of the contract(s). 13 The contract implementation phase is articulated in two stages: 1) the development of the innovative product, service or works, and 2) the purchase of the resulting supplies, services or works. The purchase is conditioned upon the outcomes corresponding to the performance levels and maximum costs which were agreed between the parties at the award stage. This does not rule out parallel commercialisation of the products or services developed as a result of the partnership.22 14 Given the complexity and the inherent uncertainty of the research and innovation process the contract(s) shall be divided into successive phases linked to intermediate targets. This is not left to the choices of the parties, but mandated under Article 31(2). “The simple obligation of structuring the process into successive phases will be important to conceptualise these phases, helping to improve partnership and preventing corruption and collusive behaviours”.23 The contracting authority is also under a (rather vague) duty to pay ‘in appropriate instalments’,24 that is following the allocation of costs throughout the innovation process.25 15 Setting the intermediate targets allows the contracting authority which has so indicated in the contract documents to abort the procedure when it considers that the whole process is less promising than originally expected, including because of unforeseen situations, cost overruns and so on.26 On the other hand, the provision introduces a certain rigidity in the procedure.27 Moreover, if the innovation partnership included several partners working in parallel, the contracting authority might, under the same conditions, decide to terminate some of the individual contracts thus reducing the number of partners. The Public Sector Directive is silent of what should happen if more than one viable product is developed in parallel by different contractors.28 12

31.3. Negotiations 16

Article 31(3) has been basically (and intentionally) cloned on Article 29(3) concerning the competitive procedure with negotiation.29 Also with regard to innovation part21 Pantilimon Voda, ‘Innovative and sustainable procurement: framework, constraints and policies’, in: C. Bovis (ed), Research Handbook of EU Public Procurement Law, 2016, p. 224 et seq. 22 See the discussion in Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 178 et seq. 23 Cerqueira Gomez, ‘The innovative innovation partnership under the 2014 Public Procurement Directive’, in: PPLR 2014, p. 215. 24 Critically Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/ Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 170 et seq. 25 ‘The Public Procurement Rules and Innovation’, in: Ølykke/Risvig/Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, p. 271. 26 Andrecka, ‘Innovative public-partnerships’, in: C. Bovis (ed.), Research Handbook of EU Public Procurement Law, p. 263. 27 Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 166; the authors also criticise the absence of mandatory third party scrutiny or verification: ibid. 172 et seq. 28 Pantilimon Voda, ‘Innovative and sustainable procurement: framework, constraints and policies’, in: C. Bovis (ed), Research Handbook of EU Public Procurement Law, 2016, p. 234.

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nerships the needs and minimum requirements only are set upfront.30 The negotiations are, therefore, part of a learning process started by the contracting authority which may, but the provision might be read differently, pick and combine elements from the solutions presented by different economic operators (so called ‘cherry-picking). 31 The negotiations are meant to incrementally improve the content of the tenders, starting from the initial tender submitted by the candidates and going on until the contracting authority decides to conclude the negotiations and calls for the final tenders.32 To safeguard the equal treatment of both the candidates and of those who might have 17 been interested in submitting their candidature for the award of a radically different contract or a contract to be awarded according to different award criteria, both the minimum requirements and the award criteria are not subject to negotiations (see Public Sector Directive Art. 29 para. 3). It is submitted that this ban on the negotiation of award criteria does not imply that the criteria set out and defined at the start of the procedure may not be better articulated and specified by the contracting authority during the procedure, at the latest when the contracting authority asks for final tenders. It is, obviously, close to impossible to define with total precision awards criteria when publishing the contract notice since what we are discussing here regards innovative products, services or works. This provided, negotiations may concern all characteristics of the purchased works, supplies and services including for instance, according to Recital 45, “quality, quantities, commercial clauses as well as social, environmental and innovative aspects”.

31.4. Equal treatment during the negotiations Equal treatment and non-discrimination are fundamental principles of EU public 18 procurement law – and to a large extent of EU law tout court – and as such they are treated in Article 18 of the new Public Sector Directive alongside the principle of transparency and proportionality.33 All phases of the procurement procedure and all procurement decisions must conform to these principles.34 Because of the multiple occasions of dialogue between the contracting authority and the candidates that it provides, the innovation partnership entails increased risks of discrimination.35 This is why Article 31(4) specifically stresses that contracting authorities shall ensure the equal treatment of all candidates during the negotiations. Today a number of more specific rules buttress the principle with specific reference to the conduct of the innovation partnership. They have been cloned36 on Article 29(4) which deals with competitive procedure with negotiations.37 The most obvious way to distort the competition favouring one participant is through 19 privileged access to information. In that respect Article 31(4) reiterates the formula alSee also Recital 49. Andrecka, ‘Innovative public-partnerships’, in: C. Bovis (ed.), Research Handbook of EU Public Procurement Law, p. 259. 31 See for an articulated discussion Andrecka, ‘Innovative public-partnerships’, in: C. Bovis (ed.), Research Handbook of EU Public Procurement Law, p. 260 et seq. 32 See also by analogy Recital 45. 33 These principles are analysed by Semple, A Practical Guide to Public Procurement, 2015 p. 35 et seq.; and C. Bovis, ‘The principles of public procurement regulation’, in: C. Bovis (ed.), Research Handbook of EU Public Procurement Law, 2016, p. 35 et seq. 34 J. Gonzáles Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), 2014, p. 62 et seq. 35 See also by analogy Recital 45. 36 See also Recital 49. 37 On which Article see also Davey, ‘Procedures involving negotiations in the new Public Procurement Directive: key reforms to the grounds for use and the procedural rules’ PPLR 2014, p. 107 et seq. 29 30

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ready used in Article 30(3) of Directive 2004/18/EC forbidding contracting authorities to provide information in a discriminatory manner which may give some tenderers an advantage over others. Moreover, contracting authorities must inform in writing at one and the same time all tenderers of any changes to the technical specifications or other procurement documents. Under Article 2(1)(18): “‘written’ or ‘in writing’ means any expression consisting of words or figures which can be read, reproduced and subsequently communicated, including information transmitted and stored by electronic means”.

A specific issue concerns confidential information whose general regime is laid down in Article 21 on confidentiality of the information provided by tenderers and candidates. Referring to Article 21, Article 31(4) specifically forbids contracting authorities to reveal to the other participants confidential information communicated by a participant in the negotiations without the agreement of the latter. Moreover, such agreement may not take the form of a general waiver but shall rather be given “with reference to the intended communication of specific information”. It is uncertain whether this preclude the contracting authority from trying to combine elements from different the solutions being developed by different contractors (so called cherry-picking).38 20 Again to safeguard equal treatment, when changing the technical specifications or other procurement documents contracting authorities must provide the participants with sufficient time to modify and re-submit amended tenders. ‘Sufficient’ must be understood in the sense that the time given is proportionate to the magnitude and nature of the change to the description of the subject-matter of the contract, always keeping in mind that the minimum requirements cannot be altered. 21 Finally, the requirements of transparency and traceability spelt out in Recital 45 according to which “all stages should be duly documented. Furthermore, all tenders throughout the procedure should be submitted in writing” are obviously applicable to the award of the innovation partnership as well, and this even more so since the two procedures are meant to be structured the same way.39

31.5. Different stages of negotiations Article 31(5) provides that the negotiations may take place in different stages to reduce the number of tenders to be negotiated if the contracting authority has so indicated in the contract documents (which should always be the case given the complexity entailed by innovation). To do so, the award criteria are applied to the initial tenders and then to successive tenders and so on. The process is somewhat cumbersome and the more so the more articulated are the award criteria. Recital 41 of Directive 2004/18/EC justified the possible reduction referring to “the flexibility which may be required and the high level of costs associated with such methods of procurement”. Even if the indication has been omitted in the new directive it makes plain common sense. 23 Under Article 65(3) the minimum number of candidates in the innovation partnership shall be three, provided that that number is sufficient to ensure genuine competition. The contracting authority may decide to continue the procedure even if the number of suitable candidates falls below the limit40 (see Public Sector Directive Art. 65). 22

38 See the discussion by Andrecka, ‘Innovative public-partnerships’, in: C. Bovis (ed.), Research Handbook of EU Public Procurement Law, p. 261 et seq. 39 Recital 49; see again C. Bovis, ‘Introduction’, in: C. Bovis (ed), Research Handbook of EU Public Procurement Law, 2016, p. 35 et seq. 40 Which was already possible according to the case law: see Case C-138/08 Hochtief AG [2009] ECR I-9889, paragraphs 37 et seqq.

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Article 66 of the Public Sector Directive makes clear that the reduction of the number 24 of participants cannot be abused in order to eliminate competition: “In the final stage, the number arrived at shall make for genuine competition in so far as there are enough tenders, solutions or qualified candidates”.

Moreover, as has been rightly remarked, discarding solutions “generates effects that are not dissimilar from an exclusion of the candidate and, consequently, that decision should be subjected to the same procedural guarantees”.41

31.6. Selecting the candidates and other miscellaneous provisions Having regulated the negotiations the lawmakers suddenly again came to think about 25 the candidates! Article 31(6) partly repeats Article 31 (2) by conflating once again the basics of innovation partnership in its second sentence. What is really important is, however, its first sentence, providing that in the selection 26 the “criteria concerning the candidates’ capacity in the field of research and development and of developing and implementing innovative solutions” must be applied. The rule specifies the more generic principle laid down in Article 65(2) which basically imposes a duty of transparency on contracting authorities. The rule also makes good sense, since the requirements directly linked to research and development are more relevant here than the other selection criteria regulated in Article 58. The provision has, nevertheless, been criticised notably because of the hurdles it places on new entrants.42 Article 31(6) is structured very much like an old uncle’s attic where to store things 27 which did not find another place to be. The big issue of intellectual property rights is dealt with here.43 Innovation is deemed to involve property rights in the form of patents and who owns them is obviously sensitive and not only from an economic point of view.44 Economic operators would normally be more eager to engage in the partnership if they retain some measure of ownership in the results, especially in view of further commercialisation of the goods and services developed.45 This in turn might raise State aid concerns.46 Keeping this in mind, it is up to the contracting authority to decide the regime of those rights, making its intentions known in the procurement documents. 47 Innovation partnership leaves contracting authorities with wide margins to shape the contract clauses relating to this aspect.48 On the contrary, Article 14 on research and de-

41 A. Sanchez Graells, ‘Exclusion, Qualitative Selection and Short-listing in the New Public Sector Procurement Directive 2014/24’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 126. 42 Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 179. 43 Andrecka, ‘Innovative public-partnerships’, in: C. Bovis (ed.), Research Handbook of EU Public Procurement Law, p. 264; Pantilimon Voda, ‘Innovative and sustainable procurement: framework, constraints and policies’, in: C. Bovis (ed), Research Handbook of EU Public Procurement Law, 2016, p. 238. 44 See ’The Public Procurement Rules and Innovation’, in: Ølykke/Risvig/Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, p. 272 et seq. 45 Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 174 et seq. 46 Cerqueira Gomez, ‘The innovative innovation partnership under the 2014 Public Procurement Directive’, in: PPLR 2014, p. 217 et seq. 47 Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 175. 48 See a discussion of different options in Pantilimon Voda, ‘Innovative and sustainable procurement: framework, constraints and policies’, in: C. Bovis (ed), Research Handbook of EU Public Procurement Law, 2016, p. 238.

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velopment services requires the contracting authority to acquire the intellectual rights resulting from that kind of activity.49 28 Finally, Article 31(6) deals with confidentiality in the implementation phase in case the partnership was concluded with several economic operators (and they work in parallel). The rules are the same as those applicable during the negotiation stage of the award phase (see Article 31 (4)). They would have to be adapted in case the several economic operators work in sequence. Given that, according to Article 2(1)(22) the purpose of innovation is to contribute to economic and social development, a part of the information should, however, become available to the whole community following an open source model.50

31.7. Preventing possible abuses With the inherent risk of discrimination in negotiations Article 31(7) admonishes potential users to observe additional caution.51 In cauda venenum. First, this procedure shall not be used when the innovation required is scarce.52 Secondly, the structure of the partnership and, in particular, “the duration and value of the different phases” must reflect the degree of innovation of the proposed solution and the sequence of the research and innovation activities required for the development of the innovative solution. Moreover, and possibly leading to challenges to the decision to have an innovation partnership, the estimated value of supplies, services or works to be purchased by the contracting authority “shall not be disproportionate in relation to the investment required for their development”. 30 The innovation partnership – like other forms of public support to research and development – may also give rise to State aid concerns.53 Indeed, it “can be extremely difficult to value the resources put into a partnership by the contracting authority and contractor such as to ensure a balance which prevents illegal state aid”.54 29

Article 32 Use of the negotiated procedure without prior publication 1. In the specific cases and circumstances laid down in paragraphs 2 to 5, Member States may provide that contracting authorities may award public contracts by a negotiated procedure without prior publication. 2. The negotiated procedure without prior publication may be used for public works contracts, public supply contracts and public service contracts in any of the following cases: See also Recital 35. See also Cerqueira Gomez, ‘The innovative innovation partnership under the 2014 Public Procurement Directive’, in: PPLR 2014, p. 216. 51 See also Recital 49; see also Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/Treumer (eds), Modernising Public Procurement: The New Directive, p. 167 et seq. 52 ‘The Public Procurement Rules and Innovation’, in: Ølykke/Risvig/Tvarnø (eds), EU Procurement Directives – modernisation growth & innovation, p. 273. 53 A. Sánchez Graells, ‘Public procurement and State aid: reopening the debate?’ PPLR 2012 p. 211 et seq.; see also Cerqueira Gomez, ‘The innovative innovation partnership under the 2014 Public Procurement Directive’, in: PPLR 2014, p. 216 et seq. 54 Telles/Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: Lichère/Caranta/ Treumer (eds), Modernising Public Procurement: The New Directive, p. 168; see also Pantilimon Voda, ‘Innovative and sustainable procurement: framework, constraints and policies’, in: C. Bovis (ed), Research Handbook of EU Public Procurement Law, 2016, p. 235 et seq. 49 50

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(a) where no tenders or no suitable tenders or no requests to participate or no suitable requests to participate have been submitted in response to an open procedure or a restricted procedure, provided that the initial conditions of the contract are not substantially altered and that a report is sent to the Commission where it so requests. A tender shall be considered not to be suitable where it is irrelevant to the contract, being manifestly incapable, without substantial changes, of meeting the contracting authority’s needs and requirements as specified in the procurement documents. A request for participation shall be considered not to be suitable where the economic operator concerned is to be or may be excluded pursuant to Article 57 or does not meet the selection criteria set out by the contracting authority pursuant to Article 58; (b) where the works, supplies or services can be supplied only by a particular economic operator for any of the following reasons: (i) the aim of the procurement is the creation or acquisition of a unique work of art or artistic performance; (ii) competition is absent for technical reasons; (iii) the protection of exclusive rights, including intellectual property rights; The exceptions set out in points (ii) and (iii) shall only apply when no reasonable alternative or substitute exists and the absence of competition is not the result of an artificial narrowing down of the parameters of the procurement; (c) in so far as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with. The circumstances invoked to justify extreme urgency shall not in any event be attributable to the contracting authority. 3. The negotiated procedure without prior publication may be used for public supply contracts: (a) where the products involved are manufactured purely for the purpose of research, experimentation, study or development; however, contracts awarded pursuant to this point shall not include quantity production to establish commercial viability or to recover research and development costs; (b) for additional deliveries by the original supplier which are intended either as a partial replacement of supplies or installations or as the extension of existing supplies or installations where a change of supplier would oblige the contracting authority to acquire supplies having different technical characteristics which would result in incompatibility or disproportionate technical difficulties in operation and maintenance; the duration of such contracts as well as that of recurrent contracts shall not, as a general rule, exceed three years; (c) for supplies quoted and purchased on a commodity market; (d) for the purchase of supplies or services on particularly advantageous terms, from either a supplier which is definitively winding up its business activities, or the liquidator in an insolvency procedure, an arrangement with creditors, or a similar procedure under national laws or regulations. 4. The negotiated procedure without prior publication may be used for public service contracts, where the contract concerned follows a design contest organised in accordance with this Directive and is to be awarded, under the rules provided for in the design contest, to the winner or one of the winners of the design contest; in the latter case, all winners must be invited to participate in the negotiations.

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5. The negotiated procedure without prior publication may be used for new works or services consisting in the repetition of similar works or services entrusted to the economic operator to which the same contracting authorities awarded an original contract, provided that such works or services are in conformity with a basic project for which the original contract was awarded pursuant to a procedure in accordance with Article 26(1). The basic project shall indicate the extent of possible additional works or services and the conditions under which they will be awarded. As soon as the first project is put up for tender, the possible use of this procedure shall be disclosed and the total estimated cost of subsequent works or services shall be taken into consideration by the contracting authorities when they apply Article 4. This procedure may be used only during the three years following the conclusion of the original contract. Literature: Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014; Bovis, EU Public Procurement Law, 2nd ed. 2012; González Garcia, Classic procurement Procedures, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014; Lichère, ‘Quid de la place nouvelle des procedures négociées et du dialogue competitive?’, in: Bulletin Juridique des Contrats Publics 2014, p. 164 et seq.; Semple, A Practical Guide to Public Procurement, 2015. 32.1. The exceptional nature of the negotiated procedure without prior publication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.2. Cases of negotiated procedure common to works, supplies and services procurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.3. Cases of negotiated procedure specific to supply contracts . . . . . . . . . . . . . . . . 32.4. Negotiated procedure following a design contest. . . . . . . . . . . . . . . . . . . . . . . . . . . 32.5. Repetition of similar works or services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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The negotiated procedure without prior publication of a contract notice does not always deserve the name of procedure. This is not just because it is normally akin to direct contracting,1 but, more radically, because Article 32 limits itself to listing the situations in which a call from competition may be avoided. As Telles and Butler rightly point out, the negotiated procedure without publication constitutes “an authorisation to contracting authorities to devise a method of awarding a contract according to circumstances prescribed by the Directive”.2 The duty to give reasons as to the existence of the specific situations listed in Article 32 is the only safeguard contracting authorities must generally comply with. Article 32(4) only goes a bit beyond this modest minimum implying at least compliance with the principle of equal treatment in case of a plurality of winners of a design context. 2 Because of its detrimental effects on competition,3 or rather because of the absence the latter, the negotiated procedure without prior publication remains confined to specific circumstances as it has always been the case in the EU public procurement – and utilities – law.4 (See Public Sector Directive Art. 26 para. 6). 3 More specifically, this exception is limited to cases where publication is either not possible, for certain reasons of extreme urgency, or where it is clear from the outset that a publication would not trigger more competition or better procurement outcomes, not 1

S. Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014, p. 1061 et seq. P. Telles/L.R.A. Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 133. 3 Recital 50. 4 J. Gonzáles Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), 2014, p. 69 et seq. 1

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least because there is objectively only one economic operator that can perform the contract.5 Because this procedure is exceptional, a specific duty to give reasons is imposed on 4 contracting authorities.6 Even if an explicit rule to this effect in the text of Article 32 would have been more appropriate, this safeguard is reaffirmed in Recital 50: “Contracting authorities relying on this exception should provide reasons why there are no reasonable alternatives or substitutes such as using alternative distribution channels including outside the Member State of the contracting authority or considering functionally comparable works, supplies and services”.

32.1. The exceptional nature of the negotiated procedure without prior publication Article 32(1) reiterates the exceptional character of the negotiated procedure without 5 prior publication of a contract notice which was already provided for – and with a stronger emphasis – in Article 26(6). Some of the exceptional grounds listed in Article 32 do apply to all procurements, be they works, supplies or services procurements, while other grounds apply only to some types of procurement.

32.2. Cases of negotiated procedure common to works, supplies and services procurements Article 32(2) lists three situations in which award through negotiated procedure without prior publication is allowed for both works, supplies and services. This is so in case of no tender or no suitable tender in a previous open or restricted procedure, in a number of cases in which the contract can only be concluded with a particular economic operator, and in some situations of extreme urgency. All the grounds mentioned were already regulated in Article 31 of Directive 2004/18/EC. The first two have been specified in more detail in the new Public Sector Directive. Directive 2004/18/EC distinguished between ‘irregular’ or ‘unacceptable’ tenders on the one hand and ‘no’ or ‘not suitable’ tenders on the other. Under Article 30 and 31 respectively, the former opened the way to negotiated procedures with prior publication while the latter dispensed the contracting authority from publishing a contract notice. The distinctions now leads to the alternative between using a competitive procedure with negotiation or competitive dialogue (see Public Sector Directive Art. 26 para. 4(b)) or a negotiated procedure without publication. As in the case of ‘irregular’ or ‘unacceptable’ tenders, the new Public Sector Directive provides Article 32(2)(a) a definition of ‘unsuitable’ tender or request to participate (there is obviously no need of a definition of ‘no’ tender or ‘no’ request to participate). As was rightly remarked, in case of no tenders (or no candidatures in restricted procedures) since advertising has been tried but not produced an adequate response, it is inappropriate to require the authority to advertise again (although it can choose to do so).7 The definition given for ‘unsuitable’ leaves, however, much to be desired. ‘Unsuitable’ is translated into ‘irrelevant to the contract’ which must, in turn, necessarily be defined, ‘irrelevant’ being as much a generic a word as ‘unsuitable’ is. This could have been avoided and a few words would have been saved. Setting aside this false start, a tender is conSee Recital 50. E.g. Case C-250/07 Commission v Greece [2009] ECR I‑4369, paragraph 17, and cases referred to therein; see also C.H. Bovis, EU Public Procurement Law, 2nd ed. 2012; p. 398 et seq. 7 Arrowsmith, The Law of Public and Utilities Procurement, 3 rd ed. 2014, p. 1083. 5

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sidered unsuitable when it is “manifestly incapable, without substantial changes, of meeting the contracting authority’s needs and requirements as specified in the procurement documents”. The focus of the definition is on the contracting authority’s needs. Tenders which do not conform to the technical specifications written in the contract documents are unsuitable only in so far as they are not meeting the performance or functional requirements which are spelt out in the same technical specifications under Article 42(2)(a) or may be deduced from them if they are drafted according to standards under lit. b of the same provisions. Basically, a tender including ‘not allowed under Article 45 variants’ will translate in a tender being ‘irregular’ under Article 26(4)(b) rather than in a tender being ‘unsuitable’.8 11 A case of unsuitable tenders was at the heart of an infringement procedure brought against Greece.9 The case concerned a negotiated procedure for the building of some power plants in Crete. The utilities rules applied, but the Court of Justice stressed that they are not only the same as to those applicable to classic sector procurements, but they must be read in the same way.10 The Court held that:11 “technical specifications such as those at issue in the present case, which stem from the national and Community legislative requirements on protection of the environment, must be regarded as essential if the installations – the supply and bringing into operation of which is the aim of the contract – are to enable the contracting entity to meet the objectives imposed upon it by legislation”.

Accordingly, tenders not in conformity with those specifications are to be considered unsuitable.12 12 Requests for participation are deemed unsuitable where the economic operator concerned is to be or may be excluded pursuant to Article 57 or does not meet the selection criteria set out by the contracting authority pursuant to Article 58. This provision is hard to reconcile with Article 26(4)(b) which instead considers tenders submitted by tenderers not having the required qualifications to be unacceptable, thus opening the way to a competitive procedure with negotiation or a competitive dialogue. When referring to the tenderers’ qualifications Article 26(4)(b) and Article 32(2)(a) cover exactly the same ground. It is true that the latter specifically refers to the ‘request for participation’ and that it is therefore specifically applicable to restricted procedures. The former would then be applicable to open procedures. Why the two should be treated differently is hard to say. Similar difficulties arise from the fact that ‘evidence of collusion or corruption’ is one of the situations in which a tender can be considered irregular under Article 26(4) (b) but it also makes the request for participation not suitable because this is one instance of possible exclusion under Article 57(4)(d). 13 Recourse to a negotiated procedure without publication is possible conditioned – besides for a report being sent to the Commission – on the contract conditions not having been substantially altered when compared with those of the initial open or restricted procedure. This again was at the centre of the infringement procedure brought against Greece for the direct award of works to build energy plants.13 The Court of Justice referred to pressetext Nachrichtenagentur,14 a case concerning permissible modifications to an awarded contract, to hold that:15 See also A. Semple, A Practical Guide to Public Procurement, 2015, p. 84. Case C-250/07, Commission v Greece [2009] ECR I‑4369. 10 Paragraphs 36 et seqq. 11 Paragraph 42. 12 See also paragraphs 43 et seq. 13 Case C-250/07, Commission v Greece [2009] ECR I‑4369. 14 Case C‑454/06, pressetext Nachrichtenagentur [2008] ECR I‑4401, paragraph 35. 15 Paragraph 53. 8

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“the amendment of an initial contract condition can be regarded as substantial […], inter alia, where the amended condition, had it been part of the initial award procedure, would have allowed tenders submitted in the procedure with a prior call for competition to be considered suitable or would have allowed tenderers other than those who participated in the initial procedure to submit a tender”.

On this basis the Court focused on a couple of specific contract conditions, the first one relating to the guaranteed volumes of waste emissions which had lead to the exclusion of all tenders in the previous procedure; the other basically concerning variants and the costs thereof. Having found that the specific condition concerning emissions had not been changed, and could not have been changed since the requirement was mandated by law,16 and that there was no substantial change as to the other condition even if the new procedure offered all the tenderers who had participated in the previous one the possibility of reviewing some of their proposals,17 the Court concluded that the contracting entity had not substantially changed the original contract conditions.18 The judgment in an infringement procedure against Spain is also relevant here.19 The 14 Court of Justice upheld the Commission’s claim that, by stating in the national legislation that a change in price of no more that 10% did not constitute a substantial modification of the contract, Spain had indeed added a new condition to those provided under what was then EC law.20 Article 72(2) on contract modification will today apply to such circumstances.21 The second case in which the negotiated procedure without competition is allowed 15 for works, supplies and services concerns contracts which may only be concluded with a particular economic operator. The corresponding provision of Article 31(1) of Directive 2004/18/EC was denser.22 It provided that recourse to this exceptional procedure could be had “when, for technical or artistic reasons, or for reasons connected with the protection of exclusive rights, the contract may be awarded only to a particular economic operator”.

Article 32(2)(b) of the new Public Sector Directive spells out in more detail the grounds based on which contracts may be directly awarded to a specific economic operator. The ‘artistic reasons’ are translated into the creation or acquisition of a unique work 16 of art or artistic performance. Recital 50 indicates that in “the case for works of art [...] the identity of the artist intrinsically determines the unique character and value of the art object itself ”. It is to be recalled that under Article 10(b) the acquisition, development and so on of broadcasting programs are simply excluded from the coverage of the directive. Technical reasons have been developed with the caption that they must be such to 17 exclude competition. According to recital 50, “Where the situation of exclusivity is due to technical reasons, they should be rigorously defined and justified on a case-by-case basis. They could include, for instance, near technical impossibility for an-

Paragraph 54. Paragraphs 55 et seqq. 18 Paragraph 58. 19 Case C‑84/03 Commission v Spain [2005] ECR I-139; see also Bovis, EU Public Procurement Law, 2012, p. 402 et seq. 20 Paragraph 49. 21 See S. Treumer, ‘Regulation of Contract Changes in the New Public Procurement Directive’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 294 et seq. 22 See the analysis by Gonzáles Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), 2014, p. 71. 16

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other economic operator to achieve the required performance or the necessity to use specific knowhow, tools or means which only one economic operator has at its disposal”.

The same recital adds that technical reasons may also derive from “specific interoperability requirements which must be fulfilled in order to ensure the functioning of the works, supplies or services to be procured”. This is somewhat puzzling, because the interoperability requirement is also referred to in Article 32(3)(b) in relation to additional supplies (not to mention Article 72(1)(b)). Article 32(3)(b) is also more demanding than Recital 50 in that it sets a three years time limit to additional contracts. A possible way out of these contradictions might be to assume that Recital 50 does not refer to the issue of additional supplies, which falls under Article 32(3)(b), but to the award of contracts requiring the close coordination of different contractors, which is just one possible example of the technical reasons to which Article 32(2)(b)(ii) refers. 18 ‘Technical reasons’ have often been invoked by the Member States to try to defend – normally without success – contracts awarded by means of negotiated procedure without prior publication. Italy tried to refer to them among various arguments invoked to try and save its decade long practice of buying helicopters for its various civil and military corps through direct negotiations with Agusta (later Agusta Bell).23 The Court of Justice obviously recalled both the exceptional character of the negotiated procedure without prior publication and that the burden of proof as to the existence of the grounds allowing for its use lies on the contracting authority.24 On this basis, the Court was quick to conclude that the Italian government had25 “not discharged the burden of proof as regards the reason for which only helicopters produced by Agusta would be endowed with the requisite technical specificities. In addition, that Member State has confined itself to pointing out the advantages of the interoperability of the helicopters used by its various corps. It has not however demonstrated in what respect a change of supplier would have constrained it to acquire material manufactured according to a different technique likely to result in incompatibility or disproportionate technical difficulties in operation and maintenance”.

Another infringement procedure concerned the direct award of river management works to an economic operator who had already been awarded such works along the same river. The argument of the Italian government to the effect that in the light of the complexity and difficult nature of the works they were better entrusted to the same undertakings was defeated by the Court of Justice holding that:26 “merely to state that a package of works is complex and difficult is not sufficient to establish that it can only be entrusted to one contractor, particularly where the works are subdivided into lots which will be carried out over many years”.

A similar outcome had an infringement procedure brought against Germany because a Land had bought software for managing vehicle registration through a negotiated procedure without prior publication. The Court of Justice held that it was not proven that similar software could not have been supplied by some other economic operator since no market research had been conducted at European level.27 Going back to Recital 50, this case is to be read as an authority for the proposition that rigorous demonstration of the technical reasons for direct award as a minimum requires the contracting authority Case C-337/05 Commission v Italy [2008] ECR I‑7313. Paragraphs 57 et seq. 25 Paragraph 59. 26 Case C-385/02 Commission v Italy [2004] ECR I-8121, paragraph 21; the Italian government had referred in its defense to an opinion of the Public Works Authority, but the content of that opinion was not a matter of discussion in the judgment. 27 Case C-275/08 Commission v Germany [2009] ECR I-168, paragraph 61. 23

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to actually look for what is on offer in the different Member States through some web searches. Depending on the subject matter of the procurement this should not be limited to the language of the contracting authority if this is not widely used in the EU. It cannot indeed be excluded that sellers, once informed of the procurement procedure through the SIMAP website, would be ready to overcome the linguistic barrier to put forward a tender. Another and very relevant and otherwise famous – since it laid the ground for a sub- 19 sequent judgment establishing the duty of Member States to deprive contracts directly awarded in breach of EU law of effects28 – case concerned, among other agreements, the contract for waste disposal awarded by City of Braunschweig by means of a negotiated procedure without prior publication.29 In the infringement procedure the German government defended the legality of the procedure claiming that for technical reasons thermal treatment of waste could be entrusted only to a specific economic operator; more specifically, it had been an essential criterion for the award of the contract that in order to avoid transport over longer distances the incineration facilities were close to the City of Braunschweig. The Court of Justice, recalling its reasoning from the case Concordia Bus,30 was ready to accept that a contracting authority may take account of criteria relating to environmental protection at the various stages of a procedure for the award of public contracts, and that, therefore, it is not impossible that a technical reason relating to the protection of the environment may be taken into account in an assessment of whether the contract at issue may be awarded to a particular supplier.31 However, the award procedure must comply with the fundamental principles of EU law, in particular the principle of non-discrimination.32 On the facts of the case, the Court held that the German government had not provided any evidence to establish not just that the thermal waste treatment could not be awarded to other suppliers, but that the “transport of waste over a greater distance would necessarily constitute a danger to the environment or to public health”.33 Very widely understood ‘technical reasons’ were also possibly the reason why Spain, 20 in implementing the 1993 directives, had provided for the negotiated procedure without prior publicity for the purchase of goods whose uniformity had been held to be necessary for their common use by the administration. This was, however, not part of the defence relied on by the Spanish government in the infringement procedure which led the Court of Justice to hold that Spain had unlawfully added a new ground allowing recourse to this procedure.34 A final interesting instance is provided by the national (domestic) issue relevant in 21 the Fastweb case which went to the Court of Justice to have some consequential remedial question answered. 35 Telecom Italia SpA was awarded a public contract for the supply of electronic communications services following a negotiated procedure without prior publication of a contract notice. The contracting authority formed the view that, for technical reasons and in order to protect certain exclusive rights, Telecom Italia was the only economic operator in a position to perform the contract at issue. The Consiglio di Stato – the highest administrative court in Italy – affirmed the illegality of the award of the conCase C-503/04 Commission v Germany [2007] ECR I-6153. Joined Cases C-20/01 and C-28/01 Commission v Germany [2003] ECR I-3609; see also the discussion in Bovis, EU Public Procurement Law, 2012, p. 404 et seq. 30 Case C-513/99 Concordia Bus Finland [2002] ECR I-7213, paragraph 57. 31 Paragraphs 60 et seq. 32 Paragraph 62. 33 Paragraphs 64 et seq. 34 Case C-84/03, Commission v Spain [2005] ECR I-139, paragraphs 57 et seqq. 35 Case C-19/13, Fastweb ECLI:EU:C:2014:2194. 28

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tract, on the ground that the Interior Minister had failed to demonstrate that the conditions for using a negotiated procedure without prior publication of a notice were satisfied. In fact, the Consiglio di Stato found that what the information in the file made clear was not the objective impossibility of entrusting the contract to different economic operators, but the inexpediency of such a choice, essentially because, in the Ministry’s view, it involved changes and costs and necessitated a period of adjustment.36 22 Another ground justifying direct award to a particular economic operator is linked to the protection of exclusive rights, including intellectual property rights. The reason is self evident, since exclusive rights rule out competition. This applies to exclusive rights in the private law sense – so to speak. These are different from exclusive rights to provide a service which are regulated under Article 11 of the new Public Sector Directive. The European Parliament had proposed to extend this clause to cover ‘ownership of a property right’. Such an amendment would have opened the door to a massive inroad for negotiated procedures in works procurements basically meaning an overruling of the Ordine degli architetti di Milano and Monza (Bicocca) judgment.37 23 According to a new proviso added at the end of Article 32(2)(b) and whose scope was extended during the legislative process, the exceptions to the rule requiring the award of public procurement contracts to follow a call from competition concerning technical reasons and the protection of exclusive rights only apply where no reasonable alternative or substitute exists.38 The rule flows from the general principle of non-discrimination as it was – and it is – embodied in the provision on technical specifications requiring the caption ‘or equivalent’ to be added to specifications referring to a specific make or source and so on (see Public Sector Directive Art. 42 para. 4).39 To discharge the burden of proof that no reasonable alternative or substitute does exist, the contracting authority is expected to conduct some market research at European level. It is certainly not enough to claim or even to show that no competitor is available on the domestic market.40 24 This provision is the specification of the same general principle of non-discrimination which is spelt out in Article 18 of the new Public Sector Directive. It links with the rule found therein that “The design of the procurement shall not be made with the intention of excluding it from the scope of this Directive or of artificially narrowing competition. Competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators”.

In a way the situation foreseen in Article 32(2)(b) is even a graver breach of the principle since competition is not just narrowed, it is eliminated.41 25 The last case in which the negotiated procedure without competition is allowed for works, supplies and services concerns some cases of extreme urgency. Compared with Article 31(1)(c) of Directive 2004/18/EC the provision has only been subject to minimal change.42 One of the requirements is that the time limits for the open, restricted or (now) the competitive procedure with negotiations cannot be complied with. In assessPoint 30. Case C-399/98, Ordine degli Architetti and Others [2001] ECR I-5409. 38 See also Recital 50; see Lichère, ‘New Award Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014, p. 165. 39 Gonzáles Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), 2014, p. 71; see also Arrowsmith, The Law of Public and Utilities Procurement, 3rd ed. 2014, p. 1067 et seq. 40 Case C‑275/08 Commission v Germany [2009] ECR I‑168, paragraphs 61 et seqq. 41 On the principle of competition see A. Sanchez-Graells, ‘Truly Competitive Public Procurement as a Europe 2020 Lever: What Role for the Principle of Competition in Moderating Horizontal Policies?’, in: 2016 European Public Law 377 et seq. 42 The older case law is analysed by Bovis, EU Public Procurement Law, 2012, p. 400. 36

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ing if the requirement is met it is to keep in mind that under Articles 27 and followings of the Public Sector Directive, these time limits have been shortened and even shorter limits apply in case of urgency. The other requirements are drafted to make sure that not every kind of urgency will 26 do, and that contracting authorities cannot avail themselves of their sloppiness. This is not so much because of the adjective ‘extreme’ which qualifies ‘urgency’. This merely adds a nuance difficult to measure and much less so to litigate upon. The important qualifications are that the situation of urgency must be due to unforeseeable events which in any event shall not be ‘attributable to the contracting authority’. One of the cases in which Italy was posed to directly purchase helicopters, this time through an authorisation to the fire department to do so in order to fight forest fires, provides an excellent case study about this requirement.43 The case was not decided on the merits but we have an excellent analysis in the conclusions by Advocate general Jacobs. The Advocate general began by remarking that:44 “As a general proposition, it seems incontrovertible that widespread outbreaks of forest fires may be reasons of extreme urgency giving rise to a need for the acquisition of firefighting services and equipment if they are not already sufficiently available”.

In that case, however, the Commission was arguing that outbreaks of forest fires in summer are a recurring event throughout Southern Europe; they are thus foreseeable, and any urgency in the need to acquire means to combat them was attributable to the Italian authorities. Advocate general Jacobs agreed with the Commission that “regular seasonal occurrences cannot be considered unforeseeable events”.45 However he also pointed out that “even such occurrences may in some years be of such exceptional intensity or extent as to be legitimately regarded as unforeseeable”.46 Based on the reasons given in the decree declaring the national state of emergency and in the ordinance authorising negotiated procedures without prior publication, the Advocate general concluded that the latter was the case due to exceptional meteorological conditions in that given year.47 In the end:48 “It may be accepted that forest fires in summer are foreseeable in Italy, so that the authorities cannot rely on their own failure to provide in advance for such fires in order to justify recourse to a negotiated procedure […]. Exceptional forest fires due to exceptional weather conditions are however by definition not foreseeable as such and may provide reasons of extreme urgency for the purposes of that provision”.

Italy was less successful in another and already recalled infringement procedure 27 which concerned the direct award of river management works to an economic operator who had already been awarded such works along the same river. The argument of urgency was easily defeated considering that the original contracts relating to the flood protection works had been awarded in the 1980 s while those challenged by the Commission dated from 1997. Furthermore, it had been anticipated from the start that the works would have been carried out in lots as and when funding were to become available. The Court of Justice was bound by the circumstances of the case to conclude that “Those matters do not establish any extreme urgency. On the contrary, they arise out of the arrangements put into place by the contracting authority”.49 Similarly, in the infringement Case C-525/03 Commission v Italy [2005] ECR I-9405. Paragraph 61. 45 Paragraph 63. 46 Paragraph 64. 47 Paragraphs 65 et seq. 48 Paragraphs 67 et seq. 43

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procedure brought against Germany because a Land had bought software for managing vehicle registration through a negotiated procedure without prior publication, the Court of Justice ruled out extreme urgency since a number of months had elapsed between the decision to apply a negotiated procedure and its conclusion.50 28 The strict conditions on the use of direct awards in situations of extreme urgency might be considered as unduly harsh not so much with contracting authorities, which have been negligent enough not to foresee or not to act in time, but with the general interest these authorities are to pursue. The mentioned judgement against Germany shows that this is not normally the case. Given the delay in concluding the negotiated procedure the contracting authority would have had all the necessary time to manage an accelerated negotiated procedure (now competitive procedure with negotiation) under what has become – with even shorter minimum time limits – Article 28(6) as made applicable to competitive procedures with negotiation by Article 29(1).51

32.3. Cases of negotiated procedure specific to supply contracts Article 32(3) provides for four cases in which the negotiated procedure without prior publication may be used to award public supply contracts. It is to be said, however, that the last case is now common to supply and service contracts. The provision is very much in line with Article 31(2) of Directive 2004/18/EC. 30 The first situation concerns products “manufactured purely for the purpose of research, experimentation, study or development”. This purpose sets aside these contracts from the research and development contracts regulated under Article 14 of the new Public Sector Directive. In that case, the aim is not research, innovation or discovery. It is to address a need of the contracting authority. Moreover, contracts awarded under this provision “shall not include quantity production to establish commercial viability or to recover research and development costs”. If this is the case, the appropriate procedure is the innovation partnership under Article 31 of the new Public Sector Directive. 52 31 The second situation concerns additional deliveries. The scope of the exception has been somewhat widened by leaving out the adjective ‘normal’ before ‘supplies or installations’.53 The recourse to the negotiated procedure with the original supplier to purchase additional deliveries is allowed when a change of the supplier would lead to incompatibility or “disproportionate technical difficulties in operation or maintenance”. The requirement may not be easy to meet. Concerning the practice of the Italian government to buy helicopters for various civil and military corps through direct negotiations with Agusta (later Agusta Bell), the Court of Justice ruled against Italy noting that:54 29

“that Member State has confined itself to pointing out the advantages of the interoperability of the helicopters used by its various corps. It has not however demonstrated in what respect a change of supplier would have constrained it to acquire material manufactured according to a different technique likely to result in incompatibility or disproportionate technical difficulties in operation and maintenance”.

Case C-385/02, Commission v Italy [2004] ECR I-8121, paragraph 28. Case C-275/08, Commission v Germany [2009] ECR I-168, paragraphs 70 et seqq. 51 Case C-275/08, Commission v Germany [2009] ECR I‑168, paragraph 75. 52 See also L.R.A. Butler, ‘Innovation in Public Procurement: Towards the “Innovation Union”’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 361 et seq. 53 The change is noted by Lichère, ‘New Award Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014, p. 165. 54 Case C-157/06 Commission v Italy [2008] ECR I-7313, paragraph 59. 49

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In addition, the cumulative duration of both the original contract(s) and of the additional one(s) shall not as a rule exceed three years. The provision analysed here is different from the one in Article 72(1)(b) on modification of contracts mainly because the inconvenience in changing the contractor is worded differently, but using terms which could be easily exchanged. However Article 72(1)(b) sets a quantitative (50%) rather than temporal (3 years limit). Whether the differences in treatment based on situations which, if not actually the same, are very much alike, make any sense is anyone’s guess.55 Rules like the Spanish ones implementing the 1993 directives which had provided for 32 the negotiated procedure without prior publicity for the purchase of goods whose uniformity had been considered to be necessary for their common use by the administration would be in breach of Article 32(3)(b) in that they are much vaguer when compared with the EU text.56 The third case in which the negotiated procedure without prior publication may be 33 used to award public supply contracts concerns supplies quoted and purchased on a commodity market. As Recital 50 argues: “a procurement procedure is not useful where supplies are purchased directly on a commodity market, including trading platforms for commodities such as agricultural products, raw materials and energy exchanges, where the regulated and supervised multilateral trading structure naturally guarantees market prices”.

In this case competition does not need to be enforced through public procurement law because it is already inherent in the structure of the specific market. 57 The regulation of such markets is obviously of more general relevance than a mere issue of public procurement as it is for instance demonstrated by Regulation (EU) No 1227/2011 on wholesale energy market integrity and transparency. The last situation in Article 32(3) does actually apply to both goods and services pro- 34 curements according to the wording. That makes sense (even if the latter seems a rarer occurrence) but the opening phrase of Article 32(3) which refers to supply only is not precise in regard to this specific exemption. The provision allows contracting authorities to take advantage of suppliers definitively winding up or being involved in some form of insolvency. At the same time it limits the distortion to competition since the supplier in question is exiting from the market. In so far as it refers to insolvency this provision will only be applicable in those Member States which have chosen not to make mandatory the exclusion based on the ground in Article 57(4)(b).

32.4. Negotiated procedure following a design contest Contracting authorities are allowed to award public service contracts following a de- 35 sign context as regulated under Article 78 ff of the new Public Sector Directive. More specifically, under Article 79(1) when contracting authorities “intend to award a subsequent service contract pursuant to Article 32(4), this shall be indicated in the contest notice”. The subsequent service contract will normally concern more detailed and executive designs and/or supervision of the works carried out based on the winning design. In case of a plurality of winners of the contest, all of them shall be invited to take part in the 55 The inconsistencies in the rules are highlighted by S. Treumer, ‘Regulation of Contract Changes in the New Public Procurement Directive’, in: F. Lichère/R. Caranta/S. Treumer (eds), Modernising Public Procurement: The New Directive, 2014, p. 292 et seq. 56 This aspect was, however, not addressed in Case C-84/03 Commission v Spain [2005] ECR I-139, paragraphs 57 et seqq. 57 See Gonzáles Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), 2014, p. 72.

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negotiations. In this situation the general principle of equal treatment will apply and Article 29(5) will be applicable by analogy.

32.5. Repetition of similar works or services Finally, under given conditions the negotiated procedure without prior publication of a contract notice is allowed with reference to new works or services which are the repetition of similar works or services. The conditions are first of all that the original works or services were awarded following a procedure which began with a call for competition, meaning any award procedure but a negotiated procedure without prior call for competition. Moreover, the similar works or services must conform to a basic project which was advertised along with the initial procurement and whose total estimated cost was considered in determining whether the contract was above the thresholds set in Article 4. Finally, unlike what is provided under Article 32(3)(b) for recurrent supply contracts, the three years limit for using this procedure cannot be exceeded. 37 The repetition of works and services is clearly very similar to the additional deliveries of goods, even if the latter seem to be regulated in a somewhat more liberal way under Article 32(3)(b). It is difficult to understand why it is so and why the two situations could not be sensibly merged into one provision. The provision analysed here also diverges from the one in Article 72(1)(b) on modification of contracts in that the latter is not based on an overall basic project but requires a high degree of inconvenience in changing the contractor. Article 72(1)(b) however sets a quantitative (50%) rather than temporal (3 years limit). Whether the differences in treatment make any sense is anyone’s guess.58 38 Member States have normally failed to show that additional works complied with the requirements which are now repeated in Article 32(5). This was the case with Italy, which had directly awarded to the concessionaire exploiting some motorways complex works to improve, including widening and linking to other routes, the same motorways.59 A more complex case stemmed from an infringement procedure brought by the Commission against Spain accused of failing to include in the concession notice and in the tendering specifications relating to the award of a public concession for the construction, maintenance and operation of the link roads from the A-6 motorway to Segovia and Ávila, and for the maintenance and operation from 2018 of the VillalbaAdanero section of the A-6 motorway, certain works which were subsequently awarded with the contract. The Spanish government contended that under domestic law tenderers were allowed to propose improvements to the works tendered and that this was the case, but the Court of Justice concluded that additional works had, in the end, been awarded without complying with EU rules.60 39 The issue of the three years limit was raised in the infringement procedure against Italy concerning the direct award of river management works to an economic operator who had already been awarded such works along the same river almost two decades earlier.61 The Italian government argued that the three years period ran from the completion of the works under the original contract and not from the time when that contract was awarded. Alternatively, it claimed that the Italian version of the provision of the directive, which used the words ‘conclusion of the procurement’ (conclusione dell’appalto) in the place of ‘conclusion of the contract’ was ambiguous.62 The Court of Justice held 36

The inconsistencies in the rules are highlighted by S. Treumer, 2014, p. 292 et seq. Joined Cases C-187/04 and C-188/04, Commission v Italy, not yet published in the ECR. 60 Case C-423/07, Commission v Spain [2010] ECR I-3429, paragraph 74. 61 Case C-385/02, Commission v Italy [2004] ECR I-8121.

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that, in the light of a comparison of the different language versions of that provision, the expression ‘conclusion of the original contract’ had to be understood as meaning “the time when the original contract was entered into and not as referring to the completion of the works to which the contract relates”.63 This conclusion was also sustained by the exceptional character of the clauses allowing the recourse to a negotiated procedure without prior publication:64 “as it is a derogating provision which falls to be strictly interpreted, the interpretation which restricts the period during which the derogation applies must be preferred rather than that which extends it. That objective is met by the interpretation which takes the starting point as being the date on which the original contract is entered into rather than the, necessarily later, date on which the works which are its subject-matter are completed”.

Legal certainty too militated for the solution since while the date on which a contract is entered into is certain, numerous dates may be treated as representing the completion of the works.65 The new Public Sector Directive has done away with another case of negotiated pro- 40 cedure without prior publication which in Article 31(4) of Directive 2004/18/EC came before additional works or services conforming to a basic project. Lit. (a) of that provision allowed, subject to certain conditions, direct award to the original contractor of additional works or services not included in the project initially considered or in the original contract but which had, through unforeseen circumstances, become necessary for the performance of the works or services described therein.66 Under the new directive this situation is covered either by the general clause in Article 32(2)(c) on award in situations of extreme urgency or – and more often – by the new rules on modifications of contracts during their term laid down in Article 72.67

Chapter II Techniques and instruments for electronic and aggregated procurement Article 33 Framework agreements 1. Contracting authorities may conclude framework agreements, provided that they apply the procedures provided for in this Directive. A framework agreement means an agreement between one or more contracting authorities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged. The term of a framework agreement shall not exceed four years, save in exceptional cases duly justified, in particular by the subject of the framework agreement. See also the discussion in Bovis, EU Public Procurement Law, 2012, p. 401. Paragraph 34. 64 Paragraph 37. 65 Paragraph 38; moreover, “while the date on which the contract is entered into is clearly established at the outset, the date of completion of the works, whatever definition is adopted, may be altered by accidental or voluntary factors for so long as the contract is being carried out”. 66 See See Gonzáles Garcia, ‘Classic procurement Procedures’, in: Trybus/Caranta/Edelstam (eds), 2014, p. 74 et seq. 67 See also Lichère, ‘New Award Procedures’, in: Trybus/Caranta/Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, 2014, p. 165. 62

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2. Contracts based on a framework agreement shall be awarded in accordance with the procedures laid down in this paragraph and in paragraphs 3 and 4. Those procedures may be applied only between those contracting authorities clearly identified for this purpose in the call for competition or the invitation to confirm interest and those economic operators party to the framework agreement as concluded. Contracts based on a framework agreement may under no circumstances entail substantial modifications to the terms laid down in that framework agreement, in particular in the case referred to in paragraph 3. 3. Where a framework agreement is concluded with a single economic operator, contracts based on that agreement shall be awarded within the limits of the terms laid down in the framework agreement. For the award of those contracts, contracting authorities may consult the economic operator party to the framework agreement in writing, requesting it to supplement its tender as necessary. 4. Where a framework agreement is concluded with more than one economic operator, that framework agreement shall be performed in one of the following ways: (a) following the terms and conditions of the framework agreement, without reopening competition, where it sets out all the terms governing the provision of the works, services and supplies concerned and the objective conditions for determining which of the economic operators, party to the framework agreement, shall perform them; the latter conditions shall be indicated in the procurement documents for the framework agreement; (b) where the framework agreement sets out all the terms governing the provision of the works, services and supplies concerned, partly without reopening of competition in accordance with point (a) and partly with reopening of competition amongst the economic operators parties to the framework agreement in accordance with point (c), where this possibility has been stipulated by the contracting authorities in the procurement documents for the framework agreement. The choice of whether specific works, supplies or services shall be acquired following a reopening of competition or directly on the terms set out in the framework agreement shall be made pursuant to objective criteria, which shall be set out in the procurement documents for the framework agreement. These procurement documents shall also specify which terms may be subject to reopening of competition. The possibilities provided for under the first paragraph of this point shall also apply to any lot of a framework agreement for which all the terms governing the provision of the works, services and supplies concerned are set out in the framework agreement, regardless of whether all the terms governing the provision of the works, services and supplies concerned under other lots have been set out. (c) where not all the terms governing the provision of the works, services and supplies are laid down in the framework agreement, through reopening competition amongst the economic operators parties to the framework agreement. 5. The competitions referred to in points (b) and (c) of paragraph 4 shall be based on the same terms as applied for the award of the framework agreement and, where necessary, more precisely formulated terms, and, where appropriate, other terms referred to in the procurement documents for the framework agreement, in accordance with the following procedure: 442

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(a) for every contract to be awarded, contracting authorities shall consult in writing the economic operators capable of performing the contract; (b) contracting authorities shall fix a time limit which is sufficiently long to allow tenders for each specific contract to be submitted, taking into account factors such as the complexity of the subject-matter of the contract and the time needed to send in tenders; (c) tenders shall be submitted in writing, and their content shall not be opened until the stipulated time limit for reply has expired; (d) contracting authorities shall award each contract to the tenderer that has submitted the best tender on the basis of the award criteria set out in the procurement documents for the framework agreement. Literature: Arrowsmith, The Law of Public and Utilities Procurement, chap. 11; Carina Risvig Hamer, ‘Regular purchases and aggregated procurement: the changes in the new Public Procurement Directive regarding framework agreements, dynamic purchasing systems and central purchasing bodies’, in PPLR 2014, 4, 201-210; Steinicke and Groesmeyer, EU’s Udbudsdirektiver, p. 245-251 and 887-927; Peter Trepte, Public Procurement in the EU – A Practioner’s Guide, 4.47 et seq. and 7.158 et seq.; Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, p. 398 et seq.; Marta Andrecka, Framework agreements, EU procurement law and the practice, UrT 2015, no 2; Marta Andrecka, ‘Clarification or missed opportunity? The provision on framework agreements in the 2014 Directive’, in: Grith Skovgaard Ølykke and Albert Sanchez Graells (eds), Reformation or Deformation of the EU Public Procurement Rules in 2014 (Edward Elgar Publishing, Cheltenham 2016), Carina Risvig Hamer, Grundlæggende Udbudsret, Djøf Forlag, 2016, chap. 5. 33.1. Framework agreements – the set up. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.1.1. Mandatory implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.1.2. Definition of a framework agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.1.3. Establishing a framework agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.1.4. The length and expiry of a framework agreement . . . . . . . . . . . . . . . . . . . . . . 33.2. The award of contracts based on a framework agreement . . . . . . . . . . . . . . . . . 33.2.1. The parties to the agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.2.2. Modification of a framework agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.3. Framework agreements with one economic operator . . . . . . . . . . . . . . . . . . . . . . 33.4. Framework agreements with more than one economic operator . . . . . . . . . . 33.4.1. Where all the terms are stated beforehand (fixed terms). . . . . . . . . . . . . . . . 33.4.2. Where all the terms are not stated beforehand. . . . . . . . . . . . . . . . . . . . . . . . . . 33.4.3. Two types of procedure to award a call-off contract. . . . . . . . . . . . . . . . . . . . . 33.5. The mini-competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.5.1. The invitation to tender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.5.2. Submission and evaluation of tender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 5 8 20 26 34 36 42 45 52 55 62 68 72 74 80

A framework agreement is an efficient tool to ensure delivery over a longer period 1 while at the same time it is not necessary to conduct a procurement procedure every time the contracting authority needs a new delivery. Framework agreements can be organised in many different ways and create flexibility for contracting authorities, hence it is perhaps not surprising that the use of framework agreements in most Member States has increased during the last years.1 1 See e.g. The study prepared for the Commission, March 2011, by PwC, London Economics and Ecorys “Public procurement in Europe – cost and efficiency”, p. 5, which states: “The use of framework agreements has been increasing rapidly at an average 18 percent per year since 2006. Most of this growth occurred in large procurers such as France and Spain. Norway, Sweden and Denmark have traditionally made the most use of framework agreements. Conversely, frameworks are used the least in Southern Europe and in the smaller EEA countries.” See also the Commission’s Evaluation Report ‘Impact and Effectiveness of EU Public Procurement Legislation’, part 1 SEC(2011) 853 final, (henceforth “the Commission’s Evaluation Report”), which states that from 2006 to 2009 the use of framework contracts has increased by almost a factor of four.

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Central purchasing bodies often conclude framework agreements (see on central purchasing bodies the commentary to Article 37). In such cases the framework agreements frequently have a large value due to the fact that the needs of the contracting authorities have been aggregated. Aggregated procurement has the advantage of achieving economies of scale while at the same time it is only necessary to conduct one procurement procedure for all the involved parties thereby reducing costs for both contracting authorities and economic operators and ensuring better value for money. Together with dynamic purchasing systems (and electronic catalogues) framework agreements provide an efficient procurement technique for aggregated procurement. 3 Framework agreements had been concluded in the Member States prior to the 2004 Directive, but it was not until the 2004 Directive that a definition, as well as specific rules on framework agreements became a part of the Public Sector Directive. 2 4 Regarding the 2014 Directive, it was the Commission’s intention that the provision on framework agreements should be maintained largely as it was in the 2004 Public Sector Directive.3 Nevertheless, the provision was amended slightly in the 2014 Public Sector Directive,4 but most of the changes mainly involve clarifications of the current state of law. The perhaps most important clarification is that a framework agreement with more than one economic operator can include more than one type of procedure to award a contract. Thus, both mini-competition between the economic operators and award based on the terms in the framework agreement can consist in the same framework agreement if it is possible to choose between the two types of procedures to award a contract with objective criteria (see below section 33.4.3). However, important elements such as the types of procedures to award a contract have not been changed (see section 33.3).5 2

33.1. Framework agreements – the set up 33.1.1. Mandatory implementation 5

According to Article 33(1) contracting authorities may conclude framework agreements, provided that they apply the procedures described in the Directive. In the 2004 Directive it was voluntary for Member States to implement the provision on framework agreements. The current provision in Article 33 on framework agreements is no longer a voluntary option for Member States to implement, rather Member States are obliged to transpose the provision into national legislation. This ensures that the same procure2 Directive 2004/18/EC Article 32. See also Recital 11 of the 2004 Directive. The utilities directive already had a provision on framework agreement prior to the 2004/17/EC Directive, see Directive 93/38/EEC Article 5. 3 Proposal for a Directive of the European Parliament and of the Council on public procurement, COM(2011) 896 final, henceforth the Commission’s proposal, Recital 21 states “The instrument of framework agreements has been widely used and is considered as an efficient procurement technique throughout Europe. It should therefore be maintained largely as it is.” 4 Also the new 2014 Utilities Directive now contains slightly more detailed rules on framework agreements, though the rules are still more flexible than the rules in the Public Sector Directive. It is for example possible under the Utilities Directive for a framework agreement to run for 8 years instead of 4 as prescribed in the Public Sector Directive and a contract based on a framework agreement is only required to be awarded on the basis of objective rules and criteria. See on this the commentary to Article 55 of the Utilities Directive. 5 Besides the procedures to award a contract listed in Article 33, the 2014 Directive also contains a new type of call-off for framework agreements, which have been concluded with more than one economic operator and where tenders have been submitted in the form of an e-catalogue. In such cases the reopening of competition for specific contracts can take place on the basis of updated catalogues by following one of the two procedures listed in Article 36. See on this the commentary to Article 36.

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ment instruments are available in all Member States and for the individual contracting authority it does not depend on in which Member State the authority is located. Some Member States use framework agreements often where others seem not to use 6 them at all. For example Denmark, UK and the Netherlands use framework agreements quite frequently whereas Malta, Luxembourg and Cyprus according to the Commission’s Evaluation Report do not use them at all.6 Making sure all Member States implement the provision on framework agreements might lead to more frequent use in some Member States. It also creates better options for contracting authorities located in different Member States to conduct procurement together since the origin of the national rules are identical (see on joint cross-border procurement the commentary to Article 39). Member States can also choose to make it mandatory for certain purchases to be con- 7 ducted by framework agreements established by a central purchasing body. Article 37 states “… Member States may provide that certain procurements are to be made by having recourse to central purchasing bodies or to one or more specific central purchasing bodies.” Even though this was not explicitly mentioned in the 2004 Directive the option for Member States to make certain purchases mandatory is not new. In Denmark for example, the Finance Ministry often creates framework agreements, which are mandatory for the Danish state to use.7 33.1.2. Definition of a framework agreement A framework agreement is an agreement where the terms of the specific contract (or 8 the specific deliveries) are established in the agreement. Framework agreements can be set up with one supplier or with multiple suppliers as well as they can be organised by one contracting authority or by several contracting authorities, including central purchasing bodies. In some cases it will be mandatory for the contracting authority to use the framework agreement and in other cases not. Some framework agreements will establish all the terms of the specific deliveries and others will not. In the latter case competition will be reopened for the award of the specific contract. Thus, the characteristics of a framework agreement depend on how the contracting authority chooses to set up the framework agreement.8 A framework agreement is not a type of procedure, which can also be seen from the 9 fact that the rules on framework agreements are located in the Directive’s Chapter II under the title “Techniques and instruments for electronic and aggregated procurement”. Thus, framework agreements can be seen as a procurement technique and not a procedure. In fact, entering into a framework agreement must take place by following one of the procedures in the Directive. If taking a closer look at the definition of a framework agreement in the Directive, 10 Article 33(2) states that “A framework agreement means an agreement between one or more contracting authorities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged.” 9 Thus, according to the Directive’s definition a framework agreement establishes the conditions for several See the Commission’s Evaluation Report, part 1, p. 100. Also Statens og Kommunernes Indkøbsservice A/S (SKI) operates some binding agreements which also covers the municipalities in Denmark, see e.g. https://www.ski.dk/viden/Documents/Vejledning_Forpligtende_rammeaftaler_formaal_koncept_anvendelse.pdf. 8 See Arrowsmith, The Law of Public and Utilities Procurement, p. 671 et seq. where she describes various types of framework agreements. 9 Same definition was found in Directive 2004/18/EC, Article 1(5) and in Article 1(4) of Directive 2004/17/EC. 6

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contracts during a given period (such a period must be of maximum 4 years, see below section 33.1.3.). Framework agreements can in that regard exist with multiple suppliers as well as for multiple contracting authorities. One way to see a framework agreement is that the framework agreement itself is a contract and that the specific deliveries “the call-offs” are orders the contracting authority makes and where the economic operator is obliged to deliver the goods, services or works on terms already established in the agreement. Another way to see framework agreements is that since framework agreements only set out the terms and conditions for subsequent call-offs, but (as a main rule) do not as such oblige the contracting authority to purchase anything framework agreements should perhaps not be considered as contracts. Thus, it is not surprising that some authors discuss whether a framework agreement is a contract in cases where the contracting authority is not required to use the framework agreement; hence the framework agreement does not create binding obligations for the contracting authority.10 The Remedies Directive states in Article 1(1) “Contracts within the meaning of this Directive include public contracts, framework agreements, public works concessions and dynamic purchasing systems.” Hence, a framework agreement is seen as a contract within the meaning of the Remedies Directive and the rules regarding standstill and ineffectiveness apply to framework agreements as well. 11 Also the CJEU has found, that a framework agreement is to be considered as a public contract.12 What makes a framework agreement characteristic is that contracting authorities are not obliged to use a framework agreement (unless the framework agreement specifies that they are). Hence, a framework agreement can be seen as a sort of “standing offer” from the economic operator. This also means that contrary to a regular type of contract the economic operator is not guaranteed a minimum sale on the agreement (and hence profit) or any sale at all. In some cases the contracting authority will create a framework agreement on a sort of exclusivity terms in the sense that if the contracting authority needs a given product the authority is obliged to purchase that product via the framework agreement.13 Even in such cases will it be necessary for the contracting authority to create a specific call-off contract at a later stage. Exclusivity means that the economic operator will be guaranteed some sale on the basis of the framework agreement and often such exclusivity terms will result in lower prices. The framework agreement will specify how specific contracts – call-offs – are to be awarded during the lifetime of the framework agreement and it will contain the general conditions for the contract including elements such as provisions regarding penalties for breach of contract as well as other relevant contract clauses. Framework agreements are often used when during a given period the contracting authority needs to buy certain products (often similar products, but not always), but does not exactly know what its needs will be in that period of time. By creating a framework agreement the contracting authority ensures that it can purchase these products 10 Some authors also argue that if the framework agreement commits the contracting authority to purchase under the agreement a specific amount, it is not a regular framework agreement, but merely a contract. The discussion will not be pursued further here. See e.g. Trepte, Public Procurement in the EU – A Practioner’s Guide, p. 208, and Arrowsmith, The Law of Public and Utilities Procurement, p. 671, who argues that where the contracting authority for example undertakes to buy all or part of its future requirements from the provider, the agreement will generally constitute a binding contract. 11 See on standstill and ineffectiveness the commentary to the Remedies Directive in part V, Article 2 a and 2 d. 12 See C-113/13, Spezzino. 13 In Denmark, for example, such mandatory framework agreements exist for certain purchases for the State.

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without conducting a procurement procedure in all cases where it needs delivery of the given products. Thus, one of the main advantages of a framework agreement is that it is not necessary for the contracting authority to procure every time it is in need of the product, but can use the framework agreement to fulfil its specific needs. Another advantage will often be achieving economies of scales especially in the cases where a central purchasing body on behalf of multiple contracting authorities enters into framework agreements. Framework agreements are often used for products, which a contracting authority needs on a regular basis, but where the authority does not know the quantity for a given period, such as office supply, spare parts, computers, groceries etc. For services framework agreements can be useful for maintenance services, temporary employment services – services which the contracting authority uses on a regular basis, but does not know how often. For works framework agreements can be construed as for certain standardised works such as for example maintenance services for buildings. However, all types of supplies the contracting authority wants to buy can be the subject of a framework agreement and practise also shows that also very complex services in recent years have been procured via framework agreements. It is possible to set up a framework agreement with one economic operator or with several economic operators. Framework agreements with one economic operator could for example be the case where a contracting authority needs simple goods such as paper on a regular basis and enters into an agreement with one economic operator. The economic operator will then deliver paper whenever the contracting authority needs it. Framework agreements with more than one economic operator can be created where all the terms are established beforehand or where the terms are not established beforehand. If the terms are established beforehand the contracting authority could use a cascade model in the sense that where a contracting authority needs paper he is obliged to contact economic operator number one, if number one cannot deliver economic operator number two will be contacted and so on. Framework agreements with more than one economic operator can also be created where all the terms are not established beforehand and the contracting authority will need to reopen competition among the economic operators for example asking them to resubmit a tender and award the paper contract based on lowest price. See below section 33.3. for further on the types of framework agreements. When a framework agreement is concluded by a central purchasing body the goods, services and works involved can be more specialised in the sense that framework agreements could exist on almost anything contracting authorities wish to purchase and when purchasing through a central purchasing body the contracting authorities do not need to conduct a whole procurement procedure themselves, but can use the agreement and perhaps only mini-competitions would be for the contracting authority to conduct. The framework agreement can (and often will) include an important number of products and will be divided into minor sub-agreements. This means that different suppliers may exist under the same framework, but not for all sub-agreements. Minor subagreements also imply the advantage of creating better options for SMEs to participate for the award of a framework agreement as SMEs do not always need to be in a position to supply all types of products covered by the framework agreement but only a selection. Depending on how a framework agreement is construed, a framework can be an advantage as well as a disadvantage for SME’s. Thus, large framework agreements with a single supplier, awarded by several contracting authorities for a longer period could hinder opportunities for SMEs to get the contract.14 On the other hand a framework agreement construed with different lots, could create better opportunities for SMEs since it

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will be easier to tender and deliver smaller parts. Framework agreements may according to Recital 61 not be used improperly or in such a way as to prevent, restrict or distort competition. This also implies that contracting authorities may not organize a tender for a framework agreement in such a way that a particular supplier will be awarded the contract. 33.1.3. Establishing a framework agreement As already mentioned above, it is possible to set up a framework agreement with one economic operator or with several economic operators. Framework agreements with one economic operator tend to be simpler than framework agreements with multiple economic operators, but framework agreements with multiple economic operators guarantee delivery and can, when reopening the competition, result in lower prices during the lifetime of the framework agreement as prices will adjust to the market. Thus, it is not always straightforward what type of framework agreement should be concluded. 21 A framework agreement is a closed system where new contracting authorities as well as suppliers cannot be added to the framework agreement during its lifetime. This means that contracting authorities, which are not parties to the framework agreement from the outset, cannot use the agreement (see further on this below at section 33.5). 22 The framework agreement itself must be concluded on the basis of one of the procedures in the Public Sector Directive like any other type of contract. Article 33(1) states “… provided that they apply the procedures provided for in this Directive”. Most frequently the open procedure has been used, but the restricted, negotiated and competitive dialogue procedures are also represented.15 This also means that the provisions in the Public Sector Directive on selection and award criteria must be observed. In that regard it should be borne in mind that Article 58(3) states that for framework agreements the contract value shall be calculated on the basis of the expected maximum size of specific contracts that will be performed at the same time, or, where it is not known, on the basis of the estimated value of the framework agreement (see on this the commentary on Article 58). The contracting authority must also specify the subject matter of the framework agreement, sub-agreements, the technical specifications, which in principle will be the same requirements, which apply when purchasing through a regular contract. 23 Besides the regular information, in the case of a framework agreement the information to be included in the contract notice also includes: 20

– Indication of the planned duration of the framework agreement, stating, where appropriate, the reasons for any duration exceeding four years (see below section 33.1.4). – As far as possible, indication of value or order of magnitude and frequency of contracts to be awarded, number and, where appropriate, the proposed maximum number of economic operators to participate (see below at section 33.2.3). 16 The reference above to “as far as possible, indication of value or order of magnitude and frequency of contracts to be awarded, number” means that the contracting authority must 14 Large framework agreements as well as aggregated procurement can, however, be an adequate possibility in markets where few suppliers has market power, see for a discussion on this matter Albert Sánchez Graells and Ignacio Herrera-Anchustegui, Impact of Public Procurement Aggregation on Competition: Risks, Rationale and Justification for the Rules in Directive 2014/24, available at http://ssrn.com/ abstract=2534496. 15 Commission’s Evaluation report, p. 99. 16 See Annex V Information to be included in Notices, Part C (information to be included in contract notices), provision 10(a).

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make an assessment of the value of the contracts to be awarded during the lifetime of the framework agreement.17 Estimating the value of the entire framework as well as the frequency of contracts can be complicated particularly for central purchasing bodies, which concludes framework agreements on behalf of many contracting authorities since in such cases the central purchasing body will not know the intention as well as the needs of the contracting authorities. However, the contracting authority must make its best assessment based on the information it has available, such as for example turnover under previous framework agreements, changes in the market, further products added to the framework agreement etc. An estimated value provides transparency as to the type of contracts and can be crucial for tenderers’ assessment as to whether they wish to submit a tender for the framework agreement. Thus, it is necessary that the contracting authority estimates the value of the framework agreement in the best possible way. 18 In the 2004 Directive it was stated “the estimated total value of the services for the entire duration of the framework agreement”,19whereas the new wording, particular the expression “as far as possible” indicates that the contracting authority has been given further flexibility in the sense that an estimated total value is only required if its possible. Nevertheless, the contracting authority must form an estimate. Before the framework agreement is concluded a standstill period in accordance with 24 the Remedies Directive Article 2 a, must be observed and the contracting authority must as soon as possible inform each candidate and tenderer of decisions reached concerning the conclusion of a framework agreement in accordance with Article 55. After the conclusion of the framework agreement a contract award notice 20 must be 25 sent in accordance with Article 50. The rules on individual reports in Article 84 must also be observed. 33.1.4. The length and expiry of a framework agreement The length of a framework agreement shall not, according to Article 33(1): “… exceed 26 four years, save in exceptional cases duly justified, in particular by the subject of the framework agreement.”21 Thus, it is the main rule that a framework agreement does not run for longer than 4 years and only in ‘exceptional cases’ can a framework agreement run longer. A maximum length of a framework agreement seeks to ensure flexibility and guarantee respect for the general principles, in particular the principle of equal treatment.22 As new economic operators cannot be added to the framework agreement dur17 Such an assessment must also be made in order to see if the thresholds in Article 4 have been reached. The methods for calculating the estimated value of procurement must be done in accordance with Article 5(5), where in the case of a framework agreement the value to be taken into consideration shall be the maximum estimated value net of VAT of all the contracts envisaged for the total term of the framework agreement, for further on the estimated value, see the comments to Article 4 and 5. 18 Lichere refers to a French Case, CE, 24 octobre 2008, Communauté d’agglomération de l’Artois, n° 313600, available on www. legifrance.gouv.fr., where the French judgment compelled a contracting authority to give an indication as to the probable quantity to be purchased. See Lichere, Francois, ‘Chap. 4: new Award Procedures’, in: Trybus/Caranta/Edelstam (eds), European Union law of Public contracts: Public Procurement and beyond, p. 96. 19 See for example Annex VII a, part 6 (a.). 20 Article50(3)(3) ”In the case of framework agreements concluded in accordance with Article 33, contracting authorities shall not be bound to send a notice of the results of the procurement procedure for each contract based on that agreement. Member States may provide that contracting authorities shall group notices of the results of the procurement procedure for contracts based on the framework agreement on a quarterly basis. In that case, contracting authorities shall send the grouped notices within 30 days of the end of each quarter.”. 21 The same wording was found in Article 32(2) of the 2004 Public Sector Directive. 22 See the 2004 Directive, Recital 11.

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ing the lifetime of the framework agreement a maximum length of the framework agreement seeks to ensure that new competition take place, hence equal treatment of the tenderers. The European Parliament had proposed extending the maximum duration of framework agreements to five years with the possibility to make even longer framework agreement in case “a) the subject of the framework agreement concerns works or services that will take longer than five years to carry out; or (b) economic operators need to make investments for which the amortisation period is longer than five years or which are linked to maintenance, the recruitment of suitable staff to perform the contract or the training of staff to perform the contract.”23 However, the Parliament’s proposal was not a part of the final version of the Directive. What did become part of the final version is a clarification of what can be considered as exceptional cases allowing for the length of the framework agreement to be longer. According to the recitals, an exceptional case, which can justify a longer lifetime for a framework agreement may “… arise for instance where economic operators need to dispose of equipment for which the amortisation period is longer than four years and which must be available at any time over the entire duration of the framework agreement.”24 The wording is almost identical to the Parliament’s proposal on what could justify exceptional circumstances for a longer period than 5 year. Thus, the clarification could perhaps be seen as a way to create a compromise by not introducing a longer lifetime for a framework agreement and instead of that introducing clarifications as to exceptional cases in line with the Parliament’s proposal.25 Other examples which can justify a longer period for a framework agreement might include similar situations where the economic operator has significant start-up costs besides the above-mentioned example for investment in equipment. This could for example include education of personnel. Poulsen states that a longer duration might also be justified if the underlying supply relates to a project that lasts more than four years. 26 Nevertheless, it will still be the main rule that a framework agreement may not run longer than 4 years and, as always, exceptions must be interpreted narrowly. It should be borne in mind that framework agreements should not be used improperly or in such a way as to prevent, restrict or distort competition.27 A long life time for a framework agreement can restrict competition in the sense that it will not be possible for new economic operators to be included in the framework agreement. If a framework agreement distorts competition it will not be permissible to conclude the agreement. It has been argued that it is possible that also framework agreements for a duration of less 23 The Parliament’s report on the proposal for a directive of the European Parliament and of the Council on public procurement, January 11, 2013, which can be found at http://www.europarl.europa.eu/documen t/activities/cont/201301/20130115ATT59102/20130115ATT59102EN.pdf last visited June, 2014, henceforth the Parliament’s report, amendment 135. 24 The 2014 Directive Recital 62. 25 A long lifetime for a framework agreement often has a negative impact for SMEs, see e.g. the Parliament’s report on SMEs “Potential impact on SMEs of certain EP amendments to two proposed Public Procurement Directives.” Thus, it is a little peculiar that the proposal to make it possible for contracting authorities to create longer framework agreements came from the Parliament since the Parliament generally had been more SME friendly in its approach to the changes in the 2014 Directives. 26 Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, p. 401. 27 Recital 62 which states “Framework agreements should not be used improperly or in such a way as to prevent, restrict or distort competition.” The wording in the 2004 Directive was placed in the provision on framework agreements. The moving of the phrase to the recitals does not indicate any change of the state of law as contracting authorities should always live up to the principles and, in fact, the principle of competition has been incorporated in the 2014 Directive Article 18.

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than 4 years could distort competition. Sánchez Graells argues as follows: “Therefore, even under the thresholds of four years of duration, contracting authorities must set the validity of the agreement so as to avoid unnecessary restrictions and distortions of competition, based on a case by case analysis.”28 Also Arrowsmith, states that it is arguable that the general provision prohibiting abuse of frameworks might require a term of below even four years for some frameworks.29 Although the point of view that competition concerns may lead to a desire to create framework agreements of shorter duration, it will be difficult for an economic operator to pursue such a concern in courts as there is no general requirement with regard to the lifetime of a contract, and considering that the Directive has only laid down that 4 years as the maximum thereby indicating that 4 years would indeed be permitted. However, contracting authorities should be careful when setting a longer duration than 4 years of the framework agreement as this can only take place in limited cases. In the contract notice the contracting authority must indicate the planned duration of 31 the framework agreement, stating, where appropriate, the reasons for any duration exceeding four years. Thus, the length of the framework agreement must be established early on. It is possible to include an option as long as the option – as a main rule – does not exceed the maximum duration of 4 years.30 Thus, a framework agreement could for example last 2 years with an option for another 2 years. The duration of the framework agreement must be established in the contract notice and contracting authorities cannot wait until a later stage to determine the length.31 One way to create flexibility for the contracting authority could be by establishing a framework agreement of 4 years with the possibility to terminate the framework agreement at an earlier point in time. It has been clarified in the 2014 Directive that it is possible to award an individual 32 contract, a ‘call off ’, just before the expiry of the framework agreement, but where the performance of the contract (delivery of goods etc.) takes place after the expiry of the framework agreement. 32 This means that a contract may run longer than the framework agreement itself, which is in fact already permitted under the 2004 Directive, though not explicitly mentioned therein.33 The length of the individual contract is not regulated in the Directive. Thus, in prin- 33 ciple a contract can run longer and even more than 4 years.34 The reasons that may legitimise a longer period than 4 years probably apply to the individual contracts as well. In fact, Recital 62 furthermore states that “In particular, it should be allowed to set the length 28 Albert Sanchez Graells, Public Procurement and the EU Competition Rules (Hart Publishing, 2011), p. 294, who also argue that the larger the number of contracting authorities involved in the framework agreement, the shorter the desirable period for the framework agreement. 29 Arrowsmith, The Law of Public and Utilities Procurement, p. 700. 30 Reasons which could justify a longer option would be the same which can justify a longer lifetime for the framework agreement itself. 31 See also Steinicke and Groesmeyer, p. 902, who argue that it is not possible to conclude framework agreements, which are indefinite as this will be a circumvention of the maximum duration of 4 years. 32 Recital 66 states “… while contracts based on a framework agreement are to be awarded before the end of the term of the framework agreement itself, the duration of the individual contracts based on a framework agreement does not need to coincide with the duration of that framework agreement, but may, as appropriate, be shorter or longer.” 33 See e.g. the Commission’s Explanatory note on framework agreements, p. 5, which states: “However, the framework agreement can of course continue to be used right until the end, even if the performance of a specific contract based on the framework agreement would take place after expiration of the framework agreement itself.” 34 See in that regard also Case C-454/06, Pressetext Nachrichtenagentur GmbH v. Austria, APA-OTS Originaltext-Service GmbH and APA Austria Presse Agentur registrierte Genossenschaft mit beschränkter Haftung [2008] ECR I-4401, p. 74. For further on the length of contracts see U.2010B.190 Christina D. Tvarnø, Offentligt-Privat Partnerskab (OPP).

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of individual contracts based on a framework agreement taking account of factors such as the time needed for their performance, where maintenance of equipment with an expected useful life of more than four years is included or where extensive training of staff to perform the contract is needed.” Once again the contracting authority must be careful not to restrict competition by creating long contracts. In this context, the principle of proportionality must be borne in mind in that regard that the contracting authority does not conclude a contract for a longer period than what is deemed necessary.

33.2. The award of contracts based on a framework agreement According to Article 33(2) “Contracts based on a framework agreement shall be awarded in accordance with the procedures laid down in this paragraph and in paragraphs 3 and 4.” Paragraph 3 deals with situations where a framework agreement is concluded with one economic operator (se section 33.3) and paragraph 4 contains the situations where a framework agreement is concluded with multiple economic operators (see section 3.4). 35 The framework agreement itself must have been concluded based on one of the procedures in the Directive (see above section 33.1.3.). 35 In both procedures to award a contract it is necessary that the parties concluding the framework agreement have been established from the beginning as only contracting authorities and the economic operators originally party to the framework agreement can use the framework agreement (see section 33.2.1 below) and it is important that the framework agreement continues to be applied on the basis of the same criteria as was set from the outset, hence no substantial modifications may be made (section 33.2.2 below). 34

33.2.1. The parties to the agreement Only contracting authorities and the economic operators originally party to the framework agreement can use the framework agreement. Article 33(2) states “Those procedures may be applied only between those contracting authorities clearly identified for this purpose in the call for competition or the invitation to confirm interest and those economic operators party to the framework agreement as concluded.” Thus, it is not possible for new contracting authorities or economic operators to become parties to the agreement. 37 One question in this regard is whether it is necessary to have all contracting authorities mentioned in the Contract Notice, or whether listing specific categories e.g. “all municipalities in a given region, a given Member State etc.” will be sufficient. This question has been clarified in the 2014 Directive where Recital 66 now states that the parties should be clearly identified from the outset, which can be done “… either by name or by other means, such as a reference to a given category of contracting authorities within a clearly delimited geographical area, so that the contracting authorities concerned can be easily and unequivocally identified.“ Thus, it is not necessary that all the contracting authorities are mentioned in the contract notice by their names, but a reference to a separate document or a list on a website containing the types of contracting authorities on a given geographical area will be sufficient. The interpretation of the 2004 Public Sector Directive leads to the same conclusion.36 36

35 Besides the procedures to award a contract listed in Article 33, the Directive also contains a new type of call-off for framework agreements, which have been concluded with more than one economic operator and where tenders have been submitted in the form of an e-catalogue. In such cases the reopening of competition for specific contracts can take place on the basis of updated catalogues by following one of the two procedures listed in Article 36. The alternative methods in the provision on e-catalogues can only be used when an e-catalogue is the tender itself, hence not in cases where a catalogue is only a part of a tender.

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The fact that contracting authorities must be easily and unequivocally identified from 38 the outset means that it is not permitted to refer in the contract notice to e.g. all “new hospitals” or similar since such contracting authorities do not exist and hence cannot be easily and unequivocally identified from the outset. The Parliament had suggested that it should be possible to add contracting authorities to a framework agreement operated by a central purchasing body under certain circumstances.37 However, this was not part of the final version of the Directive. The fact that the contracting authorities must be identified in the framework agreement from the outset also means that new contracting authorities on a central purchasing body can only use the central purchasing body´s future framework agreements. In many cases central purchasing bodies cover a large number of contracting authorities, for example the parties to the framework agreements concluded by the largest Danish central purchasing body (SKI) include most of the Danish State as well as municipalities. It also includes a large number of bodies governed by public law.38 Regarding the number of suppliers in case of a framework agreement with multiple 39 suppliers, the 2004 Directive stated in Article 32(4) that a framework agreement should be concluded with at least three economic operators (if there are a sufficient number of qualified candidates/admissible tenders). This requirement has been eliminated in the 2014 Directive, making it possible to conclude framework agreements with only two economic operators even where other admissible tenders have been submitted. The contracting authority must state in the contract notice, where appropriate, the proposed maximum number of economic operators which will be a part of the framework agreement. If the framework agreement itself is not concluded using the open procedure, it is also possible to reduce the number of otherwise qualified candidates to be invited to participate in the competition for the framework agreement at an earlier stage. In such case the minimum number of candidates to be invited must be 5 for restricted procedure and 3 for the competitive procedures. For further information see the commentary to Article 65. Despite the fact that a framework agreement is a closed system, it is not unusual that 40 a supplier leaves the framework agreement. This could be the case if an economic operator goes bankrupt or similar. In such a situation the question is whether the contracting 36 See e.g. the Commission’s explanatory note on framework agreements p.5, which states: “When a framework agreement is to be used by several contracting authorities, therefore, these contracting authorities must be identified explicitly (footnote left out) in the contract notice, either by naming them directly in the notice itself or through reference to other documents (e.g. the specifications or a list available from one of the contracting authorities (footnote left out), etc.).” From a Danish perspective see, e.g., the statement from the Danish Competition and Consumer Authority from January 27, 2009 in the case “Klage over DAB´s udbud af rammeaftaler om teknisk totalrådgivning ved både nybyggeri og renovering”, where the Authority found that a broad concept of contracting authorities in the contract notice was permitted where the suppliers could get access to a list by contacting the contracting authority. See also the decision of September 25, 2012 from the Danish Complaints Board for Public Procurement which in a case before it found that it constituted a breach of the principle of transparency that the contract notice contained a reference to “all UU centres” despite the fact that not all of these had consented to purchase via the agreement. See also Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, p. 402; Peter Trepte, Public Procurement in the EU – A Practioner’s Guide, p. 440. 37 Parliament’s report, amendment 136, which states “After conclusion of the framework agreement, the number of participating contracting authorities may only be increased where the following conditions are met: (a) the framework agreement has been concluded by a central purchasing body; (b) the possibility of such an increase is expressly provided for in the contract notice; (c) the scope for the increase can be determined on the basis of clear criteria; and (d) all parties to the framework agreement agree to the increase.”. 38 For dynamic purchasing systems it is explicitly mentioned in the Directive, Article 37(1) that “Where a dynamic purchasing system which is operated by a central purchasing body may be used by other contracting authorities, this shall be mentioned in the call for competition setting up that dynamic purchasing system.”

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authority can replace the economic operator with another. The Directive explicitly allows for replacing an economic operator in certain circumstances such as insolvency of an economic operator as long as the economic operator which replaces the previous one fulfils the criteria for qualitative selection initially established by the contracting authority, and that the change of economic operator does not entail other substantial modifications to the contract and in general the change of operator is not aimed at circumventing the application of the Directive.39 Thus, despite the fact that a framework agreement constitutes a closed system some situations can justify a change of supplier, though the situations are limited. For framework agreement with multiple suppliers where there is a need to reopen the competition, the fact that a supplier has left the framework agreement would often just mean that fewer economic operators are competing for the specific contracts. 41 If contracting authorities are obliged to use a given framework agreement it must be mentioned in the procurement documents. 33.2.2. Modification of a framework agreement Article 33(2) states “Contracts based on a framework agreement may under no circumstances entail substantial modifications to the terms laid down in that framework agreement, in particular in the case referred to in paragraph 3.” Thus, it is explicitly mentioned that framework agreements may not be modified substantially. The reference to paragraph 3 means that changes are, in particular, not a possibility when dealing with a framework agreement with one economic operator. In such cases where all the terms have been established beforehand the situation is almost similar to a regular contract and since no publication takes place it will be difficult to discover such modifications. 43 The 2014 Directive contains a provision regarding amendments of a contract as well as amendments to a framework agreement. This provision is perhaps one of the most significant amendments as it has long been a subject for debate what could be considered a substantial amendment to a contract, which requires a new procurement procedure.40 Article 72 should be seen as the overall rule regarding modifications and Article 33(2) hence merely as a reference to the fact that substantial modification must not be made in a framework agreement. In case substantial modifications are made that will lead to a duty to retender the framework agreement. 44 Article 72(4) introduces a sort of de minimis rule. According to this provision it is possible to make modifications to a frameworks agreement if the value of a modification can be expressed in monetary terms, and the value does not exceed the thresholds in the Directive. The value of the modification should furthermore be below 10% of the initial contract value for service and supply contracts and below 15% of the initial contract value for works contracts. It is furthermore a requirement that the modification does not alter the overall nature of the contract or framework agreement. This possibility can be 42

See Article 72(1) litra d) (ii). See e.g. Brown, Adrian, ‘When do changes to an existing public contract amount to the award of a new contract for the purposes of the EU procurement rules? Guidance at last in Case C-454/06’, in: PPLR 2008, 6, NA253-267; Brown, Adrian, ‘Changing a sub-contractor under a public services concession: Wall AG v. Stadt Frankfurt am Main (C-91/08)’, in: PPLR 2010, p. 160-166; Hartlev, Kristian & Liljenbøl, Poulsen, Sune Troels, ‘The possibilities of amending a public contract without a new competitive tendering procedure under EU law’, in: PPLR. 2012, 5, 167-187; Treumer, Steen, ‘Regulation of contract changes leading to a duty to retender the contract: the European Commission’s proposals of December 2011’, in: PPLR 2012, 5, 153-166; Hartlev, Kristian and Wahl Liljenbøl, Morten, ‘Changes to existing contracts under the EU public procurement rules and the drafting of review clauses to avoid the need for a new tender’, in: PPLR 2013, 2, 51-73. Most recently see Treumer, Steen, ‘Transfer of contracts covered by the EU public procurement rules after insolvency’, PPLR 2014 1, pp. 21-31. 39

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expected to be of great significance for framework agreements since framework agreements often include a very high number of products, and it can be relevant for a supplier to add similar products, because the supplier now also has a given product in its selection or can substitute a product with another similar product due to, e.g., newer technology. It seems possible to argue that this will be allowed in accordance with the provision in Article 72(4) if it fulfils the requirements, i.a., that the substitution can be expressed in monetary terms. An example could be a framework agreement on procurement of food where a supplier could be allowed to add to its selection a new type of soya milk, a new type of coffee etc. It could also be a framework agreement for mobile phones where the supplier should be allowed to replace an older model with a newer one. Nonetheless, in both cases it would not be possible for a supplier to add products, which would alter the overall nature of the framework agreement, which could be the case if a car, a washing machine etc. was added to the framework agreement. In any event a supplier will need consent from the contracting authority to add products or substitute a product. For further on modification of contracts see the commentary on Article 72.

33.3. Framework agreements with one economic operator It is possible to set up a framework agreement with either one or more economic operators. In both cases the contracting authority must have followed one of the procedures in the Public Sector Directive when entering into the framework agreement. This does not mean that the contracting authority is free to enter into the concrete contract afterwards; the procedures in paragraph 3 or 4 must be observed. Framework agreements with one economic operator tend to be simpler and most legal issues arise when dealing with framework agreements with more than one economic operator. Article 33 (3) deals with the situation where a framework agreement has been concluded with one economic operator. In such a situation the competition for the contract has ended with the conclusion of the framework agreement and the award of the framework agreement has taken place in accordance with the award criteria and so on. After the conclusion of the framework agreement, the contracting authority will not need to put its contracts out for competition, but can merely “order” from the economic operator who won the framework agreement, hence the specific contract is entered into on basis of the terms already stated in the framework agreement. A framework agreement with one economic operator will have all (the substantial) terms stated in the framework agreement. Framework agreements with one economic operator could for example be the case where a contracting authority needs paper on a regular basis and enter into an agreement with one economic operator. The economic operator will then deliver paper whenever the contracting authority needs it. Article 33(3) states “Where a framework agreement is concluded with a single economic operator, contracts based on that agreement shall be awarded within the limits of the terms laid down in the framework agreement.” Thus, in most cases for the contracts to be awarded the terms of the contract are already laid down in the framework agreement e.g. estimated time of delivery, prices etc. In such cases “… there is no scope for supplementing the initial offer. Orders are therefore placed exclusively under the terms established in the framework agreement and within the limits (in particular as concerns the range of products, works or services covered as well as the quantities) set in this agreement [footnote leftout].”41 However, Article 33(3) furthermore states “For the award of those contracts, contracting authorities may consult the economic operator party to the framework agreement in 41

Commission Explanatory note on Framework agreement, p. 7 (3.1.).

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writing, requesting it to supplement its tender as necessary.” The Commission’s explanatory note also states “An individual contract is concluded on the basis of the conditions established in the framework agreement itself in combination with the terms offered to complete the framework agreement where these were not initially established in the agreement.”42 Thus an economic operator may supplement its tender “… as necessary”. This means that the contracting authority has some leeway to ask the tender to supplement its tenderer. Other factors should also be possible to establish at a later stage such as the level of work. In the case of a service the contracting authority may for instance receive an estimate on how long time the supplier is expected to spend on the task. The fact that certain elements can be established at a later stage does not mean that substantial modifications can take place, but merely that its possible to establish minor details later with regard to such practical elements such as delivery time, delivery places etc. Regarding the topic of modifications in the substance of the contract and particular as to prices, such would need to fall under Article 72 regarding modifications to the framework agreement in order for such to be permissible. Thus, it is possible to adjust prices, products and similar. However, any changes, which would alter the original competition for the framework agreement would not be possible. 50 For contracts based on a framework agreement, contracting authorities can choose to group its contract award notices of the results of the procurement procedure for these contracts on a quarterly basis. In that case, contracting authorities shall send the grouped notices within 30 days of the end of each quarter.43 51 When awarding a contract based on a framework agreement with only one economic operator it is not necessary to provide a standstill period before signing the contract, but a standstill period must be provided when establishing the framework agreement itself (for further on standstill se the commentary to the Remedies Directive).

33.4. Framework agreements with more than one economic operator There are different ways of constructing a framework agreement, and for framework agreements with more than one operator two ways to award contracts based on a framework agreement exist. The first method relates to the situation where all the terms are stated in the framework agreement beforehand – fixed terms – also called direct award (section 33.4.1.) and the second method where all the terms are not stated in the framework agreement. In case of the latter the contracting authority using the framework agreement will need to re-open the competition among the economic operators on the framework agreement (section 33.4.2.). 53 The advantage of framework agreements with more than one economic operator depends on the type of framework agreement, but using several suppliers ensures security of supply, the reopening of competition leads to better prices over time (or better products or solutions which were not on the market to begin with). It is generally also advantageous with a view to promoting SME participation if large contracts are divided into smaller sub categories making it possible to reopen competition on regular basis for such. 54 In the 2004 Directive a minimum of 3 economic operators had to be party to a framework agreement, but this requirement has been eliminated in the 2014 Directive. Thus, it is possible to create a framework agreement with only two economic operators. There is no maximum number of economic operators on a framework agreement. However, it is possible that creating a framework agreement with too many economic operators consti52

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tutes a problem in the sense that the framework agreement would resemble a qualification system, but so far to this authors knowledge that has not yet constituted a problem.44 33.4.1. Where all the terms are stated beforehand (fixed terms) In a framework agreement where all the terms are stated beforehand, the contracting authority using the framework agreement will not re-open the competition among the economic operators on the framework agreement. Instead a “direct award” based on the conditions established in the framework agreement will take place. The Directive does not explicitly regulate choosing between the different economic operators for the award of a specific contract, but the choice of economic operator must not be random and the conditions for the award of the contract must be specified in the agreement so that the tenderers have already competed for the contract when the framework agreement itself was awarded. A typical example for the award of this type of framework agreement will be a sort of cascade model where, e.g., three economic operators are part of the agreement, and the terms establish that the contracting authority must first consult economic operator number one, if that one cannot deliver the second economic operator and so on. However, since the economic operator number two is not guaranteed any revenue it can be costly for the economic operators who have to be ready to deliver in any given situation and hence equipment and manpower must always be in a stand-by position. It is also very likely that only economic operator number one will be awarded specific contracts if that economic operator always accepts to deliver. Thus, in some cases where the subject matter of the contract justifies it, contracting authorities could have reasons to guarantee that number two and three also will be awarded contracts. This could be for security and supply reasons as well as to ensure future competition in the market.45 Hence a certain percentage of contracts could be awarded to supplier number two and three. Another way to award a framework agreement with multiple suppliers and where the terms are fixed in the framework agreement could be creating an award of the specific contracts based on a sort of basket of goods. The goods will be based on the contracting authority´s needs and the award will depend on which economic operator will be cheapest. Such an arrangement could take place within an electronic purchasing system, like in an online shop where the customer places its orders without being able to see who the supplier will be, and once the order has been placed, the system will calculate which supplier won the contract. Award of a contract could also be based on a rotation principle combined with the requirement that each undertaking be awarded the same amount, and has been used in some Member States. If such an award model were to be possible, the contracting authority should not be able to speculate when it will rotate among the tenderers. Such a rotation model could be used in conjunction with the cascade model so that supplier no. 1 may only deliver a certain amount and then the contract shall be awarded to no. 2 and so on. Another possibility is to combine the cascade model and mini-tenders, for exam-

44 In a decision of July 2nd 1998 by the Danish Complaints Board, FRI v. Copenhagen airport, the Board came to the conclusion that there is an upper limit as to how many operators the contracting authority can enter into a framework agreement with, but in the concrete case the number of 10 was not too high a number given the amount of the framework as well as the technicalities of it and the geographical locations where the work had to be performed. 45 See also Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, p. 404.

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ple in such a way that the tenderers once a year can set new prices, and once a year there will a new ranking of the cascade. 59 The most important part for the award of these types of framework agreements is that the model chosen for award of the contracts is objective, transparent and non-discriminatory.46 In that regard Article 33(4)b) states that the framework agreement must have set “… the objective conditions for determining which of the economic operators, party to the framework agreement, shall perform them; the latter conditions shall be indicated in the procurement documents for the framework agreement.” Thus, based on the framework agreement there should be no doubt as to who will be awarded the call-off and which method is to be used. This also includes that it is not possible to award a contract on the basis of a rotation principle or similar unless such award can be considered as objective.47 60 When the contracting authority has chosen to establish all the terms in the framework agreement itself, it no longer has the possibility of reopening the competition, given that Article 33(4), second subparagraph, second indent, reserves that possibility exclusively for those cases “where not all the terms are laid down in the framework agreement”. However, it is possible that the framework agreement includes both the option of awarding a contract on the basis of the terms laid down in the framework agreement and based on mini-competition see below section 33.4.3. 61 In some cases the framework agreement established is intended for natural persons. This could be the cases for orthopaedic equipment or other personal aids. Recital 61 states “The objective conditions for determining which of the economic operators party to the framework agreement should perform a given task, such as supplies or services intended for use by natural persons, may, in the context of framework agreements setting out all the terms, include the needs or the choice of the natural persons concerned.” This could for example be the case when dealing with a framework agreement for orthopaedic equipment where the user – the natural person – prefers the solutions from a specific supplier. In such cases the choice of supplier to perform that given contract (the award) may result in the natural persons´ individual choice.48 This means that different contracting authorities on the same framework agreement can make direct awards with different suppliers based on the unit's specific needs and based on objective criteria specified in the framework agreement. This could be the case where a framework agreement is concluded by several hospitals and where one hospital award a contract under a framework agreement to one supplier and another hospital make direct award to another supplier. The award decision must be objectively justified and in accordance with the objective criteria for the awards specified in the framework agreement. This could e.g. be the case of the choice of medicine. In such a situation different doctors may have different opinions about what is considered to be the most effective treatment. In such a situation it is probably possible to make a kind of framework agreement when the contract is awarded on the basis of the individual doctors assessment of what is regarded as the most effective product. It is yet to be seen how far-reaching the interpretation of the recital will be in the sense that in many cases the products on a framework agreement are intended for natural persons, e.g. plastic gloves for doctors and nurses, computers for office personnel etc. It is arguable that this exception from the general method with regard to awarding a See footnote 24 of the Commission’s Explanatory note on Framework agreements. See also Trepte, Public Procurement in the EU – A Practioner’s Guide, p. 445. 48 See also Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, p. 404, who argues that it is presumably permissible to allow end users to choose between the different framework agreements (operators) on the basis of their preferences in so called “freedom of choice” arrangements. 46 47

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contract should be interpreted narrowly and should not be used in cases such as those just mentioned concerning contracts for the supply of gloves and computers. 33.4.2. Where all the terms are not stated beforehand Where all the terms are not stated beforehand, the contracting authority using the framework agreement will need to re-open the competition among the economic operators.49 This takes place by conducting a mini-competition, sort of like a mini-procurement procedure where the contracting authority must follow the rules regarding the mini-competition established in Article 33(5). The requirements and procedure will be laid down in the framework agreement itself and supplied by the general procurement principles such as equal treatment and transparency. The framework agreement itself has been awarded on the basis of the procedural rules described in the Directive. This also includes the selection and award criteria included in the Directive. In cases where a framework agreement is to be awarded after the reopening of competition, the contracting authorities may only require from economic operators a maximum yearly turnover not exceeding two times the estimated contract value. The contract value shall be calculated on the basis of the expected maximum size of specific contracts that will be performed at the same time, or, where it is not known, on the basis of the estimated value of the framework agreement, see to this the commentary on Article 58(3). There is no requirement that the contracting authority has to go through a mini-competition with regard to each specific order made under the framework agreement. It is possible to hold mini-competitions at regular intervals, e.g. 3, 6, 12 months.50 This means that the mini- competition will decide which supplier shall be the one who delivers the goods or services over, for example, the following 6 months. In such cases the result of the mini-competition can lead to what practically amounts to a new framework agreement with the supplier who won the mini-competition in the sense that the winning supplier is obliged to deliver for example office-supply to the contracting authority when the contracting authority is in need of office-supply during this period of time, but without the need for the call-off contract to specify the specific amount and delivery time. This type of framework agreement within a framework agreement would be particular relevant for contracting authorities to establish in cases where a central purchasing bodies’ framework agreement is applied. According to Article 33(5) the mini-competition “… shall be based on the same terms as applied for the award of the framework agreement and, where necessary, more precisely formulated terms, and, where appropriate, other terms referred to in the procurement documents for the framework agreement”. Thus, the Directive does not require that the criteria for mini-competition should be identical to those of the framework agreement. This means that the contracting authority can use one set of criteria for the award of the framework agreement, and another set in connection with the award of the specific contracts in a subsequent mini-competition. However, the use of two sets of criteria must be transparent to the tenderers. This implies that the different sets should be indicated already in the specifications of the framework agreement. Nevertheless, it is possible to let many terms remain open until the award of the contract. This is, of course, natural as to 49 Article 33(4)(C) states: “where not all the terms governing the provision of the works, services and supplies are laid down in the framework agreement, through reopening competition amongst the economic operators parties to the framework agreement.” 50 See also Recital 69, which states that “The contracting authorities for whom a framework agreement is concluded should be able to use it for individual or repetitive purchases.” This indicates that a contract regarding repetitive purchase can be concluded.

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amount/quantities, delivery place, delivery time, but also as to more specific elements such as quality, price, the level of service (such as after-sale services), and contract terms. In principle everything can be up for reopening of the competition as long as the framework agreement is transparent as to what will be competed for up-front. 66 The contracting authority may probably not use completely different criteria in a mini-competition. This could, for instance be the situation where the framework agreement itself is awarded based on price and the reopening of competition takes place by using environmental criteria. There should be a certain level consistency and proportionality between the two sets of award criteria to ensure that the right suppliers are also the ones who will be selected on the framework agreement initially. Price should not necessarily be included in the award of the framework agreement. The price does not always make sense in relation to products where prices change a lot such as, e.g., gasoline or cases where prices are fixed by legislation or similar. In such cases a price competition can be held as a mini-competition later on. 67 The contracting authority will create new procurement documents for the specific contract and the mini-competition. Those documents will only be available for the economic operators which participate in the agreement. Hence, contrary to dynamic purchasing systems it is not possible for new suppliers to be added to the framework agreement. The mini-competition must be conducted in accordance with the procedure laid down in Article 33(5), see below at section 33.5. 33.4.3. Two types of procedure to award a call-off contract One question which has in some cases resulted in much debate and speculations is whether the same framework agreement with more than one economic operator can include both types of procedure to award a given contract. If, e.g., the contracting authority needs more than 150 computers a mini-competition must be held, but if the contracting authority’s needs falls below this amount will it in such a case be permissible to use an award procedure based on the criteria already stated in the framework such as, e.g., a cascade model. The 2004 Directive did not elaborate on the matter, but the topic of having both types of award procedure in the same framework agreement has resulted in case law in both Denmark51 and Sweden.52 69 In Denmark the Danish Competition and Consumer Authority53 issued in early 2011 a guidance statement regarding the interpretation of Article 32 of Directive 2004/18/EC in a specific case dealing with a framework agreement entered into by the central purchasing body, SKI.54 In this statement the Competition and Consumer Authority found that ”it is not in accordance with the Public Procurement Directive, if it follows from the framework agreement that there is a choice between the procedures for the award of contracts based on framework agreement” [the present author’s translation] 55 Thus, the Competition and Consumer Authority found that, contracts based on a framework agreement with several suppliers, should be awarded either based on conditions al68

51 See e.g. the Competition and Consumer Authority decision of January 4, 2011, “Vejledende udtalelse om anvendelse af SKIs rammeaftale 17.07”, and the Danish Complaints Board for Public Procurement’s decision of January 11, 2011, Kids Leg og Lær A/S v. K17 – indkøbsfællesskab for kommunerne i Region Sjælland or decision of December 5, 2011, Konica Minolta v. Erhvervsskolen Nordsjælland. 52 See Regeringsrättens årsbok RÅ 2010 ref. 97. 53 The Danish Competition and Consumer Authority is the authority responsible for the application of public procurement legislation in Denmark. It also handles an informal complaints system. However, in case of the latter decisions regarding complaints are not binding. 54 See the Competition and Consumer Authority decision of January 4, 2011, “Vejledende udtalelse om anvendelse af SKIs rammeaftale 17.07”.

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ready laid down in the framework agreement or by a mini-competition. It stated that “When a contracting authority has chosen to establish a framework agreement in which all terms are laid down in the framework agreement, the Authority no longer has the option to reopen the competition. The Competition and Consumer Authority finds that it is not in accordance with the Public Procurement Directive if it follows from the framework agreement that there is a choice between procedures for the award of contracts based on framework agreement.”56 Prior to the statement the Competition and Consumer Authority had asked the Commission of its interpretation of Article 32. The Commission replied that “This does not mean that in a framework agreement it is impossible to apply both options for allocating individual contracts. However, which award procedure must be used, must not be left to the contracting authority's free choice. The choice should be based on objective criteria, which respects the principles of non-discrimination and transparency. And these criteria should be laid down in the framework agreement.” [the author´s translation].57 Thus, as can be seen from this statement the Commission recognised the option of having both types of procedures in the same framework agreement if the conditions for the choice between the two call-off procedures are established beforehand. Despite the fact that the statement from the Competition Authority dealt with one specific framework agreement, the contracting authority in question, SKI, terminated many framework agreements before their expiry. In relation to other framework agreements SKI issued guidelines making it mandatory to reopen the competition. The view of the Competition Authority and the Commission was later confirmed by the Danish Complaints Board for Public Procurement in, e.g., decision of December 5th 2011, Konica Minolta v. Erhvervsskolen Nordsjælland. The contested issue has been clarified in the 2014 Directive. Thus, both mini-compe- 70 tition between the economic operators and award based on the terms of the framework agreement can consist in the same framework agreement if it is possible to choose between the two types of procedures to award a contract on the basis of objective criteria. Regarding the possibility for a framework agreement to contain both types of award procedures and as to the possibility for the contracting authority to choose between the two procedures when a given contract is awarded, it is stated in Article 33(4) b, that “The choice of whether specific works, supplies or services shall be acquired following a reopening of competition or directly on the terms set out in the framework agreement shall be made pursuant to objective criteria, which shall be set out in the procurement documents for the framework agreement.” Thus, it is clear that the contracting authority’s choice must be based on objective criteria; hence the choice of procedure to award a contract must not be left to the contracting authority’s arbitrary choice. Regarding the types of objective 55 The original Danish wording “… det ikke er i overensstemmelse med udbudsdirektivet, såfremt det følger af rammeaftalen, at der er frit valg mellem fremgangsmåderne ved tildeling af kontrakter baseret på rammeaftalen”. The Competition Authority had also, prior to this case, found that it was not in accordance with the Directive to have free choice between the two types of procedures in the same framework agreement, see “Klage over DAB’s udbud af rammeaftaler om teknisk totalrådgivning ved bade nybyggeri og renovering, January 27, 2009”. 56 The original Danish wording is as follows: “Når en ordregivende myndighed har valgt at etablere en rammeaftale, hvor alle vilkår er fastsat, har myndigheden således ikke længere mulighed for at genåbne konkurrencen. Efter styrelsens opfattelse er det ikke i overensstemmelse med udbudsdirektivet, såfremt det følger af rammeaftalen, at der er frit valg mellem fremgangsmåderne ved tildelingen af kontrakter baseret på rammeaftalen.” 57 The original Danish wording is as follows: “Det betyder ikke, at det ved en rammeaftale er udelukket at anvende begge muligheder for tildeling af enkeltkontrakter. Men hvilken tildelingsprocedure der skal anvendes, må ikke overlades til den ordregivende myndigheds frie valg. Valget skal træffes på grundlag af objektive kriterier, der overholder principperne om ikke-diskriminering og gennemsigtighed. Og disse kriterier skal være fastsat i rammeaftalen.”

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criteria, which can decide the choice between the two types of procedure, such objective criteria could “… for instance relate to the quantity, value or characteristics of the works, supplies or services concerned, including the need for a higher degree of service or an increased security level, or to developments in price levels compared to a predetermined price index.”58 A simple example could be that below a certain fixed value (or number of products) the contract will be awarded based on the terms in the framework agreement, and if the estimated contract value is above the fixed amount, the contract will be awarded by mini-competition. It could also be the case that some standard products can be awarded without reopening the competition where other, not so standardised products, must be awarded by reopening the competition or even a framework agreement regarding IT services established by a central purchasing body where the contracting authority if the authority purchases regular IT services will have to award its contract based on the terms in the agreement, whereas in cases where the authority can demonstrate an objective need for, e.g., a higher security level or degree of service it must award the contract by reopening the competition. Other examples where the choice between the two types of procedure may be decided on the basis of objective criteria could be cases in which a need for a prolonged contract period may be justified or where certain contract terms will be necessary. Thus, the clarification provided by the 2014 Directive is a welcome one as it creates flexibility especially in the case of framework agreements conducted by a central purchasing body where the many participating contracting authorities have different needs and where, as a consequence, simple purchases can be made on the terms of the framework agreement without the need to spend time and incur extra cost by conducting a mini-competition, as the need for contracts of a higher value or more complex contracts can be fulfilled without reopening the competition. That option can also serve to ensure new solutions as well as new competition. 71 Regarding the objective criteria which determine the type of procedure to be used when it comes to choosing between the two types of procedures for call-offs, the Danish Complaints Board had in the case, Konica Minolta59 found that though it is in principle not contrary to the Directives having resource to both types of procedure, it must however be clear from the outset, what will trigger the choice between the different procedures. This could, for example, be the case when some standard products can be awarded without reopening the competition whereas other, not so standardised, products should be awarded based on a reopening of competition. However, in this case the Complaints Board stated that it was not permitted to use the contracting authority´s own need as an objective criterion. It found that “In several situations where mini-competition “shall” be used, it is only the contracting authority’s “needs” that decide the procedure to be used, and thus it is really up to the individual contracting authority whether to use direct allocation or mini-competition” [the present author’s translation].60 This was due to the fact that the contracting authority could redefine its need so that it would fit the procedure it wanted to use. In the Konica Minolta case, it was unclear whether a contracting authority´s purchasing needs could be used as an objective criterion between the two procedures to award framework agreements. It is arguable that with the wording of recital 62 mentioned above, which states “… including the need for a higher degree of service or an increased security level, or to developments in price levels compared to a predetermined price index”, the contracting authority’s needs may trigger the choice between Recital 61. Decision of December 5 2011, Konica Minolta v. Erhvervsskolen Nordsjælland. 60 The original Danish wording ”I flere situationer, hvor miniudbuddet “skal” anvendes, er det således kun kundens “behov”, som styrer, hvilken procedure der skal anvendes, og dermed er det reelt op til den enkelte ordregiver, om der skal anvendes direkte tildeling eller miniudbud”. 58

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the two procedures. Thus, if a contracting authority can demonstrate a need for special terms in the contract, a higher level of security, the need for a higher quality in certain products, longer contract duration etc. this may decide the choice of a given procedure. However, in any case the contracting authority must refrain from creating a need in order to avoid for example conducting a mini-competition or to ensure that a specific supplier is awarded the contract.

33.5. The mini-competition Once a framework agreement with multiple suppliers wherein all the terms are not 72 stated beforehand is created, the contracting authority must go through a mini-competition in order to award specific contracts based on a framework agreement. The procedure for the mini-competition is laid down in Article 33(5), and must be done in accordance with the following procedure: (a) for every contract to be awarded, contracting authorities shall consult in writing the economic operators capable of performing the contract; (b) contracting authorities shall fix a time limit which is sufficiently long to allow tenders for each specific contract to be submitted, taking into account factors such as the complexity of the subject-matter of the contract and the time needed to send in tenders; (c) tenders shall be submitted in writing, and their content shall not be opened until the stipulated time limit for reply has expired; (d) contracting authorities shall award each contract to the tenderer that has submitted the best tender on the basis of the award criteria set out in the procurement documents for the framework agreement. The above requirements can be divided into requirements relating to the invitation to 73 tender (section 33.5.1. and requirements for the submission and evaluation of tender (see below section 33.5.2.). 33.5.1. The invitation to tender The contracting authority must, According to Article 33(5) litra a, consult in writing 74 the economic operators on the framework agreement capable of performing the contract. When the Directive’s requirement for electronic communication has been implemented this must obviously be done electronically. The reference to capable means that situations might exist where not all the parties to the framework agreement need to be invited. This could for example be the case where a supplier on the framework agreement cannot deliver a specific product. This would be the case in agreements that cover a high number of products and where not all suppliers can deliver all types of goods. The Commission explanatory note uses as an example a framework agreement which relates, e.g., to a certain range of office supplies and these are divided into lots. In such a case there is no obligation to consult those parties which are not covered by the framework agreement for the type of supplies that are the subject of the specific contract in question.61 Thus, the contracting authority will only need to invite the economic operators on the lot. In all other cases all the economic operators on the framework agreement must be invited to participate for the contract. In the written material the contracting authority must invite tenderers to submit a 75 tender, state the conditions for the mini-competition (procurement material), award cri61

Commission Explanatory note on framework agreements, p. 9.

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teria and the specifications and minimum requirements. Other terms than those which were part of the award for the framework agreement can be included in the mini-competition if these terms were known beforehand and stated in the procurement documents for the framework agreement itself. The contracting authority must, furthermore, set a time limit which is sufficiently long to allow tenders for each specific contract to be submitted, taking into account factors such as the complexity of the subject matter of the contract and the time needed to submit tenders. The directive does not impose any specific time limit, but often it will be possible to provide for a relatively short time limit in particular for standard types of goods whereas tenderers for more complicated contracts may need more time. As to the award criteria these must according to Article 33 (5) litra d, be “… set out in the procurement documents for the framework agreement.” Thus, it is necessary that the contracting authority already early on has decided on the criteria for the award of the contract by a mini-competition. In some cases this can result in difficulties as the specific needs have not yet been established as early as that by the contracting authority. This will mostly be the case when the framework agreement is established by a central purchasing body and where the needs of many contracting authorities must be taken into consideration. Often the solution will be to establish a range for the award criteria where, e.g., price will weight 20-40 per cent, quality will weight 80-60 per cent. In such cases the contracting authorities will then at a later stage be able to fix the precise percentages for the criteria. It is important that the weighting of the criteria does not give the contracting authority the possibility to switch the ranking of the criteria. The award criteria in the mini-competition do not need to be the same award criteria as those which were initially used to award the framework agreement, 62 but they must be stipulated in the procurement documents. A typical example could be that the competition with regard to the framework agreement would include the quality of the products whereas the mini-competition would be conducted on the basis of prices. It is possible to include e-auctions and/or e-catalogues in the mini-competition. If so, this must also have been stated in the procurement documents beforehand. Where ecatalogues are used as a tender itself in the framework agreement, the methods provided in Article 36(5) may also be used when awarding the contract (see the commentary to Article 36(4) and (5) for further). 33.5.2. Submission and evaluation of tender

Tenders must be submitted in writing and shall not be opened until the stipulated time limit for submitting tenders has expired. 81 At some point all communication must be done electronically, including the submission of tenders in a mini-competition. The Directive Article 22 must be observed. However, Recital 57 states that “… the evaluation of proportionality could result in lower levels of security being required in connection with the resubmission of electronic catalogues or the submission of tenders in the context of mini-competitions under a framework agreement or the access to procurement documents.” It should in that regard be sufficient to receive tenders for example by email where the contracting authority does not have general access to the email account and can guarantee that the emails will not be opened before the expiry of the time limit for submission of tenders. The reason for allowing the lower security level is that the tenderers have already submitted documents when being awarded the framework agreement and are thus in a situation where it perhaps only is an updated e-catalogue or similar which it should be possible to send in a faster way. 80

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This will be particular helpful in cases where a central purchasing body has established a framework agreement observing Article 22, and where small contracting authorities who might not conduct procurement procedures on a regular basis (due to the low value such contracts may have) will use a framework agreement. In such cases it will be particularly relevant if these contracting authorities do not need to invest in specific electronic systems in order to ensure confidentially etc. but can merely receive tenders by email. Since the award criteria according to Article 33 (5 d) must be “… set out in the pro- 82 curement documents for the framework agreement”, it can be discussed whether this requires that the contracting authority also makes its evaluation method known beforehand. The question has been decided on (in relation to a regular public contract) by the CJEU in Case C-6/15, TNS Dimarso. The CJEU came to the conclusion that the evaluation method must not necessarily be stated in the contract notice, which supports that the evaluation method for the mini-competition can be set at a later stage and does not need to be stated already in the Contract Notice. This will particular be the case for framework agreements with multiple contracting authorities. In such cases there is need for some leeway and flexibility to establish the award criteria and evaluation method for the individual mini-competition at a later stage. The evaluation method should be stated in the procurement documents, which are sent to the tenderers participating in the mini-competition.63 For contracts entered into based on a framework agreement contracting authorities 83 can choose to group the contract award notices of the results of the procurement procedure for these contracts on a quarterly basis. In that case, contracting authorities shall send the grouped notices within 30 days of the end of each quarter.64 It is not necessary for national law to introduce a requirement for standstill after a 84 mini-competition. However, if national law does not require a standstill, Member States shall ensure that the contract is ineffective where there is an infringement of the second indent of the second subparagraph of Article 32(4) of Directive 2004/18/EC, and the contract value is estimated to be equal to or to exceed the thresholds set out in Article 7 of Directive 2004/18/EC. See the commentary to the Remedies Directive Artice 2 d on further on ineffectiveness.

Article 34 Dynamic purchasing systems 1. For commonly used purchases the characteristics of which, as generally available on the market, meet the requirements of the contracting authorities, contracting authorities may use a dynamic purchasing system. The dynamic purchasing system shall be operated as a completely electronic process, and shall be open throughout the period of validity of the purchasing system to any economic operator that satisfies the selection criteria. It may be divided into categories of products, works or services that are objectively defined on the basis of characteristics of the procurement to be undertaken under the category concerned. Such characteristics may include reference to the maximum allowable size of the subsequent specific contracts or to a specific geographic area in which subsequent specific contracts will be performed.

63 See also the preparatory work to Danish Procurement Act, § 160 regarding publication of the evaluation method. 64 See Article 50(2) and Article 50(3).

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2. In order to procure under a dynamic purchasing system, contracting authorities shall follow the rules of the restricted procedure. All the candidates satisfying the selection criteria shall be admitted to the system, and the number of candidates to be admitted to the system shall not be limited in accordance with Article 65. Where contracting authorities have divided the system into categories of products, works or services in accordance with paragraph 1 of this Article, they shall specify the applicable selection criteria for each category. Notwithstanding Article 28, the following time limits shall apply: (a) the minimum time limit for receipt of requests to participate shall be 30 days from the date on which the contract notice or, where a prior information notice is used as a means of calling for competition, the invitation to confirm interest is sent. No further time limits for receipt of requests to participate shall apply once the invitation to tender for the first specific procurement under the dynamic purchasing system has been sent; (b) the minimum time limit for receipt of tenders shall be at least 10 days from the date on which the invitation to tender is sent. Where appropriate, Article 28(4) shall apply. Article 28(3) and (5) shall not apply. 3. All communications in the context of a dynamic purchasing system shall only be made by electronic means in accordance with Article 22(1), (3), (5) and (6). 4. For the purposes of awarding contracts under a dynamic purchasing system, contracting authorities shall: (a) publish a call for competition making it clear that a dynamic purchasing system is involved; (b) indicate in the procurement documents at least the nature and estimated quantity of the purchases envisaged, as well as all the necessary information concerning the dynamic purchasing system, including how the dynamic purchasing system operates, the electronic equipment used and the technical connection arrangements and specifications; (c) indicate any division into categories of products, works or services and the characteristics defining them; (d) offer unrestricted and full direct access, as long as the system is valid, to the procurement documents in conformity with Article 53. 5. Contracting authorities shall give any economic operator, throughout the entire period of validity of the dynamic purchasing system, the possibility of requesting to participate in the system under the conditions referred to in paragraph 2. Contracting authorities shall finalise their assessment of such requests in accordance with the selection criteria within 10 working days following their receipt. That deadline may be prolonged to 15 working days in individual cases where justified, in particular because of the need to examine additional documentation or to otherwise verify whether the selection criteria are met. Notwithstanding the first subparagraph, as long as the invitation to tender for the first specific procurement under the dynamic purchasing system has not been sent, contracting authorities may extend the evaluation period provided that no invitation to tender is issued during the extended evaluation period. Contracting authorities shall indicate in the procurement documents the length of the extended period that they intend to apply. Contracting authorities shall inform the economic operator concerned at the earliest possible opportunity of whether or not it has been admitted to the dynamic purchasing system.

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6. Contracting authorities shall invite all admitted participants to submit a tender for each specific procurement under the dynamic purchasing system, in accordance with Article 54. Where the dynamic purchasing system has been divided into categories of works, products or services, contracting authorities shall invite all participants having been admitted to the category corresponding to the specific procurement concerned to submit a tender. They shall award the contract to the tenderer that submitted the best tender on the basis of the award criteria set out in the contract notice for the dynamic purchasing system or, where a prior information notice is used as a means of calling for competition, in the invitation to confirm interest. Those criteria may, where appropriate, be formulated more precisely in the invitation to tender. 7. Contracting authorities may, at any time during the period of validity of the dynamic purchasing system, require admitted participants to submit a renewed and updated self-declaration as provided for in Article 59(1), within five working days from the date on which that request is transmitted. Article 59(4) to (6) shall apply throughout the entire period of validity of the dynamic purchasing system. 8. Contracting authorities shall indicate the period of validity of the dynamic purchasing system in the call for competition. They shall notify the Commission of any change in the period of validity, using the following standard forms: (a) where the period of validity is changed without terminating the system, the form used initially for the call for competition for the dynamic purchasing system; (b) where the system is terminated, a contract award notice referred to in Article 50. 9. No charges may be billed prior to or during the period of validity of the dynamic purchasing system to the economic operators interested in or party to the dynamic purchasing system. Literature: Arrowsmith, The Law of Public and Utilities Procurement, p. 1207-1221; Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, p. 248 et seq. and 389 et seq.; Carina Risvig Hamer, ‘Regular purchases and aggregated procurement: the changes in the new Public Procurement Directive regarding framework agreements, dynamic purchasing systems and central purchasing bodies’, in: PPLR 2014, 4, 201-210; Roger Bickerstaff, ‘E-procurement under the new EU procurement Directives’, in: PPLR 2014, 3, 134-147; Trepte, Peter, Public Procurement in the EU – A Practioner’s Guide, 7.88 et seq.; Steinicke and Groesmeyer, EU’s Udbudsdirektiver, p. 927-958, Carina Risvig Hamer, Grundlæggende Udbudsret, Djøf Forlag, 2016, chap. 5. 34.1. Characteristics and requirements with regard to a dynamic purchasing system. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.1.1. Commonly used purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.1.2. Divided into categories of products, works or services . . . . . . . . . . . . . . . . . . 34.2. Restricted procedure to set up the dynamic purchasing system. . . . . . . . . . . . 34.3. Electronic means . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.4. Procedure to award a contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.5. Requesting to participate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.6. Award / invite all admitted participants to submit a tender . . . . . . . . . . . . . . . . 34.6.1. Standstill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.7. Renewed and updated ESPD, self-declarations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.8. Validity of the dynamic purchasing system. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.8.1. Contract award notices for the specific contracts. . . . . . . . . . . . . . . . . . . . . . . . 34.9. Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A dynamic purchasing system is a way of procuring commonly used goods etc., which are generally available on the market by a completely electronic process. Compared to framework agreements dynamic purchasing systems have the advantage that it is possible for new suppliers to become part of the dynamic purchasing system during the lifetime of the dynamic purchasing system. A dynamic purchasing system “… allows the contracting authority to have a particularly broad range of tenders and hence to ensure optimum use of public funds through broad competition …”.1 Allowing new economic operators to become part of the dynamic purchasing system also allows the market to develop and hence new undertakings are able to compete for contracts from the moment they have been started and do not need to wait until a new framework agreement or dynamic purchasing system is launched. 2 The possibility to use dynamic purchasing systems has existed since the 2004 Directive, but has been used to a very limited extent.2 One reason for the limited use might be due to the fact that establishing such a system can seem complicated technically as it requires the use of electronic means (and often investment in an electronic system), but perhaps also because the provisions of the 2004 Directive were not sufficiently flexible. The 2014 Public Sector Directive seeks to change the latter. 3 The provision in Article 34 on dynamic purchasing systems is no longer an option for Member States to apply3 as Member States are obliged to implement it. This ensures that the same procurement instruments are available in all Member States and for the individual contracting authority the rules available to it do not depend on in which Member State the authority is located. This should also increase cross-border procurement (see Article 39 for further comments on joint cross-border procurement). 4 Dynamic Purchasing systems are particularly adapted to highly aggregated procurement made by central purchasing bodies and since the system is fully electronical the procurement technique can be seen as a part of the e-procurement initiatives, although the technique itself is not mentioned in neither the 2012 Communication nor the 2013 Communication.4 The use of electronic catalogues in a dynamic purchasing system can be further beneficial for procurement when a high number of products is requested. 1

34.1. Characteristics and requirements with regard to a dynamic purchasing system A dynamic purchasing system is a way of procuring commonly used purchases (see below section 34.1.1 for further on commonly used purchases) which are generally available on the market by a completely electronic process. Thus, it is a procurement technique and neither a procedure nor a contract in itself. 6 The idea behind a dynamic purchasing system is that once the system has been set up it should be easy for the contracting authority to place orders electronically in the system, which qualified tenderers can compete for. An electronic system should make it 5

Recital 63. In fact the Commission’s Evaluation Report, p. 106 states “So far the actual use of the procedure has been marginal, and in most cases seems to demonstrate a misunderstanding of the provisions.” 3 According to Recital 16 in the 2004/18/EC Directive, the reason for not making certain provisions mandatory to implement was “In order to take account of the different circumstances obtaining in Member States”. 4 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of Regions: A strategy for e-procurement COM/ 2012/0179 final, henceforth the Communication on e-procurement and Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions “End-to-end e-procurement to modernise public administration”, COM(2013) 453 final. 1

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easy for economic operators to place bids and would help ease their transaction costs to the benefit for both the contracting authority and the tenderers. Competition is ensured by making it possible for many tenderers to submit bids while administrative cost for the contracting authorities would be reduced. In many cases the use of dynamic purchasing systems will require that the contract- 7 ing authority invest in a system or develop one. This can be a costly affair and thus not surprising that so far many contracting authorities have not used this procurement technique. However, private suppliers who have created electronic tools for dynamic purchasing systems exists today. As central purchasing bodies conduct procurement on behalf on several contracting authorities it was thought likely that central purchasing bodies as well as larger contracting authorities would make use of dynamic purchasing systems more frequently. A dynamic purchasing system can be divided into lots in order to encourage the par- 8 ticipation of SMEs (see below section 34.1.2). No time limits exist for the duration of a dynamic purchasing system. Thus, a system 9 can be established for a longer period than under the 2004 Directive where a system was not allowed to last for more than four years. This ensures that the costs the contracting authority might have had to develop or purchase a system are reduced over time. As economic operators can become part of the dynamic purchasing system at any time during the lifetime of the dynamic purchasing system the fact that the lifetime of the dynamic purchasing system is indefinite does not as such impose any competition concerns (see section 34.8 regarding the validity of the dynamic purchasing system). 34.1.1. Commonly used purchases It is not possible to set up a dynamic purchasing system for all types of purchases. 10 According to Article 34(1) a dynamic purchasing system can only be set up for “… commonly used purchases the characteristics of which are generally available on the market.” This presumably means that it must be purchases which are purchased on a regular basis and which are already on the market. Also recital 66 refers to commonly used purchases as well as “off-the shelf ” products.5 Off-the shelf products meaning purchases that are available on the market without adaption or to which only minor adoptions are required. The Parliament had suggested that it should only be possible to use a dynamic pur- 11 chasing system for goods and services, but this was not a part of the final Directive. 6 The reference to purchases means, in theory, that it will also be possible to use a dy- 12 namic purchasing system for services and works, but as can be seen in the preamble the idea of a dynamic purchasing system is more designed to use for procuring off-the shelf products; products, which are easily identified and do not require any adaption to the needs of the contracting authorities etc. This could, for example, be supply for offices, computers, books, groceries and similar. It does not, however, mean that a dynamic purchasing system cannot be set up for services and works. Services and works can be commonly used and generally available on the market with regard, e.g., to cleaning services or maintenance services as long as these types of services can be considered services which are purchased on a regular basis. As competition is created for a contract between – often many – suppliers it does not raise any particular competition concerns as to the type of purchases made within a dynamic purchasing system. The restriction raised by 5 Recital 66 “… in respect of commonly used or off-the-shelf products, works or services which are generally available on the market.” 6 See the parliamentary report amendment 138.

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Parliament concerning the type of purchase should more be seen in the sense that it may be difficult for certain types of services and goods to be subjected to competition on the basis of a fully electronic system in which the award would also often follow as a result of an electronic process where the winner should be easily identifiable.7 34.1.2. Divided into categories of products, works or services According to Article 34(1) a dynamic purchasing system may be divided into categories of products, works or services. The idea of splitting a dynamic purchasing system into smaller categories is a way to make dynamic purchasing systems more amenable to SMEs.8 Especially in cases where a dynamic purchasing system is organised by a central purchasing body would it facilitate the participation of SMEs if the dynamic purchasing system were subdivided in smaller categories. 14 When subdividing a dynamic purchasing system into different categories, the categories must be objectively defined on the basis of characteristics of the procurement to be undertaken in the category concerned. According to 34(1) “Such characteristics may include reference to the maximum allowable size of the subsequent specific contracts or to a specific geographic area in which subsequent specific contracts will be performed.”9 Subdividing the dynamic purchasing system based on geographic area could be beneficial in the sense that the individual economic operators do not need to be able to deliver to all contracting authorities, but can choose the geographical areas which are most convenient for the operator in question. 15 Where a dynamic purchasing system is subdivided into categories, the contracting authority must apply selection criteria that are proportionate to the characteristics of the category concerned.10 Thus, the same selection criteria do not need to apply to all the different categories. 13

34.2. Restricted procedure to set up the dynamic purchasing system 16

Under the 2004 Directive the contracting authority had to make use of the open procedure when setting op a dynamic purchasing system. Using the open procedure entails major procedural complexities, not least the need for indicative tenders as a prerequisite for being admitted to the system.11 Indicative tenders can be seen as barriers as it can be time consuming both for the tenderers who have to prepare them as well as for the contracting authority to evaluate them. Therefore, the rules regarding dynamic purchasing systems have been simplified in the way that the contracting authority should follow the rules on the restricted procedure instead. This rule change means that tenderers instead for being required to submit indicative tenders as a condition for being admitted to the system it will be sufficient for a tenderer to request to participate. Thus, the admittance 7 See also the Commission’s Staff Working Document “Requirements for conducting public procurement using electronic means under the new public procurement Directives 2004/18/EC and 2004/17/EC, SEC(2005) 959”, where it is stated that dynamic purchasing systems should be available for “i.e. off-the shelf products for which the evaluation can be quick”. 8 A further SME friendly amendment provides that contracting authorities may only require from economic operators a maximum yearly turnover not exceeding twofold the estimated contract value. In the case of dynamic purchasing systems, the maximum yearly turnover requirement must be calculated on the basis of the expected maximum size of specific procurements to be awarded under the system, see Article 56(3). 9 See also Recital 65, which states: “… Such categories should be defined by reference to objective factors which might for instance include the maximum allowable size of specific contracts to be awarded within the category concerned or a specific geographic area in which specific contracts are to be performed”. 10 Recital 66. 11 See Cluster 6 “Aggregation of demand” Council document 6907/12 of February 28, 2012, p. 5.

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to participate in the dynamic purchasing system is based on tenderers’ qualifications instead of an initial tender. The amendment creates a better possibility to maintain the element of competition by making it possible for new economic operators to be accepted in the system at any time only by requesting to be admitted to the system. In restricted procedures, any economic operator may submit a request to participate in response to a call for competition by providing the information for qualitative selection that is requested by the contracting authority. The minimum time limit for receipt of requests to participate is 30 days from the date on which the contract notice or, where a prior information notice (PIN) is used as a means of calling for competition, the invitation to confirm interest is sent. No further time limits for receipt of requests to participate shall apply once the invitation to tender for the first specific procurement under the dynamic purchasing system has been sent. 12 The exclusion grounds referred to in Article 57 apply. The same goes for the option to use the selection criteria provided for in Article 58. Where contracting authorities have subdivided the system into categories of products, works or services in accordance with Article 34(1), they shall specify the applicable selection criteria for each category. Thus, it is possible to have different economic operators in different categories. All the candidates satisfying the selection criteria shall be admitted to the system, and the number of candidates to be admitted to the system shall not be limited in accordance with Article 65.13 This means “any economic operator that submits a request to participate and meets the selection criteria should be allowed to take part in procurement procedures carried out through the dynamic purchasing system over its period of validity.”14 Thus, the contracting authority cannot limit the number of suppliers in the system. In that regard it should be borne in mind that the contracting authorities may only require from economic operators a maximum yearly turnover, which does not exceed twice the estimated contract value. In the case of a dynamic purchasing system, the maximum yearly turnover requirement must be calculated on the basis of the expected maximum size of specific procurements to be awarded under the system, see Article 58(3). To sum up, the contracting authorities shall give any economic operator the possibility of requesting to participate in the system throughout the entire period of validity of the dynamic purchasing system. The contracting authority’s assessment of such requests must be made in accordance with the exclusion and selection criteria established and by ensuring the time for evaluation in Article 34(5), see below.

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34.3. Electronic means All communication in the context of a dynamic purchasing system shall be made by 21 electronic means in accordance with Article 22(1), (3), (5) and (6). This means for example that the dynamic purchasing system must be non-discriminatory, generally available and interoperable with the ICT products in general use and shall not restrict economic operators’ access to the procurement procedure.15 Contracting authorities shall, furthermore, ensure that the integrity of data and the confidentiality of tenders and requests to participate are preserved.16 See for further on electronic communication in Article 22.

34(2)a). Article 65 is the provision that contains the possibility to restrict the number of participants in restricted procedures to at least 5. 14 Recital 63. 15 Article 22(1). 16 Article 22(5). 12

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The Directive’s Annex VII regarding requirements relating to tools and devices for electronic receipt of tenders must also be observed.

34.4. Procedure to award a contract To award a contract based on the dynamic purchasing system, the contracting authority will send invitations to tender to all who (at that particular moment) are admitted to the system. Thus, the call for competition is made within the system and not by means of a new contract notice in the Official Journal the way it was required under the 2004 Directive. Hereafter, the tenderers are given a minimum of 10 days to submit their tenders which is a reduction in time from 15 days as in the 2004 Directive. The time reduction means that the contracting authority will have better options to use a dynamic purchasing system for regular purchases which it needs often and fast. However, the fact that tenderers must be given a minimum time of 10 days to submit a tender does also imply that a dynamic purchasing system will not be of any interest for services and goods which the contracting authority will need the moment a given incident occurs e.g. the need for fast repair and maintenance of water hoses, machineries breaking down etc. Such cases would need to be handled on the basis of a framework agreement.17 24 Article 34(4) states that when awarding contracts under a dynamic purchasing system, contracting authorities shall: 23

(a) publish a call for competition making it clear that a dynamic purchasing system is involved; (b) indicate in the procurement documents at least the nature and estimated quantity of the purchases envisaged, as well as all the necessary information concerning the dynamic purchasing system, including how the dynamic purchasing system operates, the electronic equipment used and the technical connection arrangements and specifications; (c) indicate any division into categories of products, works or services and the characteristics defining them; (d) offer unrestricted and full direct access, as long as the system is valid, to the procurement documents in conformity with Article 53.18 Where a dynamic purchasing system which is operated by a central purchasing body may be used by other contracting authorities, this shall be mentioned in the call for competition setting up the dynamic purchasing system in question. See to this Article 37(1). 26 The minimum time limit for receipt of tenders shall be at least 10 days from the date on which the invitation to tender is sent. Where appropriate, Article 28(4) shall apply. 19 Article 28(3) and (5) shall not apply.20 25

17 However, it is possible for central purchasing bodies to set up a dynamic purchasing system regarding maintenance where the contracting authorities based on the dynamic purchasing system can create a framework agreement with one supplier where the terms are fixed beforehand. The framework agreement can then establish the terms that the supplier must be able to repair the broken things fast etc. See also Chapter 33, section 33.5 regarding such types of framework agreements within a framework agreement. 18 Article 53 is the provision dealing with electronic availability of procurement documents. For a dynamic purchasing system in most cases the procurement documents will be available within the system. 19 Article 28(4) states that “Member States may provide that all or specific categories of sub-central contracting authorities may set the time limit for the receipt of tenders by mutual agreement between the contracting authority and the selected candidates, provided that all selected candidates have the same time to prepare and submit their tenders. In the absence of agreement on the time limit for the receipt of tenders, the time limit shall be at least 10 days from the date on which the invitation to tender was sent.”

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34.5. Requesting to participate Contracting authorities shall give any economic operator, throughout the entire period of validity of the dynamic purchasing system, the possibility of requesting to participate in the system if the economic operator satisfies the selection criteria. Contracting authorities shall finalise their assessment of such requests in accordance with the selection criteria within 10 working days following the receipt of the request. That deadline may be prolonged to 15 working days in individual cases where justified, in particular because of the need to examine additional documentation or to otherwise verify whether the selection criteria are met. Thus, as a main rule examination will take 10 working days. On the one hand such a short examination period might seem strict, but on the other hand an evaluation of the selection criteria will not require much examination – particular since the requirements for documentation have been reduced in the 2014 Directive. However, once a dynamic purchasing system has been established, contracting authorities might, in response to the first publication of the contract notice or the invitation to confirm interest, be faced with such a large number of requests for participation that they would need more time to examine the requests. That would seem to be admissible provided that no specific procurement is launched before all the requests have been examined. Contracting authorities are free to organise the way in which they intend to examine the requests for participation, for instance by deciding to conduct such examinations only once a week, provided the deadline for the examination of each request of admission are observed.21 It is also possible for the contracting authority, as long as the invitation to tender for the first specific procurement under the dynamic purchasing system has not been sent, to extend the evaluation period provided that no invitation to tender is issued during the extended evaluation period. Contracting authorities shall indicate in the procurement documents the length of the extended period that they intend to apply. This option will be relevant when setting up the system. Contracting authorities shall inform the economic operator concerned at the earliest possible opportunity of whether or not the economic operator has been admitted to the dynamic purchasing system. There can be many reasons as to why an economic operator has not been admitted to the dynamic purchasing system. In some cases it will be possible for a supplier to resubmit a request to participate if it fulfils the selection criteria. Thus, it is important that the contracting authority states the right reasons as to why an economic operator was not accepted in the system in order for the economic operator to repair an application and perhaps resubmit a request to participate. Article 56(3) can also be used for contracting authorities where contracting authorities may, unless otherwise provided by the national law, request the economic operators concerned to submit, supplement, clarify or complete the relevant information or documentation which are missing or appears to be incomplete or erroneous, see on this the commentary to Article 56(3).

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34.6. Award / invite all admitted participants to submit a tender Contracting authorities shall, in accordance with Article 54, invite all admitted par- 32 ticipants to submit a tender under the dynamic purchasing system Thus, the reference to 20 Article 28(3) provides the option of reducing time limits based on the grounds that a PIN has been published, and according to Article 28(5) it is possible to reduce time limits on grounds that the submission of tenders can be made electronically available. 21 Recital 64.

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Article 54 means that contracting authorities shall simultaneously and in writing invite the selected candidates to submit their tenders.22 Considering that the dynamic purchasing system is operated electronically this obligation will be easy for the contracting authority to fulfil as invitations are sent within the system. Typically, the invitation to submit a tender will be accompanied by the procurement documents. If not, the invitation to tender must include a reference to the electronic address on which the procurement documents have been made directly available by electronic means, see Article 53. Where the dynamic purchasing system has been subdivided into categories of works, products or services, contracting authorities shall invite all participants having been admitted to the category corresponding to the specific procurement concerned to submit a tender. The contracting authority shall award the contract to the tenderer that submitted the best tender on the basis of the award criteria set out in the contract notice for the dynamic purchasing system.23 The award criteria must be set in accordance with Article 67. Those criteria may, where appropriate, be formulated more precisely in the invitation to tender. It could be relevant for the contracting authority to use e-catalogues in a dynamic purchasing system which could be beneficial in the sense that contracting authorities could contact tenders from the catalogue. See to this the commentary to Article 36(6). 24 34.6.1. Standstill

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One topic the Public Sector Directive does not cover is the subject of remedies. Regarding dynamic purchasing systems as regulated by the 2004 procurement legislation it was necessary to ensure standstill when awarding a dynamic purchasing system. This is due to the fact that a dynamic purchasing system is seen as a contract.25 With the shift to the restricted procedure it could be argued that setting up a dynamic purchasing system will no longer be a contract since no award has taken place, but only a request to participate. In such a situation a standstill period will not be necessary at the time of admittance to the system, but instead a standstill-period must be ensured when entering into a specific contract. The Directive is silent on the matter as well is the recent rapport from the Commission regarding the evaluation of Directive 2007/66/ECC26. In this rapport the Commission does not mention the lack of clarity for remedies and standstill in relation to Dynamic purchasing Systems. 22 According to Article 54(2) the invitation to tender “… shall include a reference to the electronic address on which the procurement documents have been made directly available by electronic means. The invitations shall be accompanied by the procurement documents, where those documents have not been the subject of unrestricted and full direct access, free of charge, for the reasons set out in the second or third subparagraph of Article 53(1) and have not already been made otherwise available. In addition, the invitations referred to in paragraph 1 of this Article shall include the information set out in Annex IX.” 23 Or, in cases where a prior information notice is used as a means of calling for competition, in the invitation to confirm interest, Article 35(5). 24 See in that regard Roger Bickerstaff, ‘E-procurement under the new EU procurement Directives’, in: PPLR 2014, 3, 134-147. 25 Directive 2007/66/EC of the European Parliament and the Council of 11 December 2007 amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts [2007] OJ L 335/31, henceforth the Remedies Directive, where Article 1 states ”Contracts within the meaning of this Directive include public contracts, framework agreements, public works concessions and dynamic purchasing systems.” However, when awarding a contract based on the dynamic purchasing system national law can make it possible for the contracting authority not to ensure that a standstill period has taken place, but if national law does not require standstill, Member States shall ensure that the contract is ineffective under certain circumstances see Article 2 b litra c.

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It should be remembered that the rules regarding standstill were added to the Public Sector Remedies Directive through the Amending Remedies Directive in 2007 as a consequence of Court of Justice case law. The purpose of introducing standstill into the Public Sector Remedies Directive was to allow for “… effective review between the decision to award a contract and the conclusion of the contract in question.”27 A standstill period gives tenderers sufficient time to consider whether to bring proceedings before the contract is signed. Giving tenderers sufficient time to analyse and evaluate the contracting authority’s reasons for not granting them the contract ensures that a procedure has taken place correctly. A complaint brought before the review bodies before the signing of the contract allows the contracting authority to correct mistakes which makes the enforcement system more effective and minimises the overall resources spent by the contracting authority. However, if a dynamic purchasing system should be effective it is essential that the operation is fast and effective and a standstill period would prolong the award and make dynamic purchasing system less effective. Thus, it would be helpful if the Remedies Directive were to clarify the matter. If a standstill-period is not ensured where such is required the contracting authority 38 risks that its contract may be declared ineffective (see with regard to this the commentary on the Remedies Directive, Article 2 d).

34.7. Renewed and updated ESPD, self-declarations Contracting authorities may, at any time during the period of validity of the dynamic 39 purchasing system, require admitted participants to submit a renewed and updated selfdeclaration (European Single Procurement Document, ESPD) as provided for in Article 59(1) within five working days from the date on which that request is transmitted. In that regard the contracting authority may ask tenderers and candidates at any mo- 40 ment during the procedure to submit all or part of the supporting documents where this is necessary to ensure the proper conduct of the procedure.28 The contracting authority must in that regard set an adequate time limit which ensures that the tenderer/candidate has sufficient time to submit these documents.29 Contracting authorities are not under a duty to ask for supporting documents, but may ask for them. Thus, it is not an obligation. In case the contracting authority becomes aware of a violation, e.g. that an exclusion ground in Article 57 becomes pertinent with regard to a supplier, it can be argued that the contracting authority will, in fact, have a duty to ask for documentation. Article 34(7) states that “Article 59(4) to (6) shall apply throughout the entire period of 41 validity of the dynamic purchasing system.” This means that before awarding the contract, the contracting authority shall require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60 and, where appropriate, Article 62. The contracting authority may invite economic operators to supplement or clarify the certificates received pursuant to Articles 60 and 62. 30 How26 Report from the Commission to the European Parliament and the Council on the effectiveness of Directive 89/665/EEC And Directive 92/13/EEC, as modified by Directive 2007/66/EC, concerning review procedures in the area of Public Procurement, COM(2017) 28 final. See also Commission Staff Working Document, Evaluation oft he modifications introduced by Directive 2007/66/EC to Directives 89/665/EEC and 92/13/EEC concerning the European Framework for remedies in the area of public procurement, Brussels January 24, 2017. 27 Recital 4 of the Amending Remedies Directive. 28 See Article 59(4). 29 Recital 65 “It should be recalled that the possibility foreseen in the general provisions on means of proof of this Directive to ask economic operators to submit supporting documents and the obligation to do so of the tenderer to which it has decided to award the contract also applies in the particular context of dynamic purchasing systems.”

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ever, economic operators shall not be required to submit supporting documents where the contracting authority having awarded the contract already possesses these documents.

34.8. Validity of the dynamic purchasing system 42

Contracting authorities shall indicate the period of validity of the dynamic purchasing system in the call for competition. They shall notify the Commission of any change in the period of validity using the following standard forms: (a) where the period of validity is changed without terminating the system, the form used initially for the call for competition for the dynamic purchasing system; (b) where the system is terminated, a contract award notice referred to in Article 50.

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Thus, in cases where the contracting authority terminates the dynamic purchasing system a contract award notice must be published. 34.8.1. Contract award notices for the specific contracts

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For contracts entered into based on a dynamic purchasing system, contracting authorities can choose to group its contract award notices of the results of the procurement procedure for these contracts on a quarterly basis. In that case, contracting authorities shall send the grouped notices within 30 days of the end of each quarter.31

34.9. Payment According to Article 34(9) no charges may be billed prior to or during the period of validity of the dynamic purchasing system to the economic operators interested in or party to the dynamic purchasing system. 46 Contracting authorities can require payment from other contracting authorities for the use of the dynamic purchasing system, but not from the economic operators. Requiring payment from other contracting authorities will be particularly relevant for central purchasing bodies as well as in cases where a contracting authority procures on behalf of another contracting authority. In such cases they can require payment from the contracting authorities which use them. Whether such payment comes directly from the contracting authority or as a percentage for the purchases done from the economic operator seems irrelevant. 45

Article 35 Electronic auctions 1. Contracting authorities may use electronic auctions, in which new prices, revised downwards, and/or new values concerning certain elements of tenders are presented. For this purpose, contracting authorities shall structure the electronic auction as a repetitive electronic process, which occurs after an initial full evaluation of the tenders, enabling them to be ranked using automatic evaluation methods. Certain public service contracts and certain public works contracts having as their subject-matter intellectual performances, such as the design of works, which can-

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not be ranked using automatic evaluation methods, shall not be the object of electronic auctions. In open or restricted procedures or competitive procedures with negotiation, the contracting authorities may decide that the award of a public contract shall be preceded by an electronic auction when the content of the procurement documents, in particular the technical specifications, can be established with precision. In the same circumstances, an electronic auction may be held on the reopening of competition among the parties to a framework agreement as provided for in points (b) or (c) of Article 33(4) and on the opening for competition of contracts to be awarded under the dynamic purchasing system referred to in Article 34. The electronic auction shall be based on one of the following elements of the tenders: (a) solely on prices where the contract is awarded on the basis of price only; (b) on prices and/or on the new values of the features of the tenders indicated in the procurement documents where the contract is awarded on the basis of the best price-quality ratio or to the tender with the lowest cost using a cost-effectiveness approach. Contracting authorities which decide to hold an electronic auction shall state that fact in the contract notice or in the invitation to confirm interest. The procurement documents shall include at least the information set out in Annex VI. Before proceeding with an electronic auction, contracting authorities shall make a full initial evaluation of the tenders in accordance with the award criterion or criteria and with the weighting fixed for them. A tender shall be considered admissible where it has been submitted by a tenderer, who has not been excluded pursuant to Article 57 and who meets the selection criteria, and whose tender is in conformity with the technical specifications without being irregular or unacceptable or unsuitable. In particular, tenders which do not comply with the procurement documents, which were received late, where there is evidence of collusion or corruption, or which have been found by the contracting authority to be abnormally low, shall be considered as being irregular. In particular tenders submitted by tenderers that do not have the required qualifications, and tenders whose price exceeds the contracting authority’s budget as determined and documented prior to the launching of the procurement procedure shall be considered as unacceptable. A tender shall be considered not to be suitable where it is irrelevant to the contract, being manifestly incapable, without substantial changes, of meeting the contracting authority’s needs and requirements as specified in the procurement documents. A request for participation shall be considered not to be suitable where the economic operator concerned is to be or may be excluded pursuant to Article 57 or does not meet the selection criteria set out by the contracting authority pursuant to Article 58 All tenderers that have submitted admissible tenders shall be invited simultaneously to participate in the electronic auction using, as of the specified date and time, the connections in accordance with the instructions set out in the invitation. The electronic auction may take place in a number of successive phases. The electronic auction shall not start sooner than two working days after the date on which invitations are sent out.

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6. The invitation shall be accompanied by the outcome of a full evaluation of the relevant tender, carried out in accordance with the weighting provided for in the first subparagraph of Article 67(5). The invitation shall also state the mathematical formula to be used in the electronic auction to determine the automatic re-rankings on the basis of the new prices and/or new values submitted. Except where the most economically advantageous offer is identified on the basis of price alone, that formula shall incorporate the weighting of all the criteria established to determine the most economically advantageous tender, as indicated in the notice used as a means of calling for competition or in other procurement documents. For that purpose, any ranges shall, however, be reduced beforehand to a specified value. Where variants are authorised, a separate formula shall be provided for each variant. 7. Throughout each phase of an electronic auction the contracting authorities shall instantaneously communicate to all tenderers at least sufficient information to enable them to ascertain their relative rankings at any moment. They may, where this has been previously indicated, communicate other information concerning other prices or values submitted. They may also at any time announce the number of participants in that phase of the auction. In no case, however, may they disclose the identities of the tenderers during any phase of an electronic auction. 8. Contracting authorities shall close an electronic auction in one or more of the following manners: (a) at the previously indicated date and time; (b) when they receive no more new prices or new values which meet the requirements concerning minimum differences, provided that they have previously stated the time which they will allow to elapse after receiving the last submission before they close the electronic auction; or (c) when the previously indicated number of phases in the auction has been completed. Where the contracting authorities intend to close an electronic auction in accordance with point (c) of the first subparagraph, possibly in combination with the arrangements laid down in point (b) thereof, the invitation to take part in the auction shall indicate the timetable for each phase of the auction. 9. After closing an electronic auction contracting authorities shall award the contract in accordance with Article 67 on the basis of the results of the electronic auction. Literature: Arrowsmith, The Law of Public and Utilities Procurement, 1179-1207; Steinicke and Groesmeyer, EU udbudsdirektiver med kommentarer, p. 1291-1313; Ama Eyo, ‘Electronic auctions in EU procurement: reflections on the auction rules from the United Kingdom’, PPLR 2012, 1, 1-17; Commission’s Staff Working Document “Requirements for conducting public procurement using electronic means under the new public procurement Directives 2004/18/EC and 2004/17/EC, SEC(2005) 959”; Lichere, Francois, ‘Chapter 4: new Award Procedures’, in: Trybus/Caranta/Edelstam (eds), European Union law of Public contracts: Public Procurement and beyond, p. 100-103; Petra Ferk, ‘E-procurement between EU objectives and the implementation procedures in the Member States – Article 22(1) of the 2014 Directive’, in: Grith Skovgaard Ølykke & Albert Sanchez Graells (eds), Reformation or Deformation of the EU Public Procurement Rules in 2014 (Edward Elgar Publishing, Cheltenham 2016). 35.1. The use and definition of electronic auctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.1.1. Intellectual performances contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.2. Procedures where e-auctions can be used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.3. The competition elements in the e-auction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.4. Publication requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Initial tenders – start of the e-auction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Invitation to tender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Communication and information during the e-auction . . . . . . . . . . . . . . . . . . . Closing the electronic auction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Award of the contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Even though electronic auctions had also been used prior to the 2004 Directive, a 1 provision on electronic auctions was first introduced in the 2004 Directive.1 The reason for including e-auctions in the 2004/18/EC Directive was that it was to be foreseen that the use of the technique of electronic auctions was likely to increase and hence such auctions should be given a community definition and governed by specific rules in order to ensure that they operate in full accordance with the principles of equal treatment, nondiscrimination and transparency.2 The provision on e-procurement in the 2004 Directive was, however, voluntary for Member States to implement. In the 2014 Directive Member States are required to allow contracting authorities to use electronic auctions. Besides making it mandatory for Member States to implement the provision, the main elements of the provision have remained unaltered as to substance. One of the aims of the Commission’s proposal for the 2014 Directive was the promo- 2 tion of e-procurement.3 Along with provisions requiring mandatory transmission of notices in electronic form, the mandatory electronic availability of the procurement documents and a requirement for fully electronic communication, e-auctions are a part of the overall strategy to promote e-procurement. Thus, e-procurement is one of the goals of the modernization of the EU Procurement Directives, where the ultimate goal in relation to e-procurement is “straight through e-procurement” with all phases of the procedure from notification (e-notification) to payment (e-payment) being conducted electronically.4 The reason for encouraging the use of e-procurement is that “The use of electronic communications and transaction processing by public purchasers can deliver significant savings and improved procurement outcomes while reducing waste and error.”5 Along with the Commission’s proposal for the 2014 Directive the Commission adopted in April 2012 a Communication setting out a strategy to make the use of e-procurement the rule in the EU by mid-2016.6 The Communication was followed by another Communication regarding “end to end procurement”,7 a new Directive on e-invoicing8 and other e-procurement initiatives are ongoing.9 One of these ongoing projects is that the Commission intends to launch a study that identifies best practice in the area of e-procurement tools, such as e-auctions or e-catalogues.10 An electronic auction is a procurement tool. It is a fully electronic process where ten- 3 ders are evaluated and in which new prices, revised downwards, and/or new values con1 Directive 2004/18/EC, a definition was found in Article 1(7), and a provision on electronic auctions in Article 54. 2 Recital 14 of Directive 2004/18/EC. 3 See Commission proposal, p. 8. 4 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of Regions: A strategy for e-procurement COM/ 2012/0179 final, henceforth the Communication on e-procurement, p. 3. 5 Commission proposal, p. 8. 6 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of Regions: A strategy for e-procurement COM/ 2012/0179 final (henceforth the Communication on e-procurement). According to the Communication “E-procurement can significantly simplify the way procurement is conducted, reduce waste and deliver better procurement outcomes (lower price, better quality) by stimulating greater competition across the Single Market. It can also contribute to addressing two of the main challenges the European economy is facing today: the need to maximise the efficiency of public expenditure in a context of fiscal constraints and the need to find new sources of economic growth.”

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cerning certain elements of tenders are presented. The electronic auction occurs after an initial full evaluation of the tenders enabling them to be ranked using automatic evaluation methods. Thus, an electronic auction is a tool that may be used in the context of one (and sometimes several) of the already described award procedures. The provision in Article 35 sets the requirements for e-auctions, restrictions on the use of e-auctions, it sets the rules as to how an electronic auction must be conducted and ultimately how the contract is awarded. Some further detailed information requirements is given in Annex VII. So far e-auctions have not been used frequently.11 Electronic auctions can be applied to all forms of public procurement procedures, to dynamic purchasing systems and, when a mini-competition is conducted, within a framework agreement.

35.1. The use and definition of electronic auctions An electronic auction is a fully electronic process where tenders are evaluated and in which new prices, revised downwards, and/or new values concerning certain elements of tenders are presented. The electronic auction occurs after an initial full evaluation of the tenders, enabling them to be ranked using automatic evaluation methods.12 Most often the tenderers in an electronic auction will be competing for the contract based on price as this criterion lends itself most easily to applying automatic evaluation methods. 5 Contracting authorities shall structure the electronic auction as a repetitive electronic process, which occurs after an initial full evaluation of the tenders enabling them to be ranked using automatic evaluation methods. Only elements, which are suitable for automatic evaluation by electronic calculations, may be the object of electronic auctions. This means that the elements must be quantifiable. Thus, if the evaluation of certain criteria gives the contracting authority a discretion such elements cannot be the object of electronic auctions, but the elements can, however, be included in the overall evaluation of the tender, just not in the part that is included in the electronic auction. Quantifiable 4

7 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions “End-to-end e-procurement to modernise public administration”, COM(2013) 453 final. The Communication states, p. 3 “Therefore, although the final goal is to conduct the whole procurement cycle from e-notification to e-payment electronically, at this stage the Commission does not foresee legislative proposals to digitalise the remaining processes. The Commission will however monitor future developments in these areas and may decide to undertake action if it deems it useful or necessary.” 8 Directive of the European Parliament and of the Council on electronic invoicing in public procurement, Brussels, 2 April 2014 PE-CONS 21/14. 9 Recent key policy documents can be found at the Commissions website: https://ec.europa.eu/growth/ single-market/public-procurement/e-procurement_da . For a development of e-procurement policies in EU see Petra Ferk, ‘E-procurement between EU objectives and the implementation procedures in the Member States – Article 22(1) of the 2014 Directive’, in Grith Skovgaard Ølykke and Albert Sanchez Graells (eds), Reformation or Deformation of the EU Public Procurement Rules in 2014 (Edward Elgar Publishing, Cheltenham 2016). 10 See the 2013 Communication. 11 See the Commission’s Evaluation report, p. 113, where it is stated that “The use of e-auctions is equally infrequent (less than 1% in terms of number and volume of contracts awarded).” 12 In the 2004 Directive a similar definition was found in Art. 1(7), which states “An ‘electronic auction’ is a repetitive process involving an electronic device for the presentation of new prices, revised downwards, and/or new values concerning certain elements of tenders, which occurs after an initial full evaluation of the tenders, enabling them to be ranked using automatic evaluation methods.” Ama Eyo describes an electronic auction as “a procurement tool that emerged following advances in electronic technology. It is a dynamic auction in which economic operators competing to win contract opportunities successively bid their prices down, or revise their bids usually on an electronic platform.”

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elements must be understood in a way that can be expressed in figures or percentages. Besides price quantifiable elements could for example be delivery times or other time frames that can be expressed in days. In theory it could also be possible to change a the quality of a product during an e-auction if it is transparent and possible for the system to calculate a new ranking based on the higher quality. In practise most e-auctions, however, only relate to prices. The fact that the auction is repetitive means that tenders can be placed continuously 6 and that tenderers are not required to place only one bid, but can continue to revise their tender until the auction is closed. The ultimate aim being that bids will continue to become lower. The advantage of an electronic auction is that the tenderers are given an additional 7 opportunity to assess whether they can and will reduce their price. This could be beneficial for both contracting authorities as well as for the tenderer who does not initially submit the best tender by giving the tenderer the opportunity to make the tender more competitive and thus not immediately miss out on the opportunity to win the contract. However, e-auctions may also impose some competition concerns in the sense that the high transparency surrounding the auction could facilitate collusive practices.13 E-auctions can also contain a risk that the tenderers will submit a tender which the tenderer in the end is not able to perform, as the tender will ultimately not even cover the tenderer’s costs of performing the contract. Therefore, e-auctions do not seem to be an appropriate solution in markets where undertakings are under a lot of pressure and where insolvency of undertakings is common as the contracting authority then faces the risk that the undertaking to whom the contract was awarded will not in the end be able to perform the contract. Prior to the e-auction the contracting authority will have evaluated the tenders in the 8 same way as for the award of a contract without e-auctions, but without the award of the contract. Thus, electronic auctions do not change the rules for the procurement procedures including the rules on selection as well as award criteria. 35.1.1. Intellectual performances contracts A restriction on electronic auctions relates to certain public service contracts and cer- 9 tain public works contracts having as their subject-matter intellectual performances such as the design of works which cannot be ranked using automatic evaluation methods. These types of contracts shall not be subject to electronic auctions.14 The restriction was not a part of the Commission’s proposal. According to Recital 67, 10 the reason for the restriction is that e-auctions “… are typically not suitable for certain public works contracts and certain public service contracts having as their subject-matter intellectual performances such as the design of works because only the elements suitable for automatic evaluation by electronic means, without any intervention or appreciation by the contracting authority, namely elements which are quantifiable so that they can be expressed in figures or percentages, may be the object of electronic auctions.” The Parliament had suggested that e-auctions could never be used for works contracts, but only for com13 See e.g. Trepte, Public Procurement in the EU – A Practioner’s Guide, p. 419, and more generally regarding the risk of collusion and competition concerns, in Sánchez Graells (ed), Public procurement and the EU Competition Rules, Hart 2015. 14 Also in the 2004 Directive concerns were voiced regarding these types of contracts. Thus, Recital 14 in Directive 2004/187EC states “Consequently, certain works contracts and certain service contracts having as their subject-matter intellectual performances, such as the design of works, should not be the object of electronic auctions”. In Denmark this led to the option of not implementing e-auctions for works contracts in general (Implementeringsbekendtgørelsens § 4, stk. 2, i.e. the act which implemented the 2004 Directive).

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monly used services and goods.15 Nevertheless, it has been left to the discretion of contracting authorities to decide whether to use e-auctions for works in other cases. The use of e-auctions for standardized works contracts does not seem controversial. 11 The Directive does not contain a clear definition of contracts relating to intellectual performances though such a definition was proposed by the Parliament.16 This means that it will be for the contracting authority to assess whether the service involved is such an intellectual performance service, and, if so, e-auctions may not be used.

35.2. Procedures where e-auctions can be used Contracting authorities may use electronic auction whether in open, in restricted procedures or in competitive procedures with negotiation when the content of the procurement documents, in particular the technical specifications, can be established with precision. Thus, the possibility of using electronic auctions exists for all types of procedures. Consequently, in the context of competitive procedures with negotiation the option to use e-auctions has been enlarged to all cases in which the procedure may be used. Compared to the situation in the 2004/18/EC Directive the Directive limited this possibility to the case provided for under Article 30(1)(a) – irregular or unacceptable tenders. 13 Expanding the use of e-auctions to all competitive procedures with negotiation creates flexibility for the contracting authority. One question regarding negotiation is whether it will be permitted to negotiate with tenderers after an e-auction has been held. Arrowsmith argues that it should be possible to negotiate in the context of utilities after an e-auction though, in practice, procuring entities will not generally wish to negotiate tenders after an auction, since auctions without the possibility of negotiation will generally prove more effective as a tool for securing value for money.17 She argues that there will be “… exceptional cases in which this may be useful, notably in the context of collaborative auctions, which research suggests are made more difficult if post-auction negotiations are prohibited.”18 It could be argued that is should be possible to negotiate after an e-auction in the same way as had the competitive procedures with negotiation been used without an e-auction, but most often it will not make much sense to negotiate after an eauction. If the contracting authority wishes to negotiate with tenderers after an e-auction it should not be possible to negotiate price if this was a part of the e-auction. 14 An electronic auction may also be held on the reopening of competition among the parties to a framework agreement as provided for in points (b) or (c) of Article 33(4) and on the opening for competition of contracts to be awarded under the dynamic purchasing system referred to in Article 34. In both situations e-auctions will be highly rele12

15 Parliament’s report, amendment 140. The justification for the proposed amendment was that ”Electronic auctions may be appropriate for commonly used goods and services, but, as a rule, they are unsuitable or indeed counter-productive where award procedures are complex. For works award procedures, they are fundamentally unsuitable.”. 16 Parliament’s report amendment 21, which states that public service contracts “… include “knowledgebased” or intellectual services, i.e. services which do not necessarily produce the same results, as their essence lies in providing a solution to a task by performing intellectual work. For services of this type it may be possible to provide a description of the goal or the task, depending on the type of service, nevertheless providing in advance an unambiguous and complete service description (statement of work with pre-defined parameters) is not possible.” The justification for that statement was “Some considerations and provisions of the Directive might be irrelevant/meaningless if used for intellectual services due to the specific/particular nature of such services: the result cannot be specified in detail before they are delivered. Ex: inversed auctions.” 17 Arrowsmith, Sue, ‘Modernising the European Union’s public procurement regime: a blueprint for real simplicity and flexibility’, PPLR 2012, 3, 71-82. 18 Arrowsmith, Sue, ‘Modernising the European Union’s public procurement regime: a blueprint for real simplicity and flexibility’, PPLR 2012, 3, 71-82.

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vant since these types of contracts often only lack prices or other quantifiable elements and an e-auction will be easy to conduct. In order for the contracting authority to use an e-auction it is necessary that the con- 15 tent of the procurement documents, in particular the technical specifications, can be established with precision. 19 This requirement means that it must be established beforehand with precision what the basis for the competition is. The fact that the Directive mentions that the technical specifications must be established with precision ensures that it is the delivery of the same type of goods, service, and works that the tenders are bidding for. The competitive procedures with negotiation in the 2014 Directive may only be used 16 in certain situations.20 One such reason is for example, according to Article 26(4)(a)(iv) if ”the technical specifications cannot be established with sufficient precision by the contracting authority”. Since it is a requirement for the use of an e-auction that the technical specifications can in fact be established with precision, this would lead to the conclusion that e-auctions are not permitted in cases where the contracting authority seeks to use one of the competitive procedures based on Article 26(4)(a)(iv). Other reasons for the use of competitive procedures are for example, Article 26(4)(a)(i) if “… the needs of the contracting authority cannot be met without adaptation of readily available solutions“. In such cases the contracting authority has found that the use of negotiated procedures are necessarily due to the matter of the contract and not necessarily due to the technical specification. However, in many cases it is difficult to see that using e-auction should be beneficial as the need for using competitive procedures is often to ensure certain qualitative elements of a contract, which do not lend themselves to the use of an e-auction. Nevertheless, it will be possible to conduct negotiations leading to more precision and hence e-auctions are not excluded per se. Recital 67 also clarifies that “It should, however, also be clarified that electronic auc- 17 tions may be used in a procurement procedure for the purchase of a specific intellectual property right.” Thus, e-auction can in such cases be used to compete for lower prices for an IPR.

35.3. The competition elements in the e-auction The electronic auction shall be based on one of the following elements of the tenders:

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(a) solely on prices where the contract is awarded on the basis of price only; (b) on prices and/or on the new values of the features of the tenders indicated in the procurement documents where the contract is awarded on the basis of the best price-quality ratio or to the tender with the lowest cost using a cost- effectiveness approach. Basing an e-auction solely on price is the most straightforward process. But an e-auc- 19 tion can also be held based on prices for certain parts or price in combination with the values of the features of the tenders. As mentioned above only elements, which are suitable for automatic evaluation by 20 electronic calculations, may be the object of electronic auctions. This means that the elements must be quantifiable. Thus, if the evaluation of certain criteria gives the contracting authority a discretion such elements can not be the object of electronic auctions, but

19 The wording in the 2004 Directive was “… when the contract specifications can be established with precision.” 20 See Article 26(4).

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they can, however, be included in the overall evaluation of the tender, just not in the part that is included in the electronic auction. The award of the contract must be based on the award criteria in Article 67.

35.4. Publication requirements When contracting authorities decide to hold an electronic auction, this shall be stated in the contract notice or in the invitation to confirm interest. In the 2004 Directive it could only be stated in the contract notice. Thus, some flexibility has been added to the 2014 Directive in the way that the contracting authority which uses a PIN can state, at a later stage in the invitation, to confirm interest whether the contracting authority wishes to hold an e-auction.21 22 The contract notice or the invitation to confirm interest does not necessarily need to contain all information on the e-auction. Such precisions can be stated later on in the procurement documents. 23 The fact that the contracting authority must state its intention of holding an e-auction already in the contract notice means that the contracting authority is required to have an e-auction. In case the contracting authority later on comes to the conclusion not to hold an e-auction the fairest way for potential tenderers would be to cancel the procedure.22 Steinicke and Groesmeyer argues to the contrary.23 But it may also be argued that its quite possible that potential tenderers may have declined bidding for the contract knowing that an e-auction would be held while some tenders might be suited for it. In view of that it would seem to be a substantial requirement to indicate whether or not an e-auction is involved and whether or not it is actually held. However, it is possible to cancel an e-auction in cases where the contract notice only indicates that an e-auction might be used and provided that an amendment to the contract notice is made. 24 The procurement documents shall include at least the information set out in Annex VI. The reference to Annex VI means that the procurement documents must include at least the following details: 21

(a) the features, the values of which will be the subject of electronic auction, provided that such features are quantifiable and can be expressed in figures or percentages; (b) any limits as to the values which may be submitted, as they result from the specifications relating to the subject of the contract; (c) the information which will be made available to tenderers in the course of the electronic auction and, where appropriate, when it will be made available to them; (d) the relevant information concerning the electronic auction process; (e) the conditions under which the tenderers will be able to bid and, in particular, the minimum differences which will, where appropriate, be required when bidding; 21 Under the 2004/17EC utilities Directive Article 56(3) contracting entities should state in the notice it used as a means of calling for competition, which sometimes would be a PIN, whether it wanted to use eauctions. That has been critised since at that stage it can be difficult to know whether to use an e-auction. See e.g. Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed., p.1192. However, the requirement did not seem to be of practical interest as the contracting entities, as a standard practice, seemed to include an indication that they might use the tool in every notice including all PIN notices and notices advertising a call for competition, see also Ama Eyo, ‘Electronic auctions in EU procurement: reflections on the auction rules from the United Kingdom’, PPLR 2012, 1, p. 11. 22 This is also the Commission’s view as in the Commission’s Staff Working Document Requirements for conducting public procurement using electronic means under the new public procurement Directives 2004/18/EC and 2004/17/EC, SEC(2005) 959 it states p. 18 that “Once the e-auction has been announced it becomes mandatory to hold it, unless only one valid tender is received.” 23 Steinicke and Groesmeyer, p. 1298.

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(f) the relevant information concerning the electronic equipment used and the arrangements and technical specifications for connection. Annex VI is not exhaustive. Thus, if other information is relevant for the tenders such information must be stated in the procurement documents as well.

35.5. Initial tenders – start of the e-auction Before proceeding with an electronic auction, contracting authorities shall make a full initial evaluation of the tenders in accordance with the award criterion or criteria and with the weighting fixed for them. Such an evaluation is based on the same criteria as those figuring in Article 67. Article 35(5) refers to “the weighting fixed for them”, this means that it is not possible to state the criteria in decreasing order of importance. 24 Thus, once the auction begins the weighting must be fixed in order to make it possible to determine who will win the contract.25 In order for the contracting authority to proceed to the e-auction it must have made an assessment as to whether the submitted tenders are admissible. In that regard the provision in Article 35 refers to the fact that a tender shall be considered admissible where it has been submitted by a tenderer, who has not been excluded pursuant to Article 57 and who meets the selection criteria, and whose tender is in conformity with the technical specifications without being irregular26 or unacceptable or unsuitable. The wording is identical to the wording in Article 32(2) a). For further comments see Article 32. 27 Since only admissible tenders can take part in the e-auction, it will be necessary for the contracting authority at this point in time to assess whether it wishes to use the option in Article 56(3) where contracting authorities may, unless otherwise provided by the national law, request the economic operators concerned to submit, supplement, clarify or complete the relevant information or documentation which are missing or appears to be incomplete or erroneous. If a tenderer has made a reservation with regard to certain elements that issue must also be clarified before the e-auction begins. Recital 67 states to this that “It is also appropriate to recall that while contracting authorities remain free to reduce the number of candidates or tenderers as long as the auction has not yet started, no further reduction of the number of tenderers participating in the electronic auction should be allowed after the auction has started.” The Directive is silent as to whether or not the tenderers submitting a tender are required to proceed in the e-auction. Steinicke and Groesmeyer assumes that a tenderer that later on does not wish to take part in the final bidding process can do so and that in

24 Article 67(5) states: “Where weighting is not possible for objective reasons, the contracting authority shall indicate the criteria in decreasing order of importance.” This will not be possible for e-auctions. 25 See also Trepte, Public Procurement in the EU – A Practioner’s Guide, p. 423. 26 Article 35(5) states regarding irregular tenders that “In particular, tenders which do not comply with the procurement documents, which were received late, where there is evidence of collusion or corruption, or which have been found by the contracting authority to be abnormally low, shall be considered as being irregular. In particular tenders submitted by tenderers that do not have the required qualifications, and tenders whose price exceeds the contracting authority’s budget as determined and documented prior to the launching of the procurement procedure shall be considered as unacceptable.” The wording is identical to Article 26(2) b). For further comments see that Article. 27 Article 35(5) states regarding unsuitable tenders that “A tender shall be considered not to be suitable where it is irrelevant to the contract, being manifestly incapable, without substantial changes, of meeting the contracting authority’s needs and requirements as specified in the procurement documents. A request for participation shall be considered not to be suitable where the economic operator concerned is to be or may be excluded pursuant to Article 57 or does not meet the selection criteria set out by the contracting authority pursuant to Article 58”.

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such cases the tenderers initial tender would be evaluated. Thus, the initial tender is binding for the tenderer.28 29 The electronic auction may take place in a number of successive phases. The electronic auction shall not start sooner than two working days after the date on which invitations to participate in the auction are sent out (see below at section 35.6 regarding the invitation to tender). 30 Ultimately the electronic auction is based on one of the following elements of the tenders (see also above at 35.3): (a) solely on prices where the contract is awarded on the basis of price only; (b) on prices and/or on the new values of the features of the tenders indicated in the procurement documents where the contract is awarded on the basis of the best price-quality ratio or to the tender with the lowest cost using a cost-effectiveness approach.

35.6. Invitation to tender All tenderers that have submitted admissible tenders shall be invited simultaneously to participate in the electronic auction.29 The electronic auction may take place in a number of successive phases, and will not start sooner than two working days after the date on which invitations are sent out. 32 The invitation to tender in Article 35(5) shall be accompanied by the outcome of a full evaluation of the relevant tender, carried out in accordance with the weighting provided for in the first subparagraph of Article 67(5). The contracting authority is at this point not required to state reasons as under Article 55 where it is for example a requirement that the contracting authority must inform “any tenderer that has made an admissible tender of the characteristics and relative advantages of the tender selected as well as the name of the successful tenderer.”30 It is only the assessment of the selected tenderer´s tender the contracting authority at this point in time must reveal. There is no obligation to communicate at this stage the precise ranking (i.e. the relative position of the individual tenderer compared to the other participants) so long as this is done when the auction starts.31 33 The invitation shall also state the mathematical formula to be used in the electronic auction to determine the automatic re-rankings on the basis of the new prices and/or new values submitted. Except in cases where the most economically advantageous offer is identified on the basis of price alone, that formula shall incorporate the weighting of all the criteria established to determine the most economically advantageous tender, as indicated in the notice used as a means of calling for competition or in other procurement documents. For that purpose, any ranges shall, however, be reduced beforehand to a specified value. 34 In cases where the contract is awarded based on price only, the contracting authority must state in the invitation to tender the mathematical formula to be used. The process must be conducted automatically without the contracting authority’s intervention. If for example a contract is to be awarded based on Price 20 %, quality 80 %, it does not mean that the tenderers with the lowest price after the e-auction will be awarded the contract. 31

Steinicke and Groesmeyer, EU udbudsdirektiver med kommentarer, p. 1299. The invitation must satisfy the requirements in Article 22 regarding the communication. 30 Article 55 (2) (c). 31 Commission’s Staff Working Document Requirements for conducting public procurement using electronic means under the new public procurement Directives 2004/18/EC and 2004/17/EC, SEC(2005) 959, p. 18. 28 29

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During the auction the tenderers can only influence the 20 % where quality already has been evaluated beforehand. The tenders must be able to see during the auction their new overall ranking and not only the ranking of price. In theory it does not need to be only prices the tenders will be able to change during the bidding process as also other criteria such as quality and services can be the subject to change if it is possible to create a mathematical evaluation model, which is transparent from the outset. Where variants32 are authorised, a separate formula shall be provided for each vari- 35 ant. Variants will complicate an e-auction and increases the requirements to the mathematical model to be used. Since the contracting authority does not know the variant beforehand, such a model will be made after the submission of initial tenders, but prior to the e-auction and this could be potentially damaging for the competition.33 The invitation to tender should also contain information about the e-auction such as 36 the date and time of the start of the auction (no sooner than 2 working days after the date the invitations have been sent, see Article 35(5) and how and when the auction will close, see Article 35(8). The contracting authority should also describe the relevant information as to the system behind the e-auction. Such a description should make the tenderers aware of the kind of system to be used and which requirement exists at the time of submitting tenders, including relevant information concerning individual connection to the electronic equipment being used.

35.7. Communication and information during the e-auction Throughout each phase of an electronic auction the contracting authorities shall in- 37 stantaneously communicate to all tenderers at least sufficient information to enable them to ascertain their relative rankings at any moment. They may, where this has been previously indicated, communicate other information concerning other prices or values submitted. They may also at any time announce the number of participants in that phase of the auction. In no case, however, may they disclose the identities of the tenderers during any phase of an electronic auction.34 Thus, it is a requirement that the tenderers are aware of their current position in the 38 competition during the different phases. In that regard the contracting authority can provide information as to how many tenders are still in the competition, but without revealing the names of the tenderers. The contracting authority might disclose the leading tenders’ prices/values, in order for the tenderers to be aware of how much improvement of their tender is needed in order to be awarded the contract. Apart from these mandatory requirements contracting authorities may choose to 39 communicate other information provided this was stated in the specification, i.e. the number of participants, prices or values provided by all other participants or only by some of them, their relative ranking.35 32 According to Article 45 contracting authorities may authorise or require tenderers to submit variants. When doing so, they shall indicate in the contract notice or, where a prior information notice is used as a means of calling for competition, in the invitation to confirm interest whether or not they authorise or require variants. Variants shall not be authorised without such indication. Variants shall be linked to the subject-matter of the contract. 33 See Steinicke and Groesmeyer, EU udbudsdirektiver med kommentarer, p. 1303, who also on p. 1311-1313 argues that there can be potential competition concerns regarding the use of auctions in general. 34 Keeping the tenderers hidden from each other seeks to avoid that tenderers agree on prices, hence in order to prevent collusion, see e.g. Trepte, Public Procurement in the EU – A Practioner’s Guide, p. 425. 35 Commission’s Staff Working Document Requirements for conducting public procurement using electronic means under the new public procurement Directives 2004/18/EC and 2004/17/EC, SEC(2005) 959, p. 20.

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35.8. Closing the electronic auction 40

Contracting authorities shall close an electronic auction in one or more of the following manners: (a) at the previously indicated date and time; (b) when they receive no more new prices or new values which meet the requirements concerning minimum differences, provided that they have previously stated the time which they will allow to elapse after receiving the last submission before they close the electronic auction; or (c) when the previously indicated number of phases in the auction has been completed.

In all cases it must be stated beforehand which type of closing of the auction the contracting authority intends to use. 41 Where the contracting authorities intend to close an electronic auction in accordance with Article 35(8) point (c), possibly in combination with the arrangements laid down in point (b), the invitation to take part in the auction shall indicate the timetable for each phase of the auction. 42 The system for e-auction must satisfy the requirement for electronic receipt of tenders described in ANNEX IV Requirements relating to tools and devices for the electronic receipt of tenders, request for participation as well as plans and projects in design contest. 36 If the system used for the e-auction runs out of capacity during the auction, the auction must be cancelled and postponed. In case of system failure it is the responsibility of the contracting authority to decide if either the entire auction or one of its phases must be postponed to a later date; only if it is possible to provide timely and appropriate information to each participant, can extension of deadlines and re-submission of bids be envisaged.37

35.9. Award of the contract After closing an electronic auction contracting authorities shall award the contract in accordance with Article 67 on the basis of the results of the electronic auction. Thus, if the award criterion was most economically advantageous tender (MEAT), only including the lowest price, then the contract will be awarded to the tenderer whose price was the lowest at the end of the auction. If the award criterion was MEAT including other elements than price, the award decision will often have to rely on a "combined" ranking based both on the elements that were subject to the electronic auction as well as other aspects that were indicated in the tenders. 44 The provision in the 2004 Directive Article 54(8), second subparagraph, stated that “Contracting authorities may not have improper recourse to electronic auctions nor may they use them in such a way as to prevent, restrict or distort competition or to change the subject-matter of the contract, as put up for tender in the published contract notice and defined in the specification.” This provision has been deleted as part of the overall effort to streamline and simplify the proposal. The necessary safeguards continue to apply through the generally applicable provisions and principles of the Directive (in particular concerning equal treatment and transparency) and the new provisions of Article 18(2). 43

See to this the comments to Article 22. Commission’s Staff Working Document Requirements for conducting public procurement using electronic means under the new public procurement Directives 2004/18/EC and 2004/17/EC, SEC(2005) 959, p. 20. 36

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Article 36 Electronic catalogues 1. Where the use of electronic means of communication is required, contracting authorities may require tenders to be presented in the format of an electronic catalogue or to include an electronic catalogue. Member States may render the use of electronic catalogues mandatory in connection with certain types of procurement. Tenders presented in the form of an electronic catalogue may be accompanied by other documents, completing the tender. 2. Electronic catalogues shall be established by the candidates or tenderers with a view to participating in a given procurement procedure in accordance with the technical specifications and format established by the contracting authority. Furthermore, electronic catalogues shall comply with the requirements for electronic communication tools as well as with any additional requirements set by the contracting authority in accordance with Article 22. 3. Where the presentation of tenders in the form of electronic catalogues is accepted or required, contracting authorities shall: (a) state so in the contract notice or in the invitation to confirm interest where a prior information notice is used as a means of calling for competition; (b) indicate in the procurement documents all the necessary information pursuant to Article 22(6) concerning the format, the electronic equipment used and the technical connection arrangements and specifications for the catalogue. 4. Where a framework agreement has been concluded with more than one economic operator following the submission of tenders in the form of electronic catalogues, contracting authorities may provide that the reopening of competition for specific contracts takes place on the basis of updated catalogues. In such a case, contracting authorities shall use one of the following methods: (a) invite tenderers to resubmit their electronic catalogues, adapted to the requirements of the contract in question; or (b) notify tenderers that they intend to collect from the electronic catalogues which have already been submitted the information needed to constitute tenders adapted to the requirements of the contract in question; provided that the use of that method has been announced in the procurement documents for the framework agreement. 5. Where contracting authorities reopen competition for specific contracts in accordance with point (b) of paragraph 4, they shall notify tenderers of the date and time at which they intend to collect the information needed to constitute tenders adapted to the requirements of the specific contract in question and shall give tenderers the possibility to refuse such collection of information. Contracting authorities shall allow for an adequate period between the notification and the actual collection of information. Before awarding the contract, contracting authorities shall present the collected information to the tenderer concerned so as to give it the opportunity to contest or confirm that the tender thus constituted does not contain any material errors. 6. Contracting authorities may award contracts based on a dynamic purchasing system by requiring that offers for a specific contract are to be presented in the format of an electronic catalogue.

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Contracting authorities may also award contracts based on a dynamic purchasing system in accordance with point (b) of paragraph 4 and paragraph 5 provided that the request for participation in the dynamic purchasing system is accompanied by an electronic catalogue in accordance with the technical specifications and format established by the contracting authority. That catalogue shall be completed subsequently by the candidates, when they are informed of the contracting authority’s intention to constitute tenders by means of the procedure set out in point (b) of paragraph 4. Literature: Roger Bickerstaff, ‘E-procurement under the new EU procurement Directives’, PPLR 2014, 3, 134-147. 36.1. Tenders as electronic catalogue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.1.1. Definition of electronic catalogues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.1.2. Mandatory use of e-catalogues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.2. The format for the electronic catalogue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.3. Prior notice in procurement documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.4. Framework agreements and e-catalogues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.5. Reopening competition for specific contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.6. Dynamic purchasing systems and e-catalogues . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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As a new feature included in the 2014 Directive a provision on e-catalogues has been introduced. In the 2004/18 Directive, e-catalogues were only mentioned in the preamble.1 Even though there has been no explicit regulatory frame work for e-catalogues such have been used prior to the 2014 Directive.2 2 Electronic catalogues are a format for the presentation and organisation of information in a manner that is common to all the participating bidders and which lends itself to electronic treatment.3 The idea behind an e-catalogue is that it is considered that such catalogues will help to increase competition and streamline public purchasing, particularly in terms of savings in time and money.4 The reason for including a provision in the 2014 Directive is “… to ensure that the use of the new techniques complies with this Directive and with the principles of equal treatment, non-discrimination and transparency.”5 3 One of the aims of the Commission’s proposal for the 2014 Directive was the promotion of e-procurement.6 Along with provisions requiring mandatory transmission of notices in electronic form, the mandatory electronic availability of the procurement documents and a requirement for fully electronic communication, e-auctions are a part of the overall strategy to promote e-procurement. Thus, e-procurement is one of the goals of the modernisation of the EU Procurement Directives, where the ultimate goal in relation to e-procurement is “straight through e-procurement” with all phases of the procedure from notification (e-notification) to payment (e-payment) being conducted electronically.7 The reason for encouraging the use of e-procurement is that “The use of electronic communications and transaction processing by public purchasers can deliver significant 1

1 Directive 2004/18/EC, Recital 12 “… a tender submitted by a tenderer, in particular where competition has been reopened under a framework agreement or where a dynamic purchasing system is being used, may take the form of that tenderer’s electronic catalogue if the latter uses the means of communication chosen by the contracting authority in accordance with Article 42.” 2 See also Roger Bickerstaff, p. 8 “Within the United Kingdom at least it has not been thought necessary for the procurement rules to authorise the use of electronic catalogues or that there has been a need for the use of electronic catalogues to be regulated by specific rules.” 3 Recital 68. 4 Recital 68. 5 Recital 68. 6 See the Commission proposal, p. 8.

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savings and improved procurement outcomes while reducing waste and error.”8 Along with the Commission’s proposal for the 2014 Directive, the Commission adopted in April 2012 a Communication adopting a strategy to make the use of e-procurement the rule in the EU by mid-2016.9 The Communication was followed by another Communication regarding “end-to-end procurement”,10 a new Directive on e-invoicing11 and other eprocurement initiatives are ongoing.12 One of these on-going projects is that the Commission will launch a study to identify best practice in the area of e-procurement tools, such as e-auctions or e-catalogues.13

36.1. Tenders as electronic catalogue Where the use of electronic means of communication is required, contracting author- 4 ities may require tenders to be presented in the format of an electronic catalogue or to include an electronic catalogue. Thus, the tender can be the e-catalogue itself or tenders presented in the form of an electronic catalogue may be accompanied by other documents completing the tender. Hence documentation and other documents may also be submitted. According to Article 36(1) the contracting authority will only be allowed to require e- 5 catalogues in cases where the use of electronic means of communication is also required. This reference seems superfluous since e-catalogues will always be electronic and therefore it will always be necessary to submit them electronically. Printing the e-catalogue and submitting it physically makes no sense. The reference to the requirement that e-catalogues can only be used in cases where 6 the use of electronic means of communication is also required does not mean that e-catalogues cannot be used, before Member States have implemented the use of electronic means in Article 22. In fact Article 90(2) states “… Member States may postpone the application of Article 22(1) until 18 October 2018, except where use of electronic means is mandatory pursuant to Articles 34, 35 or 36, Article 37(3), Article 51(2) or Article 53.” 7 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of Regions: A strategy for e-procurement COM/ 2012/0179 final (henceforth the Communication on e-procurement, p. 3). 8 Commission proposal, p. 8. 9 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of Regions: A strategy for e-procurement COM/ 2012/0179 final. According to the Communication “E-procurement can significantly simplify the way procurement is conducted, reduce waste and deliver better procurement outcomes (lower price, better quality) by stimulating greater competition across the Single Market. It can also contribute to addressing two of the main challenges the European economy is facing today: the need to maximise the efficiency of public expenditure in a context of fiscal constraints and the need to find new sources of economic growth.” 10 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions “End-to-end e-procurement to modernise public administration”, COM(2013) 453 final. The Communication states, p. 3: “Therefore, although the final goal is to conduct the whole procurement cycle from e-notification to e-payment electronically, at this stage the Commission does not foresee legislative proposals to digitalise the remaining processes. The Commission will however monitor future developments in these areas and may decide to undertake action if it deems it useful or necessary.” 11 Directive of the European Parliament and of the Council on electronic invoicing in public procurement, Brussels, 2 April 2014 PE-CONS 21/14. 12 Recent key policy documents can be found at the Commissions website: https://ec.europa.eu/growth/ single-market/public-procurement/e-procurement_da . For a development of e-procurement policies in EU see Petra Ferk, ‘E-procurement between EU objectives and the implementation procedures in the Member States – Article 22(1) of the 2014 Directive’, in Grith Skovgaard Ølykke and Albert Sanchez Graells (eds), Reformation or Deformation of the EU Public Procurement Rules in 2014 (Edward Elgar Publishing, Cheltenham 2016). 13 See the 2013 Communication.

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Thus, contracting authorities will be able to require the use of e-catalogues in all procedures in which they may wish to do so. 36.1.1. Definition of electronic catalogues Article 36 does not include a definition of e-catalogues, but according to Recital 68 “Electronic catalogues are a format for the presentation and organisation of information in a manner that is common to all the participating bidders and which lends itself to electronic treatment. An example could be tenders presented in the form of a spreadsheet.” In principle, an excel sheet will be considered as an e-catalogue, but even a word document or a Pdf file would be sufficient. The only requirement is that the catalogue is electronic. 14 8 In the 2005 working document from the Commission on the requirements for conducting public procurement using electronic means, the Commission defines an e-catalogue as “… electronic documents established by the suppliers which describe products and prices which may, under certain conditions, constitute a tender; these are either transmitted or uploaded to the contracting authority website or made available in the suppliers’ website.”15 9 There is currently no EU standard form for an e-catalogue, but according to Recital 57 it could be beneficial if such existed. It is stated “Differing technical formats or processes and messaging standards could potentially create obstacles to interoperability, not only within each Member State but also and especially between the Member States. For example, in order to participate in a procurement procedure in which use of electronic catalogues, which is a format for the presentation and organisation of information in a manner that is common to all the participating bidders and which lends itself to electronic treatment, is permitted or required, economic operators would, in the absence of standardisation, be required to customise their own catalogues to each procurement procedure, which would entail providing very similar information in different formats depending on the specifications of the contracting authority concerned. Standardising the catalogue formats would thus improve the level of interoperability, enhance efficiency and would also reduce the effort required of economic operators.”16 It is possible that, in the future, certain standards for ecatalogues will exist. In that regard Article 22(7) authorizes the Commission to adopt delegated acts to establish mandatory use of certain technical standards in relation to ecatalogues.17 7

14 See also Arrowsmith, p 1221, who states that electronic catalouges are, in their simplest form, merely electronic versions of traditional paper-based catalogues, showing details of a firm’s products or services. 15 Commission’s Staff Working Document Requirements for conducting public procurement using electronic means under the new public procurement Directives 2004/18/EC and 2004/17/EC, SEC(2005) 959, p. 16. 16 Various initiatives exist on EU level seeking to create an overview of potential standards for e-catalogues. See for example the Report created by European Dynamics for the Commission “Electronic catalogues in Electronic Public Procurement”, Standardisation Initiatives, from 2007, which can be found at https://joinup.ec.europa.eu/sites/default/files/files_epractice/sites/media/media1830.pdf (last visited November 2017 ). 17 Art. 22(7) states that “To ensure the interoperability of technical formats as well as of process and messaging standards, especially in a cross-border context, the Commission shall be empowered to adopt delegated acts in accordance with Article 87 to establish the mandatory use of such specific technical standards, in particular with regard to the use of electronic submission, electronic catalogues and means for electronic authentication, only where technical standards have been thoroughly tested and proved their usefulness in practice. Before making the use of any technical standard mandatory, the Commission shall also carefully consider the costs that this may entail, in particular in terms of adaptations to existing e-procurement solutions, including infrastructure, processes or software.”

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It will be particularly relevant to use e-catalogues in cases of procurement of many 10 products. In such cases there will be a specific need for a systematic approach and many product lines will be necessary. 36.1.2. Mandatory use of e-catalogues Member States may render the use of electronic catalogues mandatory in connection 11 with certain types of procurement. Since e-catalogues will be particularly relevant for procurement involving many product lines or in dynamic purchasing systems, it could increase the use for e-catalogues if it were made mandatory to use e-catalogues in these types of procurement and particular if they were using the same standard. However, it is difficult to see that Member States may wish to bereave contracting authorities of the right to decide whether an e-catalogue will be beneficial in all cases. Thus it remains to be seen if e-catalogues will be mandatory in some Member States. It seems unlikely that Member States will make use of e-catalogues mandatory.18

36.2. The format for the electronic catalogue The submitted e-catalogues must be in the format required by the contracting author- 12 ity and in accordance with technical specifications19 and e-communications.20 According to Article 36(2) “Electronic catalogues shall be established by the candidates 13 or tenderers with a view to participating in a given procurement procedure in accordance with the technical specifications and format established by the contracting authority.” This means that each catalogue will need to be adapted to the contracting authority’s need and therefore cannot represent a tenderer’s general catalogue.21 According to the Commission “… This ensures that the catalogue that is transmitted in response to a given procurement procedure only contains products, works or services that the economic operators estimated – after an active examination – correspond to the requirements of the contracting authority. Obviously, economic operators may copy information contained in their "general" catalogue, but they may not submit the general catalogue as such.”22 Thus, tenderers are required to spend time (and money) by amending their general catalogues so that they only contain products, works or services that correspond to the requirements of the contracting authority. Since different contracting authorities ask for different formats and different requirements, e-catalogues cannot as such be seen as a simpler way for economic operators to create their tenders. But, of course, they may copy information from their general catalogue. A standard for e-catalogues could improve the time spent by tenderers to prepare a tender (see above 36.1.1 for further on standards). Article 36(2) also specifies that electronic catalogues shall comply with the require- 14 ments for electronic communication tools and with any additional requirements set by 18 See also Roger Bickerstaff, p. 9, ”However, it is perhaps unlikely that many Member States will take up this option. Whilst the Commission has good intentions in seeking to promote e-catalogues, any mandatory requirement to use e-catalogues could be counterproductive in practice.” 19 See Article 42. 20 See Article 22. 21 Recital 68: “Thus, the use of electronic catalogues for the presentation of tenders should not entail the possibility of economic operators limiting themselves to the transmission of their general catalogue.” 22 Cluster 4 “E-Procurement”, Council document nr. 6575/12, p. 17. See also Recital 68: “Such adaptation ensures that the catalogue that is transmitted in response to a given procurement procedure contains only products, works or services that the economic operators estimated – after an active examination – correspond to the requirements of the contracting authority. In so doing, economic operators should be allowed to copy information contained in their general catalogue, but they should not be allowed to submit the general catalogue as such.”

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the contracting authority in accordance with Article 22 (see to this the comment on Article 22). 15 Contracting authorities may require tenders to be presented in the format of an electronic catalogue or to include an electronic catalogue. Thus, the catalogue can be the tender itself or a tender can include a catalogue. In cases where other materials are required it is clear that the catalogue will only constitute parts of the overall tender.

36.3. Prior notice in procurement documents 16

The contracting authority must state in the contract notice (or in the invitation to confirm interest where a prior information notice is used as a means of calling for competition) whether the presentation of tenders in the form of electronic catalogues is accepted or required. As can be derived from this, contracting authorities can make it voluntary for tenderers to submit a tender by using an e-catalogue. Furthermore, the procurement documents must indicate all the necessary information pursuant to Article 22(6) concerning the format (electronic signatures etc.), the electronic equipment used and the technical connection arrangements and specifications for the electronic catalogue. Article 22(6) sets, along with Annex VI, rules regarding the tools and devices for the electronic transmission and receipt of tenders and for the electronic receipt of requests to participate. For further see the commentary to Article 22.

36.4. Framework agreements and e-catalogues According to the Commission’s Evaluation Report “The impact assessment on the 2004 action plan, noted that e-Catalogues appear to be used mostly by central purchasing bodies for ordering under framework agreements, using ad-hoc e-Catalogues. Mostly these catalogues appear to require the suppliers who have won a contract to upload catalogue data into the central purchasing bodies' catalogue according to that body's standard or template.”23 The potential use of e-catalogues was thus foreseen for particular framework agreements. E-catalogues could also be relevant for dynamic purchasing systems see below Section 36.6. 18 Article 36(3) and (4) contains provisions regarding the use of e-catalogues in framework agreements. The provisions apply to framework agreements with multiple suppliers and where e-catalogues were used to award the framework agreement itself. E-catalogues can obviously also be used in connection with Article 33(3) and (4) under the same conditions as for regular tenders. Article 36(3) and (4) contain an alternative method for the award of contracts based on a framework agreement where the reopening of competition for specific contracts takes place on the basis of updated catalogues. The alternative methods can only be used when an e-catalogue constitutes the tender itself, hence not in cases where a catalogue is only a part of a tender. 19 According to Article 36(3) two methods for the award of contracts based on a framework agreement can be used in cases when reopening of competition for specific contracts takes place: 17

– Method (a): invite tenderers to resubmit their electronic catalogues, adapted to the requirements of the contract in question; or – Method (b): notify tenderers that the contracting authority intends to collect from the electronic catalogues which have already been submitted the information needed for tenderers to submit tenders adapted to the requirements of the contract in question, 23

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provided that the use of that method has been announced in the procurement documents for the framework agreement. 24 In the first method it is the responsibility of the tenderers to resubmit the e-cata- 20 logues adapted to the requirements of the contract in question. Thus, the tenderers are not required to submit a new e-catalogue in case they do not wish to be awarded the contract. In method (b) it is for the contracting authority to collect the relevant information from the already submitted e-catalogues adapted to the requirements for the contract. In such a case the contracting authority must follow the procedure in Article 36(5) – see below section 36.5. The method was in the Commission’s proposal called “punch out”.25 In both situations it is questionable whether new products can be added to the e-cata- 21 logues. Bickerstaff states that the rules on e-catalogues are based on the assumption that the e-catalogue is static and will not vary over time, which he finds to be a disadvantage in the new rules.26 However, the contract may have foreseen a possibility of adding new products to e-catalogues if it is stated beforehand when such can take place, e.g. new technology etc. It should also be borne in mind that Article 72(4) introduces of a sort of de minimis rule in relation to amendments. According to this provision it is possible to make modifications to a framework agreement if the value of a modification can be expressed in monetary terms, and the value does not exceed the thresholds in the Directive and is below 10% of the initial contract value for service and supply contracts and below 15% of the initial contract value for works contracts. It is, furthermore, a requirement that the modification does not alter the overall nature of the contract or framework agreement. It can be argued that this possibility will also be of great significance for framework agreements where e-catalogues are used since such cases often include a very high number of products, and it can be relevant for a supplier to add similar products, because the supplier now also has a given product in its selection, or can substitute a product with another similar product due to, e.g., newer technology. It is likely that this will be allowed in accordance with the provision in Article 72(4) if it fulfils the requirements, e.g., that the substitution can be expressed in monetary terms. An example could be a framework agreement for food where a supplier could be allowed to add to its selection a new type of soya milk, a new type of coffee etc. It could also be a framework agreement for mobile phones where the supplier should be allowed to replace an older model with a newer. Nonetheless, in both cases it would not be possible for a supplier to add products, which would alter the overall nature of the framework agreement. That could be the case if a car, a washing machine etc. was added to the framework agreement. In any event, a supplier will need consent from the contracting authority to add products or substitute a product.

24 See also Recital 68, which states: “… Furthermore, where sufficient guarantees are offered in respect of ensuring traceability, equal treatment and predictability, contracting authorities should be allowed to generate tenders in relation to specific purchases on the basis of previously transmitted electronic catalogues, in particular where competition has been reopened under a framework agreement or where a dynamic purchasing system is being used.” 25 See the Commission’s proposal Article 35. 26 Roger Bickerstaff states that the new rules on e-catalogues “… have the significant drawback that they are predicated on an implicit assumption that the catalogues will be static, so that the products and services included in the catalogue will not vary over time and that the prices to be charged for the goods and services will only be changed when contracting authorities request the suppliers to update their catalogues. One of the key advantages of electronic catalogues is that they enable the products and services offered and the prices to be charged to be kept up-to-date with market conditions on a day-by-day basis. This opportunity has not been grasped in the new directives.”

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It should be borne in mind that the rules on electronic communication in Article 22 (6), along with Annex VI, sets the rules regarding the tools and devices for the electronic transmission and receipt of tenders. For further see the commentary to Article 22. Regarding the requirements for security in Article 22(6) it is stated in Recital 57 that “Similarly, the evaluation of proportionality could result in lower levels of security being required in connection with the resubmission of electronic catalogues or the submission of tenders in the context of mini-competitions under a framework agreement or the access to procurement documents.” Thus, the use of e-catalogues may result in a lower level of security regarding the submission of the catalogues as a tender.

36.5. Reopening competition for specific contracts 23 24

25

26

27

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Article 36(5) states the procedure for the award of contracts based on e-catalogues using the punch-out method. Where contracting authorities reopen competition for specific contracts in accordance with method b) (“punch out”), they shall notify tenderers of the date and time at which they intend to collect the information needed to constitute tenders adapted to the requirements of the specific contract in question. The contracting authorities shall give tenderers the possibility of refusing such a collection of information. This ensures that the tenderers in such a situation, where the contracting authority single-handedly put together the tender, can refuse to take part in the competition for the contract in question. If tenderers have once accepted that the contracting authority collects information they are bound by the tender the contracting authority put together based on the e-catalogue unless material errors have been made. Contracting authorities shall allow for an adequate period between the notification and the actual collection of information. The Directive is silent as to how long an adequate period is. In this regard, the principle of proportionality should be borne in mind in the sense that tenderers are given sufficient time to examine the information taking into consideration elements such as the size of the e-catalogues and perhaps also the time elapsed since last time the contracting authority collected information. Before awarding the contract contracting authorities shall present the collected information to the tenderer concerned so as to provide the tenderer with the opportunity to contest or confirm that the (collected) tender does not contain any material errors. The tenderers are bound by the collected material. Only in cases where material errors have been made will the tenderer not be bound by the generated tender.27 Since tenderers are bound by the generated tender, giving the economic operator the opportunity to contest or explicitly accept the tender that has been put together by the contracting authority on the basis of information contained in the economic operator's electronic catalogue is of course crucial.28 It can be discussed what is meant by the expression material errors. In any case the tenderers should not be given the option of making corrections to their e-catalogue in relation to particular prices. Material errors should more be understood in the sense that mistakes have been made by the contracting authority when collecting the information such as having chosen wrong products, missed some calculations or similar.

27 Recital 68 states “Where tenders have been generated by the contracting authority, the economic operator concerned should be given the possibility to verify that the tender thus constituted by the contracting authority does not contain any material errors. Where material errors are present, the economic operator should not be bound by the tender generated by the contracting authority unless the error is corrected.” 28 See also Cluster 4, “E-Procurement”, Council document nr. 6575/12, p. 18.

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Mistakes in the e-catalogue – or missing information in an e-catalogue – can be cor- 29 rected in line with Article 56(3) and the case law from the CJEU e.g. Manova and Slovensko, where contracting authorities may, unless otherwise provided by the national law, request the economic operators concerned to submit, supplement, clarify or complete the relevant information or documentation which are missing or appear to be incomplete or erroneous. See the Commentary on Article 56(3).

36.6. Dynamic purchasing systems and e-catalogues Contracting authorities may award contracts based on a dynamic purchasing system 30 by requiring that offers for a specific contract be presented in the format of an electronic catalogue. Since a dynamic purchasing system is a fully electronic system it will be of particular relevance to use e-catalogues in such cases. Often e-catalogues will probably be used without paying particular intention to the fact that an e-catalogue is involved. However, contracting authorities may also award contracts based on a dynamic pur- 31 chasing system in accordance with the punch-out method described above in section 35.5. They can, nevertheless, only use the punch-out method if the requests for participation in the dynamic purchasing system were also accompanied by an electronic catalogue and that this catalogue is in accordance with the technical specifications and format established by the contracting authority. The main purpose by requiring an e-catalogue already at the time for requesting participation is to guarantee that contracting authorities start collecting the information needed to constitute the tender for a specific contract only on the basis of information originally supplied by the economic operators themselves in the required format.29 The candidates shall complete the e-catalogue subsequently, when they are informed of the contracting authority’s intention to constitute tenders by means of the procedure set out in Article 36(4) point (b).

Article 37 Centralised purchasing activities and central purchasing bodies 1. Member States may provide that contracting authorities may acquire supplies and/or services from a central purchasing body offering the centralised purchasing activity referred to in point (a) of point (14) of Article 2(1). Member States may also provide that contracting authorities may acquire works, supplies and services by using contracts awarded by a central purchasing body, by using dynamic purchasing systems operated by a central purchasing body or, to the extent set out in the second subparagraph of Article 33(2), by using a framework agreement concluded by a central purchasing body offering the centralised purchasing activity referred to in point (b) of point (14) of Article 2(1). Where a dynamic purchasing system which is operated by a central purchasing body may be used by other contracting authorities, this shall be mentioned in the call for competition setting up that dynamic purchasing system. In relation to the first and second subparagraphs, Member States may provide that certain procurements are to be made by having recourse to central purchasing bodies or to one or more specific central purchasing bodies.

29

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2. A contracting authority fulfils its obligations pursuant to this Directive when it acquires supplies or services from a central purchasing body offering the centralised purchasing activity referred to in point (a) of point (14) of Article 2(1). Furthermore, a contracting authority also fulfils its obligations pursuant to this Directive where it acquires works, supplies or services by using contracts awarded by the central purchasing body, by using dynamic purchasing systems operated by the central purchasing body or, to the extent set out in the second subparagraph of Article 33(2), by using a framework agreement concluded by the central purchasing body offering the centralised purchasing activity referred to in point (b) of point (14) of Article 2(1). However, the contracting authority concerned shall be responsible for fulfilling the obligations pursuant to this Directive in respect of the parts it conducts itself, such as: (a) awarding a contract under a dynamic purchasing system, which is operated by a central purchasing body; (b) conducting a reopening of competition under a framework agreement that has been concluded by a central purchasing body; (c) pursuant to points (a) or (b) of Article 33(4), determining which of the economic operators, party to the framework agreement, shall perform a given task under a framework agreement that has been concluded by a central purchasing body. 3. All procurement procedures conducted by a central purchasing body shall be performed using electronic means of communication, in accordance with the requirements set out in Article 22. 4. Contracting authorities may, without applying the procedures provided for in this Directive, award a public service contract for the provision of centralised purchasing activities to a central purchasing body. Such public service contracts may also include the provision of ancillary purchasing activities. Literature: OECD (2011), ‘Centralised Purchasing Systems in the European Union’, SIGMA Papers, No. 47, OECD Publishing; Carina Risvig Hamer, ‘Regular purchases and aggregated procurement: the changes in the new Public Procurement Directive regarding framework agreements, dynamic purchasing systems and central purchasing bodies’, PPLR 2014, 4, 201-210; Steinicke and Groesmeyer, EU udbudsdirektiver med kommentarer, p. 307-313 and 608-611; Arrowsmith, The Law of Public and Utilities Procurement, p. 397-410; Trepte, Peter, Public Procurement in the EU – A Practioner’s Guide, 2.70 et seq.; Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, p. 133 et seq.; Carina Risvig Hamer, Grundlæggende Udbudsret, Chap. 5.

Framework agreements and dynamic purchasing systems are often established by central purchasing bodies on behalf of other contracting authorities. In such cases the framework agreements frequently have a large value due to the fact that the needs of the contracting authorities have been aggregated. Aggregated procurement has the advantage of achieving economies of scale while at the same time it is only necessary to conduct one procurement procedure for all the involved parties, which reduces the costs for both contracting authorities and economic operators and ensures better value for money. 2 There are many advantages for contracting authorities which use a central purchasing body’s framework agreements or dynamic purchasing systems. The aggregation of contracting authorities’ needs leads to obtaining economies of scale, including lower prices and fewer transaction costs, and to improving and professionalising procurement man1

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agement. In particular for small contracting authorities, which do not have the capacity to conduct procurement procedures (as well as buying power) for all types of contracts, these framework agreements can be a useful tool of purchasing. In view of the large volumes purchased those techniques help increase competition.1 However, it should also be mentioned that joint purchasing conducted by central purchasing bodies could be seen as being detrimental to SMEs access due to larger volumes and contract values. Thus, the 2014 Public Sector Directive also states that centralisation of purchases should be carefully monitored. 2 It can also be argued that CPBs in some cases, when many contracting authorities demands have been aggregated, can potentially be in breach of the EU competition rules in relation to abuse of a dominant position in Article 102 TFEU in case the activity of the CPB can be said to constitute an economic activity.3 A provision on central purchasing bodies was first introduced in the 2004 Directive 3 (Article 11), but some Member States had already set up such purchasing bodies prior to the Directive. The perhaps most significant adjustment regarding central purchasing bodies in the 2014 Directive is the clarification on the responsibility between central purchasing bodies and contracting authorities (see below section 37.2). The provision in Article 37(2) ensures legal certainty for contracting authorities against being met with objections on the basis of mistakes made by central purchasing bodies. Other changes in the 2014 Directive regarding central purchasing bodies mainly involve clarifications of the current state of law as well as a requirement for electronic communication for central purchasing bodies (see section 37.3).

37.1. Centralised Purchasing Bodies Member States may provide that contracting authorities may acquire supplies and/or 4 services from a central purchasing body (in this case the central purchasing body acts as a wholesaler). Member States may also provide that contracting authorities may acquire works, supplies and services by using contracts awarded by a central purchasing body, by using dynamic purchasing systems operated by a central purchasing body or, to the extent set out in the second subparagraph of Article 33(2), by using a framework agreement concluded by a central purchasing body). In these cases the central purchasing body acts as an intermediary. The Commission had suggested that it should not be for Member States to decide 5 whether to implement the option of using centralised purchasing bodies, but this section was not a part of the final Directive. This means that Member States now are free to decide whether they wish to make it possible for contracting authorities to acquire supplies and/or services via a central purchasing body. Nevertheless, even if a Member State decided not to implement the provision on central purchasing bodies, Member States may not prohibit its contracting authorities from Recital 15 of the 2004/18/EC Public Sector Directive. Recital 59 states “However, the aggregation and centralisation of purchases should be carefully monitored in order to avoid excessive concentration of purchasing power and collusion, and to preserve transparency and competition, as well as market access opportunities for SME’s”. On SME’s and aggregation of demand see also Ignacio Herrera Anchustegui, ‘Division into Lots and Demand Aggregation – Extremes Looking for the Correct Balance?’, in Grith Skovgaard Ølykke and Albert Sánchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules in 2014 (Edward Elgar Publishing, Cheltenham 2016). 3 See on this aspect see Ignacio Herrera Anchustegui , Centralizing Public Procurement and Competitiveness in Directive 2014/24, available at SSRN: http://ssrn.com/abstract=2633445 and Albert Sánchez Graells and Ignacio Herrera Anchustegui, Revisiting the Concept of Undertaking from a Public Procurement Law Perspective – A Discussion on EasyPay and Finance Engineering, November 26, 2015, available at SSRN: http://ssrn.com/ abstract=2695742. 1

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using centralised purchasing activities offered by central purchasing bodies located in another Member State.4 6 A central purchasing body can offer centralised purchasing activity in the sense of the acquisition of supplies and/or services intended for contracting authorities (wholesalers).5 Contracting authorities may also acquire works, supplies and services by using contracts awarded by a central purchasing body, by using dynamic purchasing systems operated by a central purchasing body or, by using a framework agreement concluded by a central purchasing body or a public contract for works, supplies or services intended for contracting authorities (intermediaries).6 A central purchasing body is a contracting authority, which provides centralised purchasing activities and, possibly, ancillary purchasing activities.7 Thus, a central purchasing body is also a contracting authority – a body governed by public law.8 It is not a central purchasing body in cases where contracting authorities act together to conduct procurement together occasionally (so-called occasional joint procurement, see Article 38). The structure of a central purchasing body must be set on a more permanent basis. In the Commission’s proposal it was in fact suggested that the wording “permanent basis” became a part of the definition of a central purchasing body.9 The reference to “permanent basis” did not become a part of the final wording of the Directive, indicating that it is possible to have a central purchasing body, which is not permanent, but in practise central purchasing bodies are established on a permanent basis. As can be seen from definition of a central purchasing body in Article 2(16) a central purchasing body is only one contracting authority and not several.10 The central purchasing body itself will, however, have several users (contracting authorities). Nevertheless, the rules regarding such “occasional joint procurement” are similar to those regarding Central Purchasing bodies, namely how to specify responsibility between the different contracting authorities in these cases, see the commentary in Article 38. As for centralised purchasing activities they can either consist of the acquisition of supplies and/or services intended for contracting authorities or the award of public contracts or the conclusion of framework agreements for works, supplies or services intended for contracting authorities.11 Having a definition of centralised purchasing activities is new, but as to substance it is essentially the same as the definition in the 2004 Directive of central purchasing bodies set out in Article 1(10) of the 2004 Directive. A new element in the 2014 Directive is the clarification that a central purchasing body may also provide ancillary purchasing activities. Such ancillary purchasing activities is defined in Article 2(1(15) as activities, which support purchasing activities.12 Such supporting pur4 Article 39(2). Member States may, however, choose to specify that their contracting authorities may only use the centralised purchasing activities as defined in either point a (the acquisition of supplies and/or services intended for contracting authorities) or in point b (the award of public contracts or the conclusion of framework agreements for works, supplies or services intended for contracting authorities) of Article 2(16). See further in the commentary to Article 39. 5 As referred to in point (a) of point (14) of Article 2(1). 6 Article 2(1) (14) b). 7 Article 2(18). 8 See on bodies governed by public law, the commentary in Article 2. 9 See the Commission’s proposal Article 2 (16). According to Cluster 6 “Aggregation of demand” Council document 6907/12 of February 28, 2012, the reason for such a reference was “There is one addition, namely the reference to the activities being conducted on ‘a permanent basis.’ This is necessary to create a difference between central purchasing bodies and contracting authorities carrying out occasional joint procurement as provided for under Article 37.” 10 Article 2(16) states “central purchasing body’ means a contracting authority providing centralised purchasing activities and, possibly, ancillary purchasing activities”. 11 Article 2(16).

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chasing activities could be technical infrastructure, which enables contracting authorities to award public contracts or to conclude framework agreements. This infrastructure could for example be electronic tools such as software needed for the conduct of electronic auctions. Ancillary purchasing activities could also consist in the central purchasing body giving advice on the conduct or design of public procurement procedures or activities relating to the preparation and management of procurement procedures on behalf and for the account of the contracting authority concerned.13 Such advise could also relate to legal advise as to the legality of a given framework agreement bearing in mind that if the legal advise relates to the procurement rules in general (or other rules) such advise would not be considered as ancillary.14 The line between the two can be difficult to draw. Central purchasing bodies can be large. The largest central purchasing body in Den- 7 mark (SKI, National Procurement Ltd.) manages over 50 different framework agreements, which contracting authorities (parties to the agreements) can use. Central purchasing bodies can be responsible for making acquisitions, managing dy- 8 namic purchasing systems or awarding public contracts/ framework agreements for other contracting authorities, with or without remuneration.15 Central purchasing bodies can act as wholesalers by buying, stocking and reselling or may act as intermediaries by awarding contracts, operating dynamic purchasing systems or concluding framework agreements to be used by contracting authorities.16 When purchasing via a central purchasing body’s framework agreements or dynamic purchasing systems, contracting authorities must be parties to the agreement. 17 Thus, it is not possible for new contracting authorities or economic operators to become parties to the agreements (see Article 33, section 33.2.1 for further comments). 18 In some cases where a central purchasing body establishes a framework agreement, 9 the contracting authorities might, for many reasons, not wish to purchase through the agreement. In such cases they might want to create a framework agreement themselves. The Directive is silent as to whether the same contracting authority can be party to framework agreements including the same product (fully or partial). One argument 12 Article 2(15) states “‘ancillary purchasing activities’ means activities consisting in the provision of support to purchasing activities, in particular in the following forms: (a) technical infrastructure enabling contracting authorities to award public contracts or to conclude framework agreements for works, supplies or services; (b) advice on the conduct or design of public procurement procedures; (c) preparation and management of procurement procedures on behalf and for the account of the contracting authority concerned.” 13 Article 2(17). The list is not exhaustive. 14 Legal advise is generally covered by the light regime in Article 74-76 or by Article 10, d). 15 Recital 69. 16 See recital 69, which furthermore states “Such an intermediary role might in some cases be carried out by conducting the relevant award procedures autonomously, without detailed instructions from the contracting authorities concerned; in other cases, by conducting the relevant award procedures under the instructions of the contracting authorities concerned, on their behalf and for their account.” 17 Article 37(1) explicitly states: “Where a dynamic purchasing system which is operated by a central purchasing body may be used by other contracting authorities, this shall be mentioned in the call for competition setting up that dynamic purchasing system”. 18 See also the Commission’s Explanatory note on Framework agreement where central purchasing bodies are particularly mentioned in footnote 14, where it is stated “For example, in the case of a framework agreement concluded by a central purchasing body acting as an intermediary rather than as a “wholesale dealer”, it would not therefore be sufficient to indicate that the agreement can be used by “contracting authorities” established in the Member State in question. In fact, such an indication might not render it possible to identify the entities that are parties to the agreement due to the difficulties that may arise in determining whether an entity does or does not meet the definition of a body governed by public law. On the other hand, a description permitting immediate identification of the contracting authorities concerned – for example “the municipalities of x province or of y region” – renders it possible to verify that the provision of Article 32(2), second indent has been observed.”

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against such an option is that it could be contrary to the general principle of competition. However, it can also be the case that some times having two framework agreement for the same types of supply, but with different economic operators on the two framework agreeemnts can be beneficial for the competition as the economic operators would need to compete not only with the economic oprators on their own framework, but also against the economic operators on the other framework agreement since they risk the contracting authority will use the ther framework agreement. A general prohibition against participating in several such agreements does not exist, but framework agreements may not be established to circumvent the rules in the Directive by for example creating a framework agreement where the use of mini-competition is the rule and one where direct award is the main rule without any objective criteria to separate the two framework agreement.19 37.1.1. Mandatory purchasing via central purchasing bodies As mentioned above Member States are free to provide whether contracting authorities in their Member State may use central purchasing bodies. 11 Member States can also choose to make it mandatory for certain purchases to be conducted by a central purchasing body or by a specific central purchasing body. Article 37 states “In relation to the first and second subparagraphs, Member States may provide that certain procurements are to be made by having recourse to central purchasing bodies or to one or more specific central purchasing bodies.” Even though this was not mentioned in the 2004 Directive the option for Member States to make certain purchases mandatory is not new. In Denmark for example, the Finance Ministry often creates framework agreements, which are mandatory for the Danish State to use. The legal basis for these mandatory framework agreement is not to be found in the Directive, hence the reference in the Directive merely specifies that Member States in their national legislation can make it mandatory to use a certain framework agreements. 12 Mandatory purchasing by central purchasing bodies gives tenderers the possibility of knowing that a large amount/value will be procured via the central purchasing body, which may result in lower prices. It can also be a way to encourage, for example, more social and environmental considerations if that is the policy of the central purchasing body (or a requirement for the use). At the same time, however, mandatory purchasing can result in closing the market for suppliers for a long period of time if they do not win the contract. 10

37.2. Responsibility between central purchasing bodies and contracting authorities 13

The perhaps most significant adjustment regarding central purchasing bodies is the clarification with regard to the sharing of responsibility between central purchasing bodies and contracting authorities. The state of law under the 2004 Directive on the matter was unclear.20 Under the 2004 Directive since central purchasing bodies would have to follow the rules in the Directive when entering into a framework agreement, the contracting authority would only have lived up to the rules in the Public Sector Directive if the central purchasing body did comply with the rules of the Directive. In that regard the question arises as to the consequences for a contracting authority that uses such a

19 In the Danish Procurement Act, which implements the 2014 Directive, Act nr.1564 of December 15, 2015 (which entered into force Januar 1, 2016), it has been stated in the preparatory works that such a practice of “parallel agreements” is legal as long as it does not restrict competition.

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framework agreement and the central purchasing body has made a mistake when setting up a framework agreement. According to the 2004 Directive Article 11 “Contracting authorities which purchase 14 works, supplies and/or services from or through a central purchasing body in the cases set out in Article 1(10) shall be deemed to have complied with this Directive insofar as the central purchasing body has complied with it.” One interpretation is that the contracting authority would only have fulfilled the rules of the Public Sector Directive if the central purchasing body has followed the rules of the Directive, without making mistakes in the process. This leads to the conclusion that contracting authorities could be held responsible for mistakes made by a central purchasing body when using its agreements including the risk of ineffectiveness of the contract,21 since the award of such a contract could be considered a direct award of the contract, given that no contract notice has been published in the Official Journal.22 Such interpretation seems to be the interpretation by the Danish Complaints Board for Public Procurement where the Board in December 2011, Konica Minolta 23 came to this conclusion (but did not declare the contract ineffective since an ex ante transparency notice had been published in the Official Journal).24 Article 37(3) now states that a “… a contracting authority fulfils its obligations pur- 15 suant to this Directive when it acquires supplies or services from a central purchasing body (…).” In this case the central purchasing body acts as a wholesaler and purchases in order to resell (Article 37(1), first paragraph). Article 37(3) second paragraph states: “Furthermore, a contracting authority also fulfils its obligations pursuant to this Directive where it acquires works, supplies or services by using contracts awarded by the central purchasing body, by using dynamic purchasing systems operated by the central purchasing body or, to the extent set out in the second subparagraph of Article 33(2), by using a framework agreement concluded by the central purchasing body (…).“ In the latter case, the central purchasing body acts as an intermediary. One possible interpretation regarding the new wording is that when a contracting au- 16 thority uses a central purchasing body’s framework agreement, it will have complied 20 See also Cluster 6 “Aggregation of demand” Council document 6907/12 of February 28, 2012, where the Commission states, ”However, the consequences for the contracting authorities who have procured from or through a central purchasing body are far from clear in case it is – subsequently – found that the central purchasing body has not complied with the provisions of the Directive.” See also Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, p. 134, where it is stated that “Contracting authorities that make procurement via a central purchasing body run the risk of breaching the Directive in connection with a specific purchase, as the obligations of contracting authority pursuant to the Directive are only regarded as having been fulfilled in relation to a given procurement if the central purchasing body has complied with the provisions of the Directive in carrying out the procurement procedure and the award of the contract”. 21 Regarding the situation where the contracting authority has published a Contract Notice for a framework agreement and followed the Public Procurement directive while entering into the framework agreement, such a contract will only in cases, where the contract has been signed during the standstill period, lead to ineffectiveness. 22 Public Sector Remedies Directive Article 2 d, litra a. 23 Decision of December 5, 2011, Konica Minolta Business Solutions Denmark A/S v. Erhvervsskolen Nordsjælland. The case led to legal uncertainty regarding the framework agreements of a central purchasing body in Denmark. Therefore, it is not surprising that regarding the modernisation of the Procurement Directive the Danish Governments was of the opinion that the allocation of responsibilities as between the central purchasing bodies and individual contracting authorities should be clarified and the Public Sector Directive should ensure that in cases where a customer has made use of a flawed framework agreement (call-off), the contracting authority shall not be held responsible for the on-current faults The position of the Danish Government can be seen in “Samlenotat, Europaudvalget” p. 41-79, “summary memorandum”, the European Committee, which can be found at: http://www.euoplysningen.dk/dokumenter/ft/euu/ dagsorden/2012_2013/12/. See p. 64. 24 See Article 2d(4) of the Public Sector Remedies Directive.

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with the rules in the Directive despite the fact that the central purchasing body did not. Nevertheless, the Directive also states that the contracting authority concerned shall be responsible for fulfilling the obligations pursuant to the Directive in respect of the parts it conducts itself. Such a part could for example be: (a) awarding a contract under a dynamic purchasing system, which is operated by a central purchasing body; (b) conducting a reopening of competition under a framework agreement that has been concluded by a central purchasing body; (c) pursuant to points (a) or (b) of Article 33(4), determining which of the economic operators, party to the framework agreement, shall perform a given task under a framework agreement that has been concluded by a central purchasing body.“25 The amendment to the Directive implies that a contracting authority will not be responsible for a central purchasing body’s potential mistakes made when entering into the agreement and even in cases where a central purchasing body has made significant errors when entering into for example a framework agreement; a contracting authority using the framework agreement does not risk the contract (the call-off) later being declared ineffective, as long as the contracting authority has followed the conditions established in the framework agreement. This will in fact also be the case where the central purchasing body did not even publish a notice in the Official Journal. However, in cases in which the contracting authority does not follow the conditions of the framework agreement, for example, by introducing a new award criterion in a mini-competition, which has not been foreseen in the framework agreement or purchasing goods, which are not covered by the framework agreement, the call-off contract is at risk of being declared ineffective. Even though some clarification on the allocation of responsibilities between central purchasing bodies and contracting authorities has been given, it remains to be seen how the provision will be interpreted. There will surely be many grey areas in practice where it is not clear whether the mistake made lies in the framework agreement itself (and hence the responsibility lies at the central purchasing authority) or the mistake relates to use of the framework agreement (and hence the responsibility lies with the contracting authority).26 An example could be if the award criteria in the framework agreement itself are unclear or could be interpreted in different ways, and the contracting authority interprets and uses such criteria in a different way than was the intention. It is in such cases possible that it will be the central purchasing body which will bear the responsibility since the CPB drafted the framework agreement. 17 Nevertheless, the fact that the responsibility has been clarified does not mean that the remedies of the Remedies Directive do not apply in any situations. Thus, if the central purchasing body has, e.g., entered into a framework agreement during the standstill-period it is still possible that the framework agreement can be declared ineffective. 18 The rules on central purchasing bodies and particular the rules on the allocation of responsibility between the central purchasing body and the contracting authorities in Article 37(2) apply also in cross-border situations. 25 Article 37(3). Se also Recital 69 which states: “Where the central purchasing body has sole responsibility for the conduct of the procurement procedures, it should also be solely and directly responsible for the legality of the procedures. Where a contracting authority conducts certain parts of the procedure, for instance the reopening of competition under a framework agreement or the award of individual contracts based on a dynamic purchasing system, it should continue to be responsible for the stages it conducts.” 26 As also argued in Carina Risvig Hamer, ‘Regular purchases and aggregated procurement: the changes in the new Public Procurement Directive regarding framework agreements, dynamic purchasing systems and central purchasing bodies’, in: PPLR 2014, 4, 201-210.

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37.3. Electronic means of communication All procurement procedures conducted by a central purchasing body should be per- 19 formed using electronic means of communication, in accordance with the requirements of Article 22. Thus, central purchasing bodies are required to use electronic means of communication earlier than other contracting authorities since such electronic means are “… particularly well suited to support centralised purchasing practices and tools because of the possibility they offer to re-use and automatically process data and to minimise information and transaction costs.”27 Article 90(2) states: “Notwithstanding paragraph 1 of this Article, Member States may 20 postpone the application of Article 22(1) for central purchasing bodies until 18 April 2017.” Thus, it is possible to postpone the use of electronic means for central purchasing bodies to a later stage.

37.4. Public service contract for the provision of centralised purchasing Contracting authorities may, without applying the procedures provided for in this Di- 21 rective, award a public service contract for the provision of centralised purchasing activities to a central purchasing body. Such public service contracts may also include the provision of ancillary purchasing activities. Recital 70 states: “… It should also be permitted for such public service contracts to include the provision of ancillary purchasing activities. Public service contracts for the provision of ancillary purchasing activities should, when performed otherwise than by a central purchasing body in connection with its provision of central purchasing activities to the contracting authority concerned, be awarded in accordance with this Directive. It should also be recalled that this Directive should not apply where centralised or ancillary purchasing activities are provided other than through a contract for pecuniary interest which constitutes procurement within the meaning of this Directive.” See above at 37.1. regarding ancillary purchasing activities.

Article 38 Occasional joint procurement 1. Two or more contracting authorities may agree to perform certain specific procurements jointly. 2. Where the conduct of a procurement procedure in its entirety is carried out jointly in the name and on behalf of all the contracting authorities concerned, they shall be jointly responsible for fulfilling their obligations pursuant to this Directive. This applies also in cases where one contracting authority manages the procedure, acting on its own behalf and on the behalf of the other contracting authorities concerned. Where the conduct of a procurement procedure is not in its entirety carried out in the name and on behalf of the contracting authorities concerned, they shall be jointly responsible only for those parts carried out jointly. Each contracting authority shall 27 Recital 72, which adds: “The use of such electronic means of communication should therefore, as a first step, be rendered compulsory for central purchasing bodies, while also facilitating converging practices across the Union. This should be followed by a general obligation to use electronic means of communication in all procurement procedures after a transition period of 30 months.” See also Cluster 6, Council document 6907/12 of February 28, 2012, which states: “Because of their transaction volume and expertise, central purchasing bodies have an obvious role to play as spearheads for the transition towards full use of electronic means of communications – a role that many are already playing today.”

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have sole responsibility for fulfilling its obligations pursuant to this Directive in respect of the parts it conducts in its own name and on its own behalf. Literature: Kris Wauters, Cooperative Agreements Between Public Authorities (Intersentia Publishing, 2016).

Occasional joint procurement is an expression used to signify cooperation among contracting authorities. Such cooperation can exist between contracting authorities from the same Member State (Article 38) as well as between contracting authorities from different Member States (Article 39). 2 Article 38 targets situations where the contracting authorities come from the same Member State and wish to perform certain specific procurements jointly. The provision specifies the allocation of responsibility between them and in relation to mistakes made during a tender procedure. Thus, in cases where the contracting authorities jointly carry out a procurement process in the name and on behalf of all the contracting authorities concerned, they shall be jointly responsible for fulfilling their obligations pursuant to this Directive. Where the conduct of a procurement procedure is not in its entirety carried out in the name and on behalf of the contracting authorities concerned, they shall be jointly responsible only for those parts carried out jointly. 3 The 2004/18/EC Directive did not include a provision on occasional joint procurement – neither for joint procurement between contracting authorities from the same Member State nor for joint procurement between contracting authorities from different Member States. The fact that the Directive did not mention such cooperation does not mean that contracting authorities were prohibited from conducting procurement jointly, but merely that the Directive’s general provisions would apply instead. Certain features of joint procurement have been clarified in the new Directive mainly because of the important role joint procurement may play, not least in connection with innovative projects.1 The provision on occasional joint procurement is not to be mistaken for the new Article 12 relating to horizontal cooperation between contracting authorities where contracts for the joint provision of public services are not subject to the application of the rules in the Directive provided that they are concluded exclusively between contracting authorities, that the implementation of that cooperation is governed solely by considerations relating to the public interest and that no private service provider is placed in a position of advantage vis-à-vis its competitors (see to this the commentary to Article 12(4)). 1

38.1. Joint procurement 4

Contracting Authorities coming from the same Member State and wishing to perform certain specific procurements jointly can do so. It is perhaps not surprising that two contracting authorities can perform tasks together. Joint procurement can assume 1 Recital 71. The Commission provides a number of further reasons in Cluster 6, Council document 6907/12 of February 28, 2012, p. 14, where it explains that “Given the (partially) new provisions that may strengthen the role of central purchasing bodies, it was all the more important to set out explicitly that other forms of joint procurement may exist within the borders of any given Member States (joint procurement between contracting authorities from different Member States is dealt with in Article 38). A common model for the occasional joint procurement dealt with in this provision, is often to be found at e.g. regional or local levels when several contracting authorities agree to achieve economies of scale by joining certain of their procurements. This may take various forms, including cases where one contracting authorities, for instance because it disposes of more resources or a specific experience with that particular subject matter, conducts on its own the procurement procedure(s) concerned. Paragraph 2 therefore mirrors the provisions of Article 35(3).”

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many different forms, ranging from coordinated procurement through the preparation of common technical specifications for works, supplies or services that will be procured by a number of contracting authorities, each conducting a separate procurement procedure, to situations where the contracting authorities concerned jointly conduct one procurement procedure either by acting together or by entrusting one contracting authority with the management of the procurement procedure on behalf of all contracting authorities.2 Though joint procurement was not mentioned in the 2004 Directive, this does not mean that joint procurement has not taken place before. On the contrary; many contracting authorities would occasionally do procurement together with other contracting authorities. Contracting authorities can apply joint procurement in relation to all types of goods, services and works.

38.2. Joint responsibility The most important part of the provision on occasional joint procurement relates to 5 the responsibility of the contracting authorities. Article 38(2) specify that where a procurement procedure is not carried out jointly, each contracting authority shall be responsible for fulfilling their obligations pursuant to the Directive for the part it has conducted and where the conduct of a procurement procedure in its entirety is carried out jointly in the name and on behalf of all the contracting authorities concerned, they shall be jointly responsible for fulfilling their obligations pursuant to this Directive. Where several contracting authorities are jointly conducting a procurement proce- 6 dure, they are jointly responsible for fulfilling their obligations under the Directive. This means, for example, that if two contracting authorities are procuring a certain service jointly in the name of both contracting authorities they are jointly responsible for having complied with the procurement rules. This will also be the case where one of the contracting authorities manages the entire procedure on its own behalf and on the behalf of the other contracting authority. Thus, it will be relevant to pay attention to what has been stipulated in the contract notice. If both contracting authorities are mentioned they will be jointly responsible. However, where the conduct of a procurement procedure is not in its entirety carried 7 out in the name and on behalf of the contracting authorities concerned, they shall be jointly responsible only for those parts carried out jointly. Each contracting authority shall have sole responsibility for fulfilling its obligations pursuant to this Directive in respect of the parts it conducts in its own name and on its own behalf. This means that each contracting authority is solely responsible in respect of procedures or parts of procedures it conducts on its own, such as the awarding of a contract, the conclusion of a framework agreement, the operation of a dynamic purchasing system, the reopening of competition under a framework agreement or the determination of which of the economic operators party to a framework agreement shall perform a given task.3

Recital 71. Recital 71. The wording of the recital regarding the responsibility is identical to what applies with regard to responsibility in relation to central purchasing bodies. For further comments see Article 36. 2

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Article 39 Procurement involving purchasing authorities from different Member States 1. Without prejudice to Article 12, contracting authorities from different Member States may act jointly in the award of public contracts by using one of the means provided for in this Article. Contracting authorities shall not use the means provided in this Article for the purpose of avoiding the application of mandatory public law provisions in conformity with Union law to which they are subject in their Member State. 2. A Member State shall not prohibit its contracting authorities from using centralised purchasing activities offered by central purchasing bodies located in another Member State. In respect of centralised purchasing activities offered by a central purchasing body located in another Member State than the contracting authority, Member States may, however, choose to specify that their contracting authorities may only use the centralised purchasing activities as defined in either point (a) or in point (b) of point (14) of Article 2(1). 3. The provision of centralised purchasing activities by a central purchasing body located in another Member State shall be conducted in accordance with the national provisions of the Member State where the central purchasing body is located. The national provisions of the Member State where the central purchasing body is located shall also apply to the following: (a) the award of a contract under a dynamic purchasing system; (b) the conduct of a reopening of competition under a framework agreement; (c) the determination pursuant to points (a) or (b) of Article 33(4) of which of the economic operators, party to the framework agreement, shall perform a given task. 4. Several contracting authorities from different Member States may jointly award a public contract, conclude a framework agreement or operate a dynamic purchasing system. They may also, to the extent set out in the second subparagraph of Article 33(2), award contracts based on the framework agreement or on the dynamic purchasing system. Unless the necessary elements have been regulated by an international agreement concluded between the Member States concerned, the participating contracting authorities shall conclude an agreement that determines: (a) the responsibilities of the parties and the relevant applicable national provisions; (b) the internal organisation of the procurement procedure, including the management of the procedure, the distribution of the works, supplies or services to be procured, and the conclusion of contracts. A participating contracting authority fulfils its obligations pursuant to this Directive when it purchases works, supplies or services from a contracting authority which is responsible for the procurement procedure. When determining responsibilities and the applicable national law as referred to in point (a), the participating contracting authorities may allocate specific responsibilities among them and determine the applicable provisions of the national laws of any of their respective Member States. The allocation of responsibilities and the applicable national law shall be referred to in the procurement documents for jointly awarded public contracts.

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5. Where several contracting authorities from different Member States have set up a joint entity, including European Groupings of territorial cooperation under Regulation (EC) No 1082/2006 of the European Parliament and of the Council1 or other entities established under Union law, the participating contracting authorities shall, by a decision of the competent body of the joint entity, agree on the applicable national procurement rules of one of the following Member States: (a) the national provisions of the Member State where the joint entity has its registered office; (b) the national provisions of the Member State where the joint entity is carrying out its activities. The agreement referred to in the first subparagraph may either apply for an undetermined period, when fixed in the constitutive act of the joint entity, or may be limited to a certain period of time, certain types of contracts or to one or more individual contract awards. Literature: BBG and SKI for the Commission (Rapport), Feasibility study concerning the actual implementation of a joint cross-border procurement procedure by public buyers from different Member States, December 2016 (http://ec.europa.eu/DocsRoom/documents/22102/, last visited November 2017); Gabriella M. Racca, ‘Joint Procurement Challenges in the Future Implementation of the New Directives’, in F. Lichère, R. Caranta and S. Treumer (eds), Modernising Public Procurement: the New Directive, DJØF Publishing, 225-254; Albert Sanchez-Graells, ‘Collaborative Cross-border Procurement in the EU: Future or Utopia?’, UrT, 1, 2016; Sanchez-Graells, Albert, ‘Is Joint Cross-Border Public Procurement Legally Feasible or Simply Commercially Tolerated? – A Critical Assessment of the BBG-SKI JCBPP Feasibility Study’, European Procurement & Public Private Partnership Law Review (2017). Available at SSRN: https:// ssrn.com/abstract=2944008.

Where Article 38 involves joint procurement by contracting authorities in the same 1 Member State, Article 39 explicitly targets situations where the contracting authorities are located in different Member States – cross-border procurement. A similar provision was not included in the 2004/18/EC Directive. This did not mean 2 that joint procurement between contracting authorities located in different Member States did not take place before, as it was not forbidden in the Directive. According to the Commission, stakeholders had complained about the lack of legal certainty in crossborder joint procurement situations, in particular in cases where contracting authorities from different Member States were jointly awarding a public contract.2 The legal uncertainty relates primary to conflicts between the different national legislations of the Member States. Thus, a new provision on cross-border procurement has been placed in the new Directive with the aim of creating legal certainty in the field. Cross-border procurement is seen as an important instrument for innovative pur- 3 chasing.3 It plays a significant role for such procurement, for instance in the case of networks of public procurers from different Member States purchasing jointly innovative clean vehicles. It is therefore particularly important to remove legal and administrative obstacles to such cross-border projects.4 1 Regulation (EC) No 1082/2006 of the European Parliament and of the Council of 5 July 2006 on a European grouping of territorial cooperation (EGTC) (OJ L 210, 31.7.2006, p. 19). 2 Cluster 6, Council document 6907/12 of February 28, 2012, p. 15. See also Recital 71, which states: “Joint awarding of public contracts by contracting authorities from different Member States currently encounters specific legal difficulties concerning conflicts of national laws. Despite the fact that Directive 2004/18/EC implicitly allowed for cross-border joint public procurement, contracting authorities are still facing considerable legal and practical difficulties in purchasing from central purchasing bodies in other Member States or jointly awarding public contracts.” 3 Commission Proposal, p. 10. 4 Commission, Cluster 6, Council document 6907/12 of February 28, 2012, p. 15.

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Another aim of the rules on joint cross-border procurement is expressed as follows “… in order to facilitate cooperation between contracting authorities and enhancing the benefits of the internal market by creating cross-border business opportunities for suppliers and service providers.”5 Contracting authorities should have maximum benefits from the potential of the internal market in terms of economies of scale and risk-benefit sharing, not least for innovative projects involving a greater amount of risk than reasonably bearable by a single contracting authority.6 5 Article 39 clarifies that contracting authorities can engage in cross-border procurement and that they have free choice between the techniques described in the following paragraphs, namely joint procurement through a central purchasing body, joint contract awards and procurement through a joint legal entity. The rules of Article 39 determine the conditions for cross-border utilisation of central purchasing bodies and designate the applicable public procurement legislation, including the applicable legislation on remedies, in cases of cross-border joint procedures, complementing the conflict of law rules of Regulation (EC) No 593/2008 of the European Parliament and the Council. 7 4

39.1. Contracting authorities from different Member States Contracting authorities from different Member States may act jointly in the award of public contracts by using one of the means provided for in Article 39. Thus, Article 39(1) makes it clear that contracting authorities can engage in cross-border procurement and that they have a free choice between the techniques described in the Article, namely joint procurement through a central purchasing body, joint contract awards and procurement through a joint legal entity. 7 It is, nevertheless, stated in Article 39(1) that contracting authorities shall not use the means provided in Article 39 for the purpose of avoiding the application of mandatory public law provisions in conformity with Union law to which they are subject in their Member State. Such national rules might include, for example, provisions on transparency and access to documents or specific requirements for the traceability of sensitive supplies.8 8 Article 39(1) uses the wording “Without prejudice to Article 12 (…)”. This means that Article 39 does not apply in the context of the in-house provision dealt with in Article 12. Thus, a public contract awarded by a contracting authority to a legal person governed by private or public law falls outside the scope of the Directive where the conditions of Article 12 are fulfilled. In theory, this means that a contracting authority in one Member State can award a contract to the same kind of legal person in another Member State if the criteria in Article 12 are fulfilled. In practise the contracting authorities will not exercise over the legal person concerned a control, which is similar to that which it exercises over its own departments in cases where the legal person is located in another Member State. Thus, Article 12(1)-(3) will probably not be relevant for cross-border procurement. Article 12(4) regarding public-public cooperation between the participating contracting authorities with the aim of ensuring that public services they have to perform are provided with a view to achieving objectives they have in common, could 6

Recital 71. Recital 71. 7 Recital 74. 8 Recital 11 states in that regard: “However, contracting authorities should not make use of the possibilities for cross-border joint procurement for the purpose of circumventing mandatory public law rules, in conformity with Union law, which are applicable to them in the Member State where they are located. Such rules might include, for example, provisions on transparency and access to documents or specific requirements for the traceability of sensitive supplies.” 5

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on the contrary be relevant in some situations. Thus, such cooperation can exists between contracting authorities in different Member States.

39.2. Central purchasing body located in another Member State than the contracting authority Member States may not prohibit contracting authorities from using central purchas- 9 ing activities offered by a central purchasing body located in another Member State. In the Commission’s proposal the wording of the provision was as follows: “Member States shall provide for” which indicated that Member States should do something active e.g. adopting legislation, issuing guidance etc. By prescribing instead that “Member States may not prohibit”, that wording should help making it clear that Member States do not need to include national rules on the matter, and at the same time are not allowed to prohibit contracting authorities from using central purchasing bodies located in another Member State. Member States may, however, choose to specify that the contracting authorities of 10 their Member State may only use certain centralised purchasing activities. Thus, Member States may, choose to specify that their contracting authorities may only use the centralised purchasing activities as defined in either point (a) or in point (b) of point (14) of Article 2(1). 9 This means that Member States can restrict the use to either a) the acquisition of supplies and/or services intended for contracting authorities, or to (b) the award of public contracts or the conclusion of framework agreements for works, supplies or services intended for contracting authorities. When purchasing via a central purchasing body located in another Member State the 11 procurement procedure shall be conducted in accordance with the national provisions of the Member State where the central purchasing body is located. This is also the case for the activities the contracting authority using the central purchasing body conducts itself, e.g. the mini-competition, award of a contract under a dynamic purchasing system etc. (see below at section 39.3).

39.3. Provisions applying to centralised purchasing activities by a central purchasing body located in another Member State Article 39(3) sets out the legal basis in cases where the contract is awarded in accor- 12 dance with Article 39 (2), hence by using a central purchasing body located in another Member State. Thus, according to Article 39(3) when a contracting authority uses a central purchasing body located in another Member State, the procedure must be conducted in accordance with the national provisions of the Member State where the central purchasing body is located. The national provisions also apply for the contracting authority if the authority must conduct parts of the award itself such as e.g. the award of a contract under a dynamic purchasing system, the award of a contract based on a framework agreement such as the conduct of a reopening of competition under a framework agreement or the determination of which of the economic operators, party to the framework agreement, shall perform a given task. The list in Article 39(3) of parts the contracting authority may conduct itself is despite the wording, presumably not exhaustive. The list merely has the purpose of stating examples. It is identical to the list concerning central 9 Which states: “(14)‘centralised purchasing activities’ means activities conducted on a permanent basis, in one of the following forms: (a) the acquisition of supplies and/or services intended for contracting authorities, (b) the award of public contracts or the conclusion of framework agreements for works, supplies or services intended for contracting authorities.”

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purchasing bodies in Article 37(2) regarding the responsibilities for contracting authorities, which use a central purchasing body. The wording of Article 37(2) is as follows: “(…) However, the contracting authority concerned shall be responsible for fulfilling the obligations pursuant to this Directive in respect of the parts it conducts itself, such as (…)”. Using the wording “such as” indicates that only examples are given and these are not exhaustive. Article 39(3) should therefore be seen in this context. Since the list only creates examples, all activities relating to the central purchasing body must be done in accordance with the national legislation of the central purchasing body and, of course, EUlaw. 13 The rules on central purchasing bodies and particular the rules on the allocation of responsibility between the central purchasing body and the contracting authorities in Article 37(2) apply also in cross-border situations. 14 It should be borne in mind that in order for a contracting authority to use a framework agreement it must be party to the agreement from the outset (see the commentary to Article 33). Thus, it will only be in the case of new framework agreements that the central purchasing body may decide that a contracting authority from another Member State can become a party. When using a central purchasing body the parties may not use the provision of Article 39(4) in the sense that they can agree about which national legislation to apply.

39.4. Joint award of contracts Cross-border procurement does not need to take place within centralised purchasing activities. Thus, several contracting authorities from different Member States may jointly award a public contract, conclude a framework agreement or operate a dynamic purchasing system. 16 Contracting authorities may also “… to the extent set out in the second subparagraph of Article 33(2), award contracts based on the framework agreement or on the dynamic purchasing system.” The reference to Article 33(2) means that contracting authorities can be permitted to use another contracting authority’s framework agreement and award contracts based on the agreement in accordance with Article 33(2). This resembles the situation where a contracting authority can use a central purchasing body, but in this case it is another contracting authority. The possibility must be stated in the contract notice beforehand. 17 Unless the necessary elements have been regulated by an international agreement 10 concluded between the Member States concerned, the participating contracting authorities shall conclude an agreement that determines: 15

(a) the responsibilities of the parties and the relevant applicable national provisions; (b) the internal organisation of the procurement procedure, including the management of the procedure, the distribution of the works, supplies or services to be procured, and the conclusion of contracts. In the case of a joint contract award by several contracting authorities from different countries, determining the applicable public procurement law becomes less selfevident. Since the contract award procedure takes place involving all participating authorities, on the one hand, and all participating economic operators, on the other, theoretically each 10 Such Treaties can assume many forms, one example being the Treaty between Germany and Denmark regarding the construction of a fixed link across Fehmarn Belt, “Treaty of September 3, 2008 between the Kingdom of Denmark and the Federal Republic of Germany on the construction of a fixed link across the Fehmarn Belt.”

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national procurement law involved could have a claim to govern the procedure. Art. 39(3) overcomes this positive conflict – which is often cited as the biggest obstacle to cross-border joint contract awards – by inviting the participating authorities to determine the applicable national procurement rules in an agreement which should also cover the practical details, such as distribution of tasks and responsibilities and allocation of the purchased works, supplies or services.11 Determining the relevant applicable national provisions presumably means that the 18 national law of one of the contracting authorities must be chosen. Thus, if a contracting authority in Spain and a contracting authority in Italy wish to award a public contract they cannot choose to award the contract based on German public procurement legislation, but they are free to decide whether Italian or Spanish Procurement rules should apply. It must also be brought to mind that paragraph 39(1) states: ”Contracting authorities shall not use the means provided in this Article for the purpose of avoiding the application of mandatory public law provisions in conformity with Union law to which they are subject in their Member State.” If the Member States could simply choose as they might see fit which Member State legislation to apply it would be difficult to avoid the suspision that the choice was made in order to circumvent their national rules. It should therefore not be permitted. In the Commission’s proposal it was stated in Article 38(3) that ”When determining the applicable national law in accordance with point (a), contracting authorities may choose the national provisions of any Member State in which at least one of the participating authorities is located.” The wording can also be found in the Council document 11745 from July 12, 2013, which is the version that was agreed upon between the Council, Parliament and Commission after the trilogue negotiations. However, the phrase used in the published version is instead “When determining responsibilities and the applicable national law as referred to in point (a), the participating contracting authorities may allocate specific responsibilities among them and determine the applicable provisions of the national laws of any of their respective Member States.”[emphasis added] This wording also leads to the conclusion that national law of one of the participating authorities must be chosen. The Directive is silent about the situation in which an agreement determining the ap- 19 plicable public procurement law does not exist. In theory, since the contract award procedure takes place between all participating authorities, on the one hand, and all participating economic operators, on the other, theoretically each national procurement law involved could have a claim to govern the procedure. The Commission had proposed rules on what should happen in such cases, but this was not part of the final Directive.12 Regarding the responsibilities and applicable law Article 39(4) states: “A participating 20 contracting authority fulfils its obligations pursuant to this Directive when it purchases works, supplies or services from a contracting authority which is responsible for the procurement procedure.” The wording is similar to the wording of allocation of responsibiliSee also Cluster 6, Council document 6907/12 of February 28, 2012, p. 16. See Commission’s proposal Article 38(4), which states: “In the absence of an agreement determining the applicable public procurement law, the national legislation governing the contract award shall be determined following the rules set out below: (a) where the procedure is conducted or managed by one participating contracting authority on behalf of the others, the national provisions of the Member State of that contracting authority shall apply; (b) where the procedure is not conducted or managed by one participating contracting authority on behalf of the others, and (i) concerns a works contract, contracting authorities shall apply the national provisions of the Member State where most of the works are located; (ii) concerns a service or supply contract, contracting authorities shall apply the national provisions of the Member State where the major part of the services or supplies is provided; (c) where it is not possible to determine the applicable national law pursuant to points (a) or (b), contracting authorities shall apply the national provisions of the Member State of the contracting authority which bears the biggest share of the costs.” 11

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ties between central purchasing bodies and contracting authorities in Article 37(3). However, with one difference being that “the participating contracting authorities may allocate specific responsibilities among them and determine the applicable provisions of the national laws of any of their respective Member States.” As stated in Article 39(4), the allocation of responsibilities and the applicable national law shall be referred to in the procurement documents for jointly awarded public contracts. 21 In the Commission’s proposal it was suggested that remedies should be made available for breach of the procurement rules. Thus, it was proposed that decisions must be subject to the full set of review mechanisms and Member States had to make sure that decisions by review bodies from other Member States would be recognized and executed.13 The provision in Article 39 is silent regarding remedies, though Recital 71 states that the rules regarding cross-border joint procurement “… should determine the conditions for cross-border utilisation of central purchasing bodies and designate the applicable public procurement legislation, including the applicable legislation on remedies, in cases of cross-border joint procedures, complementing the conflict of law rules of Regulation (EC) No 593/2008 of the European Parliament and the Council.14”

39.5. Joint entity 22

Where several contracting authorities from different Member States have set up a joint entity, the participating contracting authorities shall, by a decision of the competent body of the joint entity, agree on the applicable national procurement rules of one of the following Member States: (a) the national provisions of the Member State where the joint entity has its registered office; (b) the national provisions of the Member State where the joint entity is carrying out its activities.

The agreement may either apply for an undetermined period, when fixed in the constitutive act of the joint entity, or may be limited to a certain period of time, certain types of contracts or to one or more individual contract awards. If the entity is carrying out activities in more than one Member State, it is important that the applicable national procurement rules have been established beforehand. National rules in the Member State where an activity takes place must also be observed. 23 As an example of joint entity the Directive refers to European Groupings of territorial cooperation under Regulation (EC) No 1082/2006 of the European Parliament and of the Council15 or other entities established under Union law. 24 Where contracts are awarded through a joint legal entity set up by the participating authorities, the situation with regard to the applicable procurement law is also different: 13 See the Commission’s proposal Article 38(8) which stated: “Decisions on the award of public contracts in cross-border public procurement shall be subject to the ordinary review mechanisms available under the national law applicable.” Paragraph 9 states: “In order to enable the effective operation of review mechanisms, Member States shall ensure that the decisions of review bodies within the meaning of Council Directive 89/665/EEC [footnote left out] located in other Member States are fully executed in their domestic legal order, where such decisions involve contracting authorities established on their territory participating in the relevant cross-border public procurement procedure.” 14 Regulation (EC) No 593/2008 of the European Parliament and the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) (OJ L 177, 4.7.2008, p. 6). 15 Regulation (EC) No 1082/2006 of the European Parliament and of the Council of 5 July 2006 on a European grouping of territorial cooperation (EGTC) (OJ L 210, 31.7.2006, p. 19).

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Although, on a purely technical level, the procurement procedure involves only the joint entity and the participating economic operators, one has to take into account that the entity has been created as a vehicle to be used on a long-term basis for cooperation and common procurement by public authorities from different Member States. It is therefore preferable that the participating authorities determine, through the decision-making mechanism of their joint entity, the applicable national public procurement rules. Their choice is, however, limited to the Member State where the joint entity is registered or where it carries out its activities. This restriction is necessary in order to ensure that the procedure has a sufficiently strong legal and factual link to the Member State whose rules are to be applied.16 The Commission proposal contained rules regarding what was to happen in the ab- 25 sence of an agreement determining the applicable public procurement law, but this part was eliminated in the final version.17

Chapter III Conduct of the procedure Section 1 Preparation Article 40 Preliminary market consultations Before launching a procurement procedure, contracting authorities may conduct market consultations with a view to preparing the procurement and informing economic operators of their procurement plans and requirements. For this purpose, contracting authorities may for example seek or accept advice from independent experts or authorities or from market participants. That advice may be used in the planning and conduct of the procurement procedure, provided that such advice does not have the effect of distorting competition and does not result in a violation of the principles of non-discrimination and transparency. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, 2014, p. 650 et seq.

This provision is also to be found in Article 58 of Directive 2014/25/EU (the ‘Utilities 1 Directive’), whereas neither Directive 2009/81/EC (the ‘Defence and Security Directive’) nor Directive 2014/23/EU (the ‘Concessions Directive’) contain corresponding provisions. In these directives corresponding issues are dealt with under the general principles in Article 3 of the ‘Concessions Directive’ and Article 4 of the ‘Defence Procurement Directive’. Cluster 6, Council document 6907/12 of February 28, 201, p. 20. Proposal, Article 38(6): “In the absence of an agreement determining the applicable public procurement law under paragraph 4, the national legislation governing procurement procedures conducted by joint legal entities set up by several contracting authorities from different Member States shall be determined following the following rules: (a) where the procedure is conducted or managed by the competent organ of the joint legal entity, the national provisions of the Member State where the legal entity has its registered office shall apply. (b) where the procedure is conducted or managed by a member of the legal entity on behalf of that legal entity, the rules set out in points (a) and (b) of paragraph 5 shall apply. (c) where it is not possible to determine the applicable national law pursuant to points (a) or (b) of paragraph 5, the contracting authorities shall apply the national provisions of the Member State where the legal entity has its registered office.” 16

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The provision in Article 40 is new, and the same is the case for Articles 24 and 41 which are connected with Article 40. Previously the there was no express regulation of the possibility of conducting a technical dialogue, but the wording of recital 8 to Directive 2004/18/EC (the ‘2004 Public Secctor Directive’) indicated that technical dialogue was acceptable provided there was no breach of the principle of equal treatment. This framework for technical dialogue was first introduced in amendments to the Directives towards the end of the 1990 s, though only in the recitals.1 The recital stated: Before launching a procedure for the award of a contract, contracting authorities may, using a technical dialogue, seek or accept advice which may be used in the preparation of the specifications provided, however, that such advice does not have the effect of precluding competition.2 According to the recital, an adviser may not be allowed to take part in a procurement contest if this would preclude competition. This goes far to ensure the interests of contracting authorities and advisers and, together with Articles 40 and 41, it provides for an approach that is more amenable to equal treatment. Under these rules it is not required that competition should be entirely precluded for there to be ineligibility.3 Article 40 establishes that giving advice may not necessarily have the effect of distorting competition or result in a breach of the principles. While there is a general reference to the principles, it is the principle of equal treatment that is most relevant here. The provision draws attention to the fact that it is permitted to receive advice in connection with preparing a procurement. In preparing a procurement it will be natural for a contracting authority to seek guidance and advice from experts in the area. This is necessary as contracting authorities often do not have the professional and technical knowledge necessary for drawing up a contract notice and other procurement documentation with a sufficient degree of detail. There is a need for detailed communication between contracting authorities and advisers in order to draw up as correct and complete procurement documentation as possible. However, problems may arise later during the tendering stage since, by their contacts with the contracting authority, a tenderer which has acted as an adviser may have obtained a competitive advantage so that equal treatment with other tenderers may be impossible. The wording can be seen as clarification of the earlier recital and of the case law that has built up around technical dialogue. Article 40 should be read in conjunction with Article 41 and Article 57(4). Article 40 should also be read in conjunction with Article 18 which secures the fundamental principles which, in this context, primarily means the principle of equal treatment. 3 It is not entirely clear where the boundaries lie between what is part of the preparation of a procurement and what is more remote from such preparation. What must be decisive here is whether the work performed for the contracting authority leads to the possibility of an advantage being obtained or the principles being breached. Advice that merely enables a contracting authority to decide whether a given task must be put out to tender or to decide how an area or a facility should be used would seem to lie outside the 2

1 Directive 97/52/EC concerning the coordination of procedures for the award of public service contracts, public supply contracts and public works contracts respectively. The recital was carried forward in recital 8 of the 2004 Procurement Directive. 2 Recital 8. The provision was originally included to comply with the EU’s international obligations in connection with its membership of the World Trade Organization (WTO). This membership required the harmonisation of the rules of the two organisations, i.e. the EU’s procurement directives on the one hand and the WTO’s procurement rules in the Government Procurement Agreement (GPA) on the other hand. 3 This must also follow from the principle of equal treatment; equal treatment means that tenderers are not treated differently. Protection from discriminatory treatment provides stronger protection than where only preclusion of competition that is prohibited.

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scope of the provision. What is decisive is not necessarily how close the advisory role has been to the preparation of the procurement but whether that role has to some extent given a competitive advantage or may lead to a breach of the principle of equal treatment. In its ruling of 13 June 1996, Foreningen af Rådgivende Ingeniører (FRI), the Danish Complaints Board for Public Procurement dealt with a case of an advisory task which did not have such a close connection with the actual procurement as to have given a competitive advantage. In this case an undertaking had carried out an environmental study of a site for a municipality, but at this stage the municipality had not decided how the site should be used. It was only later that it was decided that the site should be used as a museum garden. The municipality offered two contracts for advice for establishing the museum garden and the adviser wanted to tender for one of these. The procurement consisted of advice in connection with the planning of the museum garden, with associated buildings and car parking, as well as planning preventive measures for dealing with contaminated soil. Overall, the Complaints Board was of the view that the advantage which the adviser had obtained in carrying out the environmental study was not significant in relation to the contracts offered. The general work on the preparation of a site did not mean the undertaking should be excluded from tendering in connection with the use of the site.

40.1. Informing economic operators Article 40 provides that, in preparing a procurement, a contracting authority may 4 conduct market consultations ‘with a view to informing economic operators of their procurement plans and requirements’. It must be assumed that the basis for this part of the provision is that a well-informed market will have the best opportunity of reacting and giving the contracting authorities the solution it seeks. The possibility of informing the market, or typically a sector of the market, that a 5 procurement contract is imminent is reflected in the possibility of publishing a notice at national level; see Article 52 which states that: ‘Notices referred to in Articles 48, 49 and 50 and the information contained therein shall not be published at national level before the publication pursuant to Article 51.’ Apart from the timing of the publication of such a notice, it is also relevant that Article 52(3) provides that notices published at national level may not contain information other than that contained in the notices sent to the Publications Office of the European Union. Article 52 does not give complete freedom to publish notices, as there are conditions governing the timing and content of such notices. It must be assumed that the same rules apply to a contracting authority’s approaches to the market prior to the publication of any notice. There is probably a difference in the extent to which this will be contrary to Article 40, based on whether information about a contract given to the market is given to one undertaking or to more than one, many or even all undertakings. According to Article 52, there must at least be the same restrictions on giving notice under Article 40 as under Article 52 in relation to publishing a notice at national level with more specific information about the contract. It is not entirely clear what is meant by allowing contracting authorities to inform economic operators of their procurement plans and ‘requirements’. It must mean that contracting authorities can give information about their overall expectations as to how the task should be performed. It would be more difficult to give information about detailed processes and similar requirements, either with regard to the contract or the procedure, as such information can only be given at a later point. There is no precise distinction between lawful information given pursuant to Article 40 and information that is not lawful pursuant to Article 52. It cannot be assumed that it depends on whether the Michael Steinicke

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information is published in a notice or given to specific individual economic operators. In other words, if the information given is the same, the form in which it is given (whether by publication of a notice or not) should not be relevant as, the effect of the information will be the same regardless of how it is given.

40.2. Seek or accept advice According to Article 40, contracting authorities may ‘seek or accept advice from independent experts or authorities or from market participants.’ The reference to ‘independent experts or authorities’ is presumably included for the sake of completeness as there will not usually be problems with independent experts or authorities given the overall purpose of the provision, which is to prevent the ineligibility of advisers. That said, the term ‘economic operators’ is not used here. This may be because the term ‘economic operator’ is applied very broadly in the case law of the Court of Justice of the European Union (CJEU), also covering independent experts or authorities, so their eligibility might come into question if they wish to take part as tenderers or candidates in a procurement contest where they have acted as advisers. Despite this wording, the provision usually applies to economic operators as it is only relevant where an adviser subsequently participates in a procurement contest or as an adviser for a participating economic operator. 7 Article 40 provides that such advice can be taken if it does not have the effect of distorting competition or result in a breach of the principles of non-discrimination and transparency. The provision does not contain any express reference to the consequences of such a breach, but under Articles 41 and 57 it will ultimately lead to the exclusion of economic operators that have provided the advice from the procurement contest. 8 Article 41 refers to breaches of the principle of equal treatment but not to distortions of competition, whereas Article 57 only refers to distortions of competition. Thus both the general principles and distortion of competition are relevant to the situation of advisers. However, there is no clear categorisation of these two kinds of infringements. A breach of the general principles will often lead to a distortion of competition, and vice versa, but neither situation can be sure of leading to a breach of the rules in all cases. On the basis of Article 57 one could ask whether a contracting authority may only exclude an economic operator if the authority believes that competition will be distorted. This would mean that infringements that only result in different treatment but which do not distort competition pursuant to Article 57 will not lead to exclusion. On the other hand, if both conditions must be fulfilled the conditions would be stricter than previously. Hitherto it has been sufficient for there to be a breach of the principle of equal treatment. If both conditions must now be fulfilled, a breach of the general principle will not, in itself, be sufficient to constitute an infringement leading to exclusion. This would be contrary to the provisions in Article 18 and would be difficult to reconcile with the other procurement rules. It must be assumed that the legislator expects breaches of the principle of equal treatment and distortions of competition to be expressed in the same way, so it is only necessary to establish the existence of either a distortion of competition or unequal treatment for the provisions to apply, including Article 57. The Public Sector Directive contains no definition of a ‘distortion of competition’, but the CJEU has considered the term in a few cases concerning procurement. Nevertheless, what the terms covers has not been clearly settled. Typically an assessment of the principle of equal treatment will apply to Articles 40, 41 and 57 and it will often be easier to make such an assessment than the more difficult decision of whether there is a distortion of competition. 6

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Article 41 Prior involvement of candidates or tenderers Where a candidate or tenderer or an undertaking related to a candidate or tenderer has advised the contracting authority, whether in the context of Article 40 or not, or has otherwise been involved in the preparation of the procurement procedure, the contracting authority shall take appropriate measures to ensure that competition is not distorted by the participation of that candidate or tenderer. Such measures shall include the communication to the other candidates and tenderers of relevant information exchanged in the context of or resulting from the involvement of the candidate or tenderer in the preparation of the procurement procedure and the fixing of adequate time limits for the receipt of tenders. The candidate or tenderer concerned shall only be excluded from the procedure where there are no other means to ensure compliance with the duty to observe the principle of equal treatment. Prior to any such exclusion, candidates or tenderers shall be given the opportunity to prove that their involvement in preparing the procurement procedure is not capable of distorting competition. The measures taken shall be documented in the individual report required by Article 84. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 650 et seq. 41.1. Negotiations or technical dialogue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.2. Entities covered by the provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.3. Technical dialogue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.3.1. In general. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.3.2. Balancing of interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.3.3. Relevant elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.3.3.1. Primary factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.3.3.2. Secondary factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.4. Incumbents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.5. Ways to avoid the exclusion of economic operators. . . . . . . . . . . . . . . . . . . . . . . . 41.6. Consultation of tenderers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 8 10 10 11 13 14 24 25 26 32

This provision is also found in Article 59 of the Utilities Directive. There is no corre- 1 sponding provision in either the Defence and Security Directive or the Concessions Directive, but in these directives corresponding issues are dealt with under the general principles (Article 4 of the Defence and Security Directive and Article 3 of the Concessions Directive). The situation of advisers and their eligibility to take part in procurement contests is 2 closely related to situations where there are conflicts of interest which are governed by Article 24. In Article 24 the focus is on situations where an economic or personal connection between a candidate or tenderer and the contracting authority means there is a risk that a decision will distort competition. One difference between the ineligibility of advisers and conflicts of interest is that the ineligibility of an adviser usually relates to a specific task, whereas conflicts of interest can relate to all tasks where there is a specific form of relationship between a contracting authority and a tenderer. Another difference is that in a certain sense the ineligibility of an adviser may arise from a legitimate interest as the ineligibility results the legitimate need of the contracting authority for advice, and the award of the contract to the tenderer in question could result in a better fulfilment of the task since the tenderer/adviser may be better suited to perform the task they have specified. In contrast, a conflict of interests in breach of Article 24 may merely be

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an expression of nepotism and abuse of power. Even if the eligibility of an adviser may not be regarded as legitimate, the above shows that there is a difference between the two situations and this difference can justify the two situations being treated differently. This is probably why they are dealt with in two different provisions. Thus an assessment of ineligibility may not be the same in the two situations. At the same time it appears that standards applicable to the provisions in Articles 24, 40 and 41 are largely the same, i.e. whether there is distortion of competition or unequal treatment. In Joined Cases C-21/03 and C-34/03 Fabricom SA, the CJEU explained the connection between the situation of the adviser and the principle of equal treatment.1 The CJEU stated that it is settled case-law that the principle of equal treatment requires comparable situations not to be treated differently and different situations to be treated in the same way unless such different treatment is objectively justified. The CJEU then stated that an undertaking that has carried out research, experiments, studies or development in connection with works, supplies or services relating to a public contract is not necessarily in the same situation as regards participation in a procedure for the award of a contract as an undertaking that has not carried out such works. Thus, an undertaking that has participated in preparatory works may be at an advantage when formulating its tender because of the information it has received concerning the public contract when carrying out that work. This situation may give rise to a conflict of interests in the sense that, even without intending to do so, the undertaking may influence the conditions of the contract in a manner favourable to itself. The CJEU did not expand on this last point. 3 Other situations may fall within the scope of Article 41, given its wording ‘or has otherwise been involved in the preparation of the procurement procedure’. It must be assumed that this wording is merely a catch-all provision which resolves the relationship between Article 40 and Article 41, as it only refers to a situation in which advice is given but which, for some reason, is not governed by Article 40 nor covered by the obligation to prevent distortions of competition pursuant to Article 41. It will hardly ever be relevant to interpret Articles 40 and 41 so that distortions of competition should not be prevented or sanctioned. The question is what significance this addition to Article 40 has for Article 41, i.e. whether it adds anything to the application of either Article 41 or Article 40. Perhaps it means that communications between an economic operator and a contracting authority other than in the role of an adviser can fall within the scope of Article 41, regardless of whether they fall within the scope of Article 40. However, Article 41 refers to ‘the preparation of the procurement procedure’ which excludes situations where an economic operator and a contracting authority negotiate on elements of a contract that are unrelated to a procurement procedure.

41.1. Negotiations or technical dialogue 4

Apart from distinguishing between the two grounds of ineligibility (distortion of competition and unequal treatment), it is also necessary to distinguish between the ineligibility of advisers on the one hand and negotiations during the period leading up to the launch of a procurement procedure on the other. These two situations differ and are thus subject to different rules of the Public Sector Directive; the eligibility of advisers is covered by Articles 40 and 41, and preliminary negotiations are covered by Article 18 and in particular the principle of equal treatment. Since the situations have clear similarities and the rules governing them are basically the same (the principle of equal treatment), their treatment will often be the same. 1

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Dialogue between a contracting authority and one or more potential tenderers in the 5 phase prior to the launch of a procurement (the preparatory phase) can either take the form of negotiation or technical dialogue (advice). The distinction between these is relevant since the assessment of whether the principle of equal treatment has been breached can depend on whether the case concerns negotiation or technical dialogue. Negotiation in the preparatory phase is not directly covered by the joint declaration (see the commentary on the ban on negotiation in Article 18), but even if this were not the case contracting authorities would be prohibited from negotiating during the period prior to launching a procurement. And in all circumstances contracting authorities are subject to the principle of equal treatment. There can be various reasons for entering into negotiations prior to a procurement 6 procedure. First, the negotiations can be part of normal contractual negotiations at a time when the contracting authority does not expect to put the task out to tender but merely wishes to take soundings. Second, the contracting authority may seek a negotiating partner to cooperate on the task to be put out to contract. Naturally this aim is not legitimate under the procurement rules. Third, negotiations can arise, consciously or unconsciously, in connection with an advisory task relating to the procurement. In this last situation the adviser does not take part in a dialogue with a view to defining and describing an appropriate and reasonable service for the contracting authority but to increase its chance of being awarded the contract. What is common to all these situations is that the negotiations are not contrary to the procurement rules at the time when they take place. The negotiations will first become unlawful when a potential tenderer submits its tender. The differences and similarities between the ineligibility of advisers and negotiation 7 can be significant for examining compliance with the principle of equal treatment. Two factors that must be considered in distinguishing between the eligibility of advisers and negotiation. First, it is necessary to consider whether the assessment of negotiation prior to tendering will be the same as with the assessment of the eligibility of advisers. Second, it must be considered whether the intention behind the communication (whether to do with negotiation or the eligibility of advisers) is relevant to assessing whether there is an infringement. It must be assumed that the kind of infringement that can be relevant to prior negotiations occurs where, by means of the negotiation, an undertaking has influenced on the specification of the contract offered for tender. What is central to both situations is that, prior to the publication of the contract notice, an undertaking has exercised such influence on the subject matter of the contract that it has effectively obtained a competitive advantage on the basis of that influence or insight. On the face of it, it does not seem to matter whether a case concerns negotiation or technical dialogue. However, depending on the context there are now different consequences of infringements in the two situations, as there can be different penalties under Article 40 and Article 41; see Article 57. While both situations were formerly assessed purely on the basis of equal treatment and transparency, distortion of competition now appears to play a role under the latest Directive.

41.2. Entities covered by the provision Article 41 refers to: ‘Where a candidate or tenderer or an undertaking related to a 8 candidate or tenderer has advised the contracting authority’. Thus Article 41 covers not only undertakings that have advised the contracting authority, but also candidates and tenderers related to or connected with an adviser. Michael Steinicke

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It must be considered whether Article 41 means there should be a focus on specific kinds of links between a candidate or tenderer and another undertaking, or whether the focus should be on any connection that can lead to a competitive advantage being obtained from the advisory task. It must be assumed that it is the latter that is referred to. On this basis the similarity to the provision on ineligibility in Article 24 is even clearer. The most obvious ways in which there is a risk of a competitive advantage being passed from an adviser to a participant in a procurement process are: 1) where there is a corporate connection between the adviser and the candidate or tenderer; 2) where the adviser also acts as an adviser to the candidate or tenderer; or 3) where information is otherwise passed to the candidate or tenderer, for example under a contract. The CJEU has previously ruled that a corporate connection can be relevant to the assessment of to the participation of economic operators in a procurement. 2 In the case of technical dialogue under Articles 40 and 41 this probably means that where there is a corporate connection between a contracting authority’s adviser and a tenderer, there can be ineligibility. This may also be the case where there is a corporate connection between a tenderer and a contracting authority. It must be assumed that there is such a close connection between two legal persons, based on the corporate connection, that the knowledge of one of the entities is available to the other. This means that in assessing the ineligibility of advisers, it will not only be the adviser’s use of information obtained by means of their advisory function that is relevant, but also the potential use of this knowledge by the adviser’s associated undertakings. Therefore, in connection with ineligibility it is necessary to ask whether a contracting authority must take account of an organisational connection between two undertakings where such a connection means there is a risk of a party obtaining a competitive advantage. In this case an assessment of eligibility will be made with additional uncertainty due to the fact that it is not the advisory undertaking itself that may potentially use the competitive advantage but some other legal person. All things being equal, this must mean that the consequence of a connection between an adviser and a tenderer will not be as strict as it would be if the adviser itself was the tenderer. In any event it is clear that the assessment of ineligibility must be made on the basis of the facts, including the facts that are generally relevant to assessing the ineligibility of an adviser and the organisational circumstances. In cases concerning the ineligibility of advisers, all kinds of organisational connections between contracting authorities, advisers and tenderers are relevant, since such connections give possibilities for passing on information between such parties. This situation will often be an element that can reinforce a competitive advantage arising from the giving of advice.

41.3. Technical dialogue 41.3.1. In general 10

Under Articles 40 and 41, the starting position is that the fact that an undertaking has acted as an adviser for a contracting authority in the preparatory phase of a procurement does not prevent that undertaking from subsequently submitting a tender for the contract in question. This must naturally be subject to compliance with the principles of equal treatment and transparency.3 The requirement to comply with the principle of 2 3

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See Case C-389/92 Ballast Nedam Groep I and Case C-5/97 Ballast Nedam Groep II. See Joined Cases C-21/03 and C-34/03 Fabricom SA.

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equal treatment means that in some situations this starting position must be departed from so that an adviser must be excluded from tendering. In assessing eligibility, a tenderer will presumably be found ineligible even where the advantaged tenderer does not win the contract; the mere fact that the tenderer obtain an advantage over the other tenderers is sufficient. According to the wording of the provision, an assessment will usually be made of whether a party is ineligible at a stage in the proceedings when it will not yet have been possible to determine which tenderer will win the contract, so the contracting authority will often not have had the possibility to take account of the specific competitive situation between tenders in assessing whether the role of an adviser will have given a competitive advantage. Even though the assessment of eligibility may not, in principle, be affected by the final contest result, the practical effect is that the ineligibility does not have a significant effect on the contest. Ineligibility can arise in various contexts. The first is where an adviser wants to tender for a contract for which it has provided technical assistance. Ineligibility can also arise where there is no formal consultancy contract but where there has been technical dialogue with individual undertakings on the market for the product or service in question. These may be existing or former suppliers or undertakings that have not previously had transactions with the contracting authority. Ineligibility can also be applicable where, in the preparatory phase, an undertaking with a function similar to that of an adviser to the contracting authority has been given access to information about a proposed procurement. A related but essentially different question concerns the situation in relation to Articles 40 and 41 if an undertaking obtains information about a future contract from an existing service provider. It is questionable whether a competitive advantage obtained from such a contact between two undertakings can lead to the exclusion of an undertaking pursuant to Article 41 if the existing contractor does not organise the procurement or set the terms for the service to be provided. While a contract for a corresponding service will presumably be based on the existing service and knowledge of the existing service can give useful information about the contracting authority’s preferences at the time when the existing contract was awarded, it must be assumed that this will not result in ineligibility equivalent to that of an adviser unless the contracting authority has asked the undertaking fulfilling the existing contract to provide the information. Another question that follows from this is whether the function of an existing service provider as an adviser to another tenderer in the course of a procurement process can lead to ineligibility equivalent to that of an adviser. This would probably depend on whether the existing service provider itself would be ineligible to tender. See section 41.4 below on incumbents. 41.3.2. Balancing of interests Ineligibility is primarily governed by the principle of equal treatment. Thus it would 11 be natural to assume that the level of protection of competition that generally applies under the principle will also apply to the question of ineligibility. The level of protection of competition reflects a balance between, on the one hand, consideration for the contracting authority’s right to enter into a contract that gives it as wide a scope as possible and, on the other hand, consideration for competition which is the primary goal of the Procurement Directives.4 In the Fabricom case the CJEU stated that ‘Taking account of the situation in which a 12 person who has carried out certain preparatory work may find himself, therefore, it can4

According to recital 8 of Directive 2004/18/EC.

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not be maintained that the principle of equal treatment requires that that person be treated in the same way as any other tenderer.’5 The application of the principle of equal treatment is generally made with a clear weighting in favour of competition. The question is whether this weighting also applies to ineligibility and in particular whether the weighting applies equally to the ineligibility of advisers and ordinary ineligibility. In what follows the focus is on the ineligibility of advisers since ordinary ineligibility is dealt with in Chapter 24. 41.3.3. Relevant elements 13

Neither Article 40 nor Article 41 state what constitutes ‘advice’ and what functions are covered by the term; they are equally silent on what effect or influence associated with giving advice can lead to distortion of competition or a breach of the principle of equal treatment. There can be various points of departure for determining whether there is a distortion of competition or an infringement of the general principles. The need for advice will vary according to the nature of the task, its complexity etc. For certain contracts there is a great need for advice, for example there will be a need for preliminary advice in connection with the purchase of products that contain a major element of innovation, whereas there will be much less of a need for professional advice when buying standard products. This means that assessing whether there is ineligibility requires flexibility, taking all relevant factors into account. Various factors can be relevant for assessing the ineligibility of advisers. A review of some typical factors follows. While the factors that are decisive for determining whether there is ineligibility are many and varied, it is possible to list the factors that are of primary importance to such a determination and the factors that are generally of secondary or supplementary importance. The factors that have primary relevance will typically result in infringements of the principle of equal treatment or will distort competition. There is a close connection between the nature of the advice, the competitive advantages obtained from giving it and the measures necessary for removing the competitive advantages. According to Article 41, such measures ‘shall’ include communication of the relevant information to the other candidates and tenderers and the fixing of adequate time limits. It cannot be assumed that all potential competitive advantages can be removed by these two measures. The provision must mean that one or both of these measures should be applied if they will be capable of removing the competitive advantage. Where other measures can eliminate a competitive advantage, they should be applied. Whether or not a tenderer has previously carried out work for a contracting authority is not decisive for an assessment pursuant to Article 41. The fact that a tenderer has general knowledge of the contracting authority should not be a disadvantage for a tenderer any more than it should be to their disadvantage that they are generally better qualified to perform the task than their competitors because they have the general qualifications which the contracting authority needs. For an adviser to be ineligible there must be a specific connection with the contract in question. The weighting of an assessment of eligibility takes account of the factors listed below. These are factors that are generally of primary importance and will weigh heavily in the balance when making an assessment; other factors will generally be of secondary importance and will not be given as much weight. However, the weightings will reflect the circumstances of each case. Any assessment depends heavily on the circumstances of the case and will take account of the factors that are relevant to it. 5

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41.3.3.1. Primary factors The most important factor for determining whether there is ineligibility is the advis- 14 er’s influence on the content of the procurement documentation. A technical adviser can often influence the contracting authority’s choice of product and the formulation of the procurement documentation and procurement conditions in such a way as to secure a competitive advantage even before the procurement is initiated. In assessing an adviser’s influence account can be taken of how and how far the adviser’s preliminary work or advice has had an influence, whether the preliminary work compares with the finished project put out to tender, whether the result of the advice is available to other tenderers, the extent to which the adviser has been involved in formulating the award criteria, whether the cooperation has resulted in the project having technical specifications that are tailor-made to the adviser’s own products, and whether the adviser has otherwise obtained an improper competitive advantage.6 Formulating the procurement documentation so that it fits with the tenderer’s product line can occur if an adviser is connected with the tenderer and if the adviser draws up the procurement documentation for the contracting authority. While this situation can arise, it will more often be the case that, after the procurement has been launched and the procurement documentation has been established, the adviser is engaged by a tenderer. In this case it is naturally not possible to formulate the procurement documentation to fit the tenderer’s products since at the time of drafting the procurement documentation there is not yet any connection between the tenderer and the adviser. It must be assumed that, where the specification of a task is so close to the adviser’s own products as to restrict competition, a tender associated with the adviser will be found ineligible. This aspect of ineligibility has its roots in the same principles as form the basis for the rules on technical specifications (see further below) and the prohibition of restrictions on trade in Article 34 of the Treaty on the Functioning of the Europe Union (TFEU).7 Where, under the rules on technical specifications (or the ‘or equivalent’ rule; see the commentary on Article 42(4)), it is decisive whether it is impossible to make a precise and intelligible description of the subject-matter of the contract and whether ‘or equivalent’ is added to a specification, there are no formal conditions for the assessment of ineligibility. In this case what will be examined is whether the specifications are formulated to such a high degree to match the adviser’s products that competition is weakened. Several factors can play a role in assessing whether there is an infringement. The market conditions for the goods or services in question can be relevant as there will be a stricter assessment of eligibility if there is only one or few other products corresponding to the adviser’s product. Another factor that can be relevant is the possibility of specifying goods on the basis of objective criteria, something that is related to technical specifications. It is thus difficult to lay down clear criteria for assessing the influence of an adviser on the procurement conditions and documentation in order to establish adviser ineligibility. Based on the above, an assessment must be based on the actual procurement documentation and the competitive situation. It is probably not only participation in drafting the procurement documentation that weighs heavily in assessing whether a tenderer is ineligible. Where an adviser has under6 See the ruling of the Danish Complaints Board for Public Procurement of 23 August 1995, B4 Aps. In this case the contracting authority’s technical adviser had drawn up the specifications in such a way that they were largely identical to the design which the adviser had itself launched. 7 See, among others, Case 45/87 Commission v Ireland (Dundalk), Case C-243/89 Commission v Denmark (Storebælt), and Case C-535/93 Commission v the Netherlands (UNIX).

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taken technical analyses or studies in connection with giving advice, and this material is included in the procurement documentation, this can also be relevant to the assessment of eligibility. The assessment may also take account of circumstances such as whether the formulation of the technical studies may form a basis for drafting the procurement documentation. Where procurement documentation is subsequently influenced by others than the adviser prior to its finalisation, this may affect a finding of whether the adviser is ineligible. 15 Another factor is that a technical adviser may acquire knowledge about a procurement so as to have an advantage over competitors, i.e. knowledge about matters that can be relevant to the contest and which the other tenderers do not know. This knowledge will often concern the special requirements of the contracting authority. In this situation it can be relevant whether the information obtained by the adviser is made available to all tenderers. Where the information thus obtained is insignificant, the adviser will not be found ineligible. The information can relate to the whole of the procurement or only part of it. In the latter case the effect must be of a certain magnitude before the adviser will be found ineligible as the competitive advantage obtained from that one part of the task must affect the whole task. What is decisive is the extent to which having the information improves the chances of that tenderer to win the contract. Thus, what matters for the assessment is whether the information is significant to the contest. 16 If an adviser obtains information that cannot be used in connection with a procurement contest, but which may be useful subsequently (if the undertaking wins the contract), this will not result in ineligibility. In Joined Cases C-21/03 and C-34/03 Fabricom SA, the CJEU considered a provision in Belgian law whereby: ‘No person who has been instructed to carry out research, experiments, studies or development in connection with public works, supplies or services shall be permitted to apply to participate in or to submit a tender for a contract for those works, supplies or services.’ The CJEU pointed out that an undertaking that has acted as an adviser can be in a different situation than other tenderers and that it can therefore be justifiable to exclude an adviser from tendering. However, the CJEU went on to state that: ‘a rule such as that at issue in the main proceedings does not afford a person who has carried out certain preparatory work any possibility to demonstrate that in his particular case the problems referred to in paragraphs 29 and 30 of the present judgment do not arise.’ 8 The CJEU also stated that such a rule went further than was necessary to ensure the equal treatment of all tenderers. The CJEU concluded that the application of the rule could exclude persons who carried out certain preparatory works from the award procedure even though their participation in the procedure entailed no risk whatsoever for competition between tenderers.9 This judgment does not say anything very specific about what can be said to affect competition, as the provision in question related to ‘research, experiments, studies or development in connection with public works, supplies or services’, i.e. to a very broad scope of activities. The provision contained no direct reference to the concept of advice or the drafting of procurement documentation, but these activities must be assumed to be treated in the same way by the CJEU. However, it can be deduced from the judgment that it is not possible simply to exclude an undertaking that has been involved in the preparation of a procurement, but there must considerFabricom, para. 33. Fabricom, para. 35. In his Opinion, Advocate General Léger was of the view that the Belgian provision was in accordance with the procurement rules. 8 9

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ation of the facts of the case to assess whether competition will be distorted by the undertaking’s participation in the procurement process. The knowledge obtained can be information about the character or composition of the goods or services, but it can also be about more intangible matters such as the opinions and preferences of the contracting authority which may not be expressed in the procurement documentation. The additional knowledge that a technical adviser may acquire should, in principle, have limited significance for the contest. In connection with public procurements all contracting authorities must make available to all tenderers all the information that is relevant to the contest. Where this is the case, the additional information that an advisory undertaking may have obtained will seldom be such as to give it a significant competitive advantage. However, where it does give a significant advantage it is clear from Article 41 that the information must be given to the other tenderers in order to counter any advantage. Thus it seems that what is critical to cooperation between a contracting authority and a technical adviser is the drafting of the procurement documentation and the selection of the products or solutions on which the contracting authority bases its purchases. What is ultimately important for determining whether an adviser is ineligible on the basis of their acquisition of information is whether sufficient information has been given to the other tenderers. The extent of advice can also be relevant to an assessment of ineligibility. It is not decisive whether an advisory task is divided between several advisers or how many advisers may have been involved. What is decisive is whether the nature of the advice provided has given a competitive advantage. If an adviser has only given advice on part of a task, the risk of that adviser being excluded from tendering will be less; conversely if the advice given is relevant to the whole task there will be an increased risk of the adviser being ineligible. It can also be relevant that an adviser has obtained a time advantage from their giving advice if an adviser obtains knowledge about a task enabling it to draft a tender earlier that fulfils the contracting authority’s requirements or is more competitive. 10 For this argument to carry weight, the adviser must have had the possibility of drafting its tender more thoroughly than the other tenderers and thereby appear to the contracting authority to be more suited to the task, or if the deadlines are so short as to put great timepressure on other tendering undertakings so the adviser’s prior knowledge becomes relevant. The same situation (a disproportion between time limits for tendering and the time required for drawing up a tender) can also arise if the extent and complexity of the task means that it is not possible to present a detailed offer within the minimum time limits of the Directives. According to Article 41, extending the time limits can be one of the ways in which to avoid the ineligibility of advisers and ultimately to avoid the exclusion of advisers from tendering. The significance of this is obvious in situations where a lack of time makes it difficult for other tenderers to submit tenders that are as competitive as that of the adviser. It may be argued that the reference to time limits in Article 41 is unnecessary since Article 47 already provides that, when fixing time limits, contracting authorities must take account of the complexity of the contract and the time required for drawing up tenders, (without prejudice to the minimum time limits set out in Articles 27 to 31).

10 The advantage may also be manifested by the adviser being able to complete the task more quickly than others during the contract period, which can be reflected in a lower tendered price.

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A problem not directly addressed in Article 41 is the situation where potentially interested undertakings refrain from submitting a tender because they believe they cannot submit an adequate tender within the time limit. If an advisory undertaking is the only tenderer, the question is how such a situation should be tackled from a legal perspective.11 A review of the time limits might suggest that there is nothing to complain about, since at least one undertaking (the adviser) will have been able to prepare an adequate tender. In these situations an adjustment of the time limits during the procurement proceedings may not be lawful, as these should be regulated in accordance with Article 41 (and Article 47) when the contracting authority first publishes the contract notice. Consideration for potential tenderers must mean that any adjustment of the time limits should be made before the procurement proceedings start. 21 It is possible that a change of personnel, either of the tenderers or of the contracting authority, can be relevant to eligibility. This is a central issue in preventing conflicts of interest. In principle the ineligibility of an adviser is aimed at the undertaking and not at specific persons. The reason why an advisory undertaking may be ineligible is that it may have acquired relevant information in the capacity of an adviser. Even if the personnel involved in the advisory work are excluded from working on a tender, the information obtain via the advisory work will still be available to others in the organisation. The main rule may be derogated from in two situations. The first is where only those who have been involved in the advisory work are able to use the information (for example, in the case of technicians with special skills). Here the exclusion of these persons from working on the tender will mean that information obtained by them cannot be used by the undertaking since the persons working on the tender will not have the specific skills for using the information obtained. The exclusion of such persons will continue after the cooperation or employment relationship has come to an end.12 It is possible that after the exclusion of such personnel the undertaking will be able to take part in the procurement, but the exclusion must be effective. The second situation in which the main rule may be derogated from is where the persons who have advised the contracting authority are separated from those who work on the tender. This differs from the situation immediately above in that this does not relate to the exclusion of experts who are the only persons able to use the information obtained, but rather a separation of ‘critical’ information (which is usable by several employees) from the employees who are to work on the tender. In order for there to be an effect on eligibility, very convincing evidence will be required that such separation is effective and that the information in question is not circulated in the organisation. 22 It must be assumed that a change of personnel of the contracting authority will not be significant for the assessment of ineligibility since it is the circumstances of the tenderer that matter. However, a change of personnel of the contracting authority can be decisive where there is a conflict of interest (Article 24), and where there is a duplication of a role with contracting authority or of one of its employees. 23 The weightiest cause of adviser-ineligibility is where an adviser influences the procurement specifications. This is because such advice gives the tenderer an absolute ad11 See the ruling of 8 January 1997 of the Danish Complaints Board for Public Procurement in the Danske Handelskammer case, where there had been negotiations with the ultimate winner of the contract prior to putting the contract out to tender. The winning tenderer was the only undertaking to submit a tender. It was stated that the reason for this was that other tenderers did not have enough time to prepare a competitive bid. The winning tenderer did have enough time as it had already obtained information about the task by means of the negotiations prior to the publication of the procurement notice. 12 A natural extension of this is that another undertaking that employs such persons may risk becoming ineligible.

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vantage, since the description of the task can be made to fit the adviser’s products. This form of ineligibility weakens the contest for the main object of the task, the goods or services. Advantages which an adviser may obtain relating to timing and knowledge only give the tenderer a relative advantage, since the Directives provide for a minimum requirement for time limits and for information to be given in the procurement documentation. Where these time limits and requirements for information are fulfilled, it is assumed that tenderers have sufficient time and information to prepare a tender that meets the contracting authority’s needs. Furthermore, in relation to such an informational advantage it must be assumed that the contracting authority has set out the factors that are important for the contest either as requirements or conditions for entering into the contract or where the award criteria are based on the best relationship between quality and price. If the procurement documentation is tailor-made for the benefit of an adviser, this will irreparably harm the contest. This is because, once the procurement process has been initiated, the specifications cannot be significantly altered, so the contest must either be decided on the basis of the existing specifications or it must be cancelled and replaced by a new contest (with new advice). Where a competitive advantage is based on the time-limits and the knowledge acquired, it is often possible to make good the problem as long as the competitive advantage is identified in good time. This can be done by extending time-limits for submitting tenders or by adding to the information given to the other tenderers (provided that consideration for potential tenderers is not such that the time-limits should be adjusted prior to the initiation of the procurement proceeding). The primary factor in an assessment of ineligibility is the adviser’s influence on the procurement documentation as this competitive advantage cannot be made good for an existing procurement proceeding. Where there is such a degree of influence as to potentially affect the competitive situation, the adviser will often be found ineligible. 41.3.3.2. Secondary factors It is debatable whether the intention of a technical dialogue is relevant to the assess- 24 ment of whether it results in ineligibility. This is not entirely impossible, but it is questionable. It is also possible that the special conditions of a trade sector can be relevant to eligibility. This should be taken into account if the advice is given in a trade sector where there is only one or a very few undertakings that are able to tender. It is doubtful whether this should be given significance if experience shows that there are only few that are interested in tendering but where there are several that have the competences to fulfil the tasks. Of course, it is not impossible that there can be other market factors that are relevant to an assessment of whether the giving of advice should mean that the advisory undertaking should be excluded from taking part in a procurement contest. Under Article 41, a contracting authority should not merely comply with the principle of equal treatment, but shall be seen to comply with the principle of equal treatment. It can be argued that this part of the provision goes too far in offering protection. The balance between the interests of the contracting authority in entering into an appropriate contract by means of a procurement contest and consideration for competition (complying with the principle of equal treatment) should not be shifted so far in favour of equal treatment as to make it too difficult to enter into a contract. The principle of equal treatment must mean that the contracting authority should comply with the principle, not that it shall be seen to comply with the principle.

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41.4. Incumbents 25

A situation that, with regard to its effects, is similar to that of an adviser is where an undertaking has previously performed the task put out to tender, and is possibly still performing the task up to the date of the procurement proceedings. It would be natural that, in describing the task, a contracting authority will refer to how the task has been performed previously. A description and organisation of the task in accordance therewith will naturally give an advantage to the current contractor. It would be inappropriate for an existing contractor to be prevented from taking part in a procurement contest just because it is currently performing the task in question. It is clear that, in describing the task, a contracting authority may not give the existing contractor an advantage that does not have a proper basis and cannot be objectively justified. It is also essential that all other participants in the contest should be given all the necessary information which the current contractor has. Otherwise the same factors that are relevant to the ineligibility of advisers will also be relevant where a previous contractor participates in a procurement contest.

41.5. Ways to avoid the exclusion of economic operators It can be questioned whether the measures referred in Article 41, for preventing a breach of the principle of equal treatment or a distortion of competition, are exhaustive. The wording states that ‘such measures shall include’, and on this basis it must be assumed that it is not only the two measures referred that can be relevant, but that other measures may be admissible if they can prevent a distortion of competition or a breach of the principle of equal treatment in connection with a technical dialogue. If only the two kinds of measures referred to are applicable this will prevent the use of some kinds of technical dialogue or prevent the solution to certain kinds of problems by technical dialogue, even though the harmful effect of technical dialogue (for example that a technical adviser has been involved in preparing procurement documentation) may be dealt with by other means. The second paragraph of Article 41 provides: ‘The candidate or tenderer concerned shall only be excluded from the procedure where there are no other means to ensure compliance with the duty to observe the principle of equal treatment’. All things being equal, this must mean that all measures that that may help remove distortions to competition arising from the position of an adviser shall be used. It will be interesting to see what measures the CJEU will accept. The use of the word ‘shall’ suggests an expectation that other methods must be used. It cannot be assumed that it means that both the measures referred to must be used in every case. It makes most sense that, in assessing ineligibility, a contracting authority must take these factors into account in determining how a specific distortion of competition should be dealt with. 27 One obvious possibility for dealing with the problem of an adviser’s competitive advantage would be for the contracting authority to exclude an adviser from the procurement contest in advance. However, a contracting authority cannot just exclude an undertaking from tendering on the ground that it has acted as an adviser in connection with the procurement in question. This must also be a consequence of the principle of equal treatment and of the requirement for balance in Articles 40 and 41, which seek to protect the rights of both advisers and other tenderers to participate in procurement contests as long as this does not distort competition.13 In line with this, see Joined Cases C-21/03 and C-34/03 Fabricom SA, where a provision in national law which automati26

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cally excluded undertakings that had acted as advisers to the contracting authority was found to be contrary to the procurement rules. A contracting authority might guard against the problem of the eligibility of advisers by making a contract to provide advice conditional on the adviser agreeing to refrain from participating in the subsequent procurement contest. Such a condition would presumably not be contrary to procurement law, but it might raise the question of what measures a contracting authority could take if the adviser subsequently sought to take part in the procurement, i.e. failed to comply with the condition requiring it to refrain from doing so. The answer must be that the breach of contract would not have a direct consequence under procurement law, i.e. the adviser could not be excluded from the procurement contest on the basis of such a breach of contract. In the event of a breach of the contract the contracting authority’s remedies would be limited to the usual contract law sanctions. Apart from agreeing with an adviser that they will not take part in a subsequent procurement contest, there are several other measurers that a contracting authority can take. For example, as referred to above, an authority can pass on to the other tenderers the information that may have given the adviser a competitive advantage. This can be done in writing or otherwise. Information can also be communicated by allowing tenderers to contact the undertaking that currently performs the task. It is difficult to imagine practical solutions to the ineligibility of advisers other than excluding the adviser from the procurement contest or offset out the competitive advantages. Other methods, such as allowing an adviser to take part in the contest but imposing competitive disadvantages on the adviser, would not be practicable. For example, to allow an adviser to take part in the contest, but subject to a pricing adjustment to offset the competitive advantage, might make the competitive situation acceptable in some cases, but it would hardly be workable as it would be difficult to price such competitive advantages. There is a question of whether the ineligibility of advisers could be dealt with by the changing the personnel of the adviser. In principle the ineligibility of an adviser applies to the whole advisory undertaking and not specific personnel.14 This applies with different strengths to different kinds of ineligibility. Where an adviser has had an influence on the procurement documentation, naturally this cannot be made good by a change of personnel since the procurement requirements will have been influenced by the products or services supplied by the adviser, and a competitive advantage based on this will not be linked to the adviser’s individual employees. Where the adviser’s individual employees have the knowledge that gives the adviser a competitive advantage it may be possible to remove them from the task so the advantage is not exploited by the adviser in drawing up its tender. This may be possible where there is physical separation of the undertaking into different units, especially where this is supplemented by functional and organisational separation between different parts of the undertaking. In financial market law there are corresponding problems in connection with insider trading. The issue has been whether it is possible to separate different parts of a legal person so that one part of a legal person that has critical information can be effectively separated from other parts of the same legal person if there is a risk of the legal person being affected by the prohibition of insider trading. The concept of ‘Chinese walls’ is used in this context. A Chinese wall refers to the situation where rules and procedures 13 The principle of equal treatment normally applies where one tenderer has an advantage over the others, but the principle also protects that one tenderer from discrimination in favour of the other tenderers. 14 See the ruling of 1 July 1998 of the Danish Complaints Board for Public Procurement of in the case of Arkitektfirmaet C. F. Møllers Tegnestue.

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are adopted to prevent critical information being passed to other parts of an undertaking. The CJEU has not ruled on the use of such measures to prevent the ineligibility of advisers. The weakness of this separation of personnel to prevent ineligibility is that there will still be a common interest of the separated persons or departments (all will have an interest in the undertaking winning the tender even if they do not work in the department that will perform the contract – this conflict of interest may be contrary to Article 24), and it will be difficult to ensure adequately that communication is cut off between departments. Even though key personnel may be physically, organisationally or otherwise separated, there can be communication (by telephone, mail etc.) whereby critical information can be passed on without this being seen. This means that Chinese walls presumably cannot be used in procurement law. If CJEU accepts Chinese walls as a legitimate method for preventing ineligibility, this method could be applicable both to the ineligibility of advisers and to conflicts of interest (Article 24).

41.6. Consultation of tenderers 32

Article 41, third paragraph, provides that: ‘Prior to any such exclusion, candidates or tenderers shall be given the opportunity to prove that their involvement in preparing the procurement procedure is not capable of distorting competition.’ There is no provision for any specific form in which a tenderer or candidate should be consulted. There is no express corresponding provision in Article 24, on conflicts of interest. However, the case law of the CJEU must be equally applicable.

Article 42 Technical specifications 1. The technical specifications as defined in point 1 of Annex VII shall be set out in the procurement documents. The technical specification shall lay down the characteristics required of a works, service or supply. Those characteristics may also refer to the specific process or method of production or provision of the requested works, supplies or services or to a specific process for another stage of its life cycle even where such factors do not form part of their material substance provided that they are linked to the subject-matter of the contract and proportionate to its value and its objectives. The technical specifications may also specify whether the transfer of intellectual property rights will be required. For all procurement which is intended for use by natural persons, whether general public or staff of the contracting authority, the technical specifications shall, except in duly justified cases, be drawn up so as to take into account accessibility criteria for persons with disabilities or design for all users. Where mandatory accessibility requirements are adopted by a legal act of the Union, technical specifications shall, as far as accessibility criteria for persons with disabilities or design for all users are concerned, be defined by reference thereto. 2. Technical specifications shall afford equal access of economic operators to the procurement procedure and shall not have the effect of creating unjustified obstacles to the opening up of public procurement to competition.

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3. Without prejudice to mandatory national technical rules, to the extent that they are compatible with Union law, the technical specifications shall be formulated in one of the following ways: (a) in terms of performance or functional requirements, including environmental characteristics, provided that the parameters are sufficiently precise to allow tenderers to determine the subject-matter of the contract and to allow contracting authorities to award the contract; (b) by reference to technical specifications and, in order of preference, to national standards transposing European standards, European Technical Assessments, common technical specifications, international standards, other technical reference systems established by the European standardisation bodies or – when any of those do not exist – national standards, national technical approvals or national technical specifications relating to the design, calculation and execution of the works and use of the supplies; each reference shall be accompanied by the words ‘or equivalent’; (c) in terms of performance or functional requirements as referred to in point (a), with reference to the technical specifications referred to in point (b) as a means of presuming conformity with such performance or functional requirements; (d) by reference to the technical specifications referred to in point (b) for certain characteristics, and by reference to the performance or functional requirements referred to in point (a) for other characteristics. 4. Unless justified by the subject-matter of the contract, technical specifications shall not refer to a specific make or source, or a particular process which characterises the products or services provided by a specific economic operator, or to trade marks, patents, types or a specific origin or production with the effect of favouring or eliminating certain undertakings or certain products. Such reference shall be permitted on an exceptional basis, where a sufficiently precise and intelligible description of the subject-matter of the contract pursuant to paragraph 3 is not possible. Such reference shall be accompanied by the words ‘or equivalent’. 5. Where a contracting authority uses the option of referring to the technical specifications referred to in point (b) of paragraph 3, it shall not reject a tender on the grounds that the works, supplies or services tendered for do not comply with the technical specifications to which it has referred, once the tenderer proves in its tender by any appropriate means, including the means of proof referred to in Article 44, that the solutions proposed satisfy in an equivalent manner the requirements defined by the technical specifications. 6. Where a contracting authority uses the option laid down in point (a) of paragraph 3 to formulate technical specifications in terms of performance or functional requirements, it shall not reject a tender for works, supplies or services which comply with a national standard transposing a European standard, a European technical approval, a common technical specification, an international standard or a technical reference system established by a European standardisation body, where those specifications address the performance or functional requirements which it has laid down. In its tender, the tenderer shall prove by any appropriate means, including those referred to in Article 44, that the work, supply or service in compliance with the standard meets the performance or functional requirements of the contracting authority.

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Literature: Christopher Bovis, The Law of EU Public Procurement, p. 107 et seq., Arrowsmith, The Law of Public and Utilities Procurement, p. 648; Trybus, Caranta and Edelstam (eds), EU Public Contract Law. Public Procurement and Beyond, p. 37; Farr, Harmonisation of Technical Standards in the EC; Hawkins, Mansell and Skea (eds), Standards, Innovation and Competitiveness; Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, p. 278 et seq. 42.1. Information on technical specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.2. Safeguarding of equal opportunities and unrestricted competition . . . . . . . . 42.3. Methods of specification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.3.1. Specification by means of performance and functionality. . . . . . . . . . . . . . . 42.3.2. Use of technical specifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.3.2.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.3.2.2. Function and aim of standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.3.2.3. The standardisation system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.3.2.4. Hierarchy of specifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.3.3. Combination of performance requirements and reference to technical specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.4. Reference to trademarks and specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.5. Assessment of conformity of bids with specifications . . . . . . . . . . . . . . . . . . . . . . 42.5.1. Proof of conformity with specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.5.2. Product comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.5.2.1. Degree of compliance and elements of crucial importance . . . . . . . . . . 42.5.2.2. Matters of significance to the product comparison . . . . . . . . . . . . . . . . . 42.6. Proof of conformity with functional requirements . . . . . . . . . . . . . . . . . . . . . . . . .

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The provision in Article 42 is continued from Directive 2004/18 Article 23. Similar provisions are found in Utilities Directive 2014/25 Article 60, Concession Directive 2014/23 Article 36 (in a modified version compared to the Public Sector Directive) and Defence and Security Directive 2009/81 Article 18. 2 When the original proposal for the Public Sector Directive 2004/18 was presented in KOM(2000) 275, the reasoning for the new provisions on specifications was phrased as follows: 1

“The current provisions on technical specifications are designed to require public purchasers to define technical specifications by reference to an exhaustively listed set of instruments so as to avoid conferring any advantage on a given economic operator or giving preference to national production. These instruments are not only well known, transparent and publicly available but also represent, as far as possible, harmonisation of specifications at European or international level. The most important of these instruments is the standard – preferably European, international or, failing that, national. Other instruments which are more sector-specific (European Technical Approval for building products, as provided for in Directive 89/106/EEC) have also been retained as possible references.”

The Commission further stated that in some cases the provisions on technical specifications had led to situations where the standard used had been treated as a de facto mandatory instrument. Where this has been the view, the use of standards will be limiting the choice of the contracting entity to only those products which comply with the standard. This interpretation is not consistent with the function of the standards as reference, but will favour the standardized technical solution to the detriment of more recent technology. As the standardization process in some sectors is furthermore lagging behind the technical development, the above interpretation of standards is harmful. On this background the Commission found that the provisions need to be amended so as to clarify the notion of “reference” in order for more (innovative) enterprises to participate in tenders. A way of meeting these requirements is to introduce the possibility of specification in the form of a description of performance.

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The specific elements that have been most important in regard to adapting the cur- 3 rent provisions on technical specifications are presented in recital 74 of the preamble to the Public Sector Directive: “The technical specifications drawn up by public purchasers need to allow public procurement to be open to competition as well as to achieve objectives of sustainability. To that end, it should be possible to submit tenders that reflect the diversity of technical solutions standards and technical specifications in the marketplace, including those drawn up on the basis of performance criteria linked to the life cycle and the sustainability of the production process of the works, supplies and services. Consequently, technical specifications should be drafted in such a way as to avoid artificially narrowing down competition through requirements that favour a specific economic operator by mirroring key characteristics of the supplies, services or works habitually offered by that economic operator. Drawing up the technical specifications in terms of functional and performance requirements generally allows that objective to be achieved in the best way possible. Functional and performance-related requirements are also appropriate means to favour innovation in public procurement and should be used as widely as possible. Where reference is made to a European standard or, in the absence thereof, to a national standard, tenders based on equivalent arrangements should be considered by contracting authorities. It should be the responsibility of the economic operator to prove equivalence with the requested label. To prove equivalence, it should be possible to require tenderers to provide third-party verified evidence. However, other appropriate means of proof such as a technical dossier of the manufacturer should also be allowed where the economic operator concerned has no access to such certificates or test reports, or no possibility of obtaining them within the relevant time limits, provided that the economic operator concerned thereby proves that the works, supplies or services meet the requirements or criteria set out in the technical specifications, the award criteria or the contract performance conditions.”

42.1. Information on technical specifications It is stipulated in paragraph 1 of Article 42 that the technical specifications shall be 4 set out in the procurement documents, which means one of the relevant documents included in the definition of procurement document found in Article 2, para. 1(13). This provision covers “any document produced or referred to by the contracting authority to describe or determine elements of the procurement or the procedure, including the contract notice, the prior information notice where it is used as a means of calling for competition, the technical specifications, the descriptive document, proposed conditions of contract, formats for the presentation of documents by candidates and tenderers, information on generally applicable obligations and any additional documents”. It is not defined, which other contract documents could come into question or what the notion “additional documents” means. A document which could be the issue (apart from those actually mentioned) could be an invitation to submit tender, in other words the document which in restricted tender procedures, tender procedures with negotiation and competitive dialogue prequalifies candidates to further participate in the tender. The broad reference to various types of contract documents probably implies that the invitation to submit tenders is considered to be included in the wording “contract documents”, as the wording of the provision would otherwise make no sense. If the provision should be interpreted in this way, the provision must be considered inappropriate, as in these situations candidates/tenderers will only get the precise description of the object of the contract well into the process (when concluding the selection process). Considering that the technical specifications aim to increase transparent competition, such an interpretation of paragraph 1 may be wrong. The provision stipulates that “for all procurement which is intended for use by natu- 5 ral persons, whether the general public or the staff of the contracting authority, the technical specifications shall, except in duly justified cases, be drawn up so as to take into Michael Steinicke

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account accessibility criteria for persons with disabilities or design for all users.” This part of the provision clearly expresses the political wish to address this type of consideration. However, the wording mentioned does not imply any obligation that can be sanctioned. Thus, if a contracting authority sees no possibility of taking above considerations into account, it will not be possible to enforce or sanction this part of the provisions. As a new addition to this part of the provision it is now stipulated that “where mandatory accessibility requirements are adopted by a legal act of the Union, technical specifications shall, as far as accessibility criteria for persons with disabilities or design for all users are concerned, be defined by reference thereto”. This requirement is stronger than the first one regarding disabled persons and can therefore be subject to sanctions if not complied with. In regard to whether such reference and specification meet the set standards for specifications could be subject to enforcement within the procurement regime, whereas the issue of compliance with the relevant EU acts establishing the accessibility criteria will be subject to the relevant enforcement regime for those other provisions.

42.2. Safeguarding of equal opportunities and unrestricted competition This is one of the provisions of the Public Sector Directive which bears the stamp of promoting competition. The provision supplements the principle of equal treatment by stressing that tenderers must be offered equal terms of competition. 7 It is stipulated that technical specifications shall offer tenderers equal opportunities and shall not have the effect of creating unjustified obstacles to the opening up of competition for public procurement contracts. The provision aims to avoid, on the one hand, the selection and use of technical specifications which may result in different competition opportunities, where the contracting entity uses technical specifications stipulated in Article 42 (3)(b) and, on the other hand, avoid that the contracting entity specifies functional requirements which result in unequal competition opportunities. The provisions do not clearly state how to interpret “equal access”. It is difficult to see which further obligations this entails compared to the protection and the requirements that are already specified in the provision on the principle of equal treatment. If one has to identify a difference between the two provisions, the difference could lie in the fact that Article 42 (2) does not as such constitute a proper requirement for equal treatment, as the requirement for equal treatment will take the actual conduct of the contracting authority into consideration. However, a requirement that tenderers shall have equal access could be interpreted to be aimed primarily at the effect of actions by the contracting authority (irrespective of the nature of the conduct). The “access” that shall be equal to all participating economic operators does seem difficult to identify from the wording of the provision. Does this requirement imply that all enterprises must be allowed the opportunity to fulfill the functional requirements made by the contracting entity? Depending on the circumstances, this could imply a considerable restriction in the autonomy of the contracting entity as regards the desired product. Instead, it might be interpreted to the effect that the contracting entity shall draw up the functional requirements in such a way as to avoid specifying unnecessary quality requirements, as such conditions could instead be part of the awarding criteria. The requirement may seem somewhat severe in relation to the use of the technical specifications, because where such specifications are used, the contracting entity will not be drawing up the specifications, but will only use them. Furthermore, particularly European technical specifications and, to some extent, also national technical specifications will usually express objective specifications, which will generally offer everyone equal opportunities. 6

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The second part of this provision stipulates that technical specifications shall not cre- 8 ate unjustified obstacles to the opening up of competition. The wording gives the clear impression that obstacles to the opening up of competition can lawfully be created, provided these are justified. The wording can be interpreted to mean that the creation of obstacles is allowed, if the reasons for doing so are indicated. Such an interpretation will give a wide access to creating obstacles for the competition, when drawing up and using the specifications to apply for the actual procurement procedure, and can hardly be considered to be correct. On the contrary, the provision shall probably be interpreted to mean that not only shall reasons be provided for the obstacles created, but the reasons must also be qualified. In other words, the requirement that obstacles shall not be unjustified cannot be fulfilled by whichever explanation of the obstacles the contracting entity may choose. If this assumption is correct, it is necessary to consider, in what way the reasons must be qualified. It may be assumed that the reasons provided shall fulfill the other general requirements of the Public Sector Directive, i.e. the requirements for equal treatment, transparency, objectivity and proportionality. It may probably also be assumed that the reasons acceptable will be of the same character as other exceptions to the provisions and will thus be based on practical matters. The term “obstacle” to the competition linguistically indicates that all opportunities of competition are excluded, which cannot be the intention of the provision. The ban against unjustified obstacles must be interpreted to mean that also less radical impacts on competition are prohibited. It is difficult to determine precisely what is meant by an obstacle to the competition, even though one might possibly expect it to refer to such impact that will impair competition because it will limit the competition opportunities of some of the companies participating in the tender, due to the obstacle. Thus, this term when used presents the same difficulties as similar terms related to competition law, such as distortion or restriction of competition. If the ban against obstacles to the competition shall be interpreted in the context of the remaining provisions and the Directive, it is assumed that restriction or distortion of competition is at issue, as these terms are linguistically not so far-reaching. It should also be considered which justified obstacles will be lawful. If one reads the full provision, the requirement for lawful reasons for the obstacle will likely be impossible to fulfill. This is well matched with the exceptions in Article 42 (4). Thus it must be assumed that paragraph 2 of Article 42 can particularly be applicable, where none of the other exceptions can be used. It could be argued that unjustified obstacles exist, when there is no proportionality between the specification and the obstacle it creates. This is probably not correct, as the wording primarily relates to the nature of the obstacle, not its strength. In case C-552/13, Grupo Hospitalario Quiron SA, the national court asked the CJEU 9 whether it was in accordance with EU law and the provision in Article 42(2) that a national procuring authority required that the health service which was subject to the procurement procedure was to be carried out in a specific municipality. The Court stated, that the requirement established in the specific procurement procedure constitutes a territorial constraint “which by its nature is not such as to enable the objective set out […] above to be achieved, namely to ensure the proximity and accessibility of the private support hospital establishment, in the interests of patients, their families and the medical personnel who are required to travel to that establishment, while ensuring equal and non-discriminatory access to those contracts by all tenderers.”1 The treatment could be given to patients would live in one of the neighbouring municipalities (which would 1

See C-552/13, Grupo Hospitalario Quiron, para. 28.

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leave the requirement meaningless in that specific situation) and companies located in municipalities bordering to the requested municipality would still have the necessary proximity to sufficiently deliver the treatment needed. The Court thus concluded: “Consequently, that requirement does not ensure equal and non-discriminatory access to the two contracts at issue in the main proceedings by all tenderers who might be able to ensure the proximity and accessibility of the private support hospital establishment, since that requirement renders those contracts accessible only to those tenderers who can provide the services in question in an establishment situated within the municipality designated in the corresponding contract notices.” The requirement set forth in the procurement specifications were contrary to Article 42(2).

42.3. Methods of specification It is possible to specify either by referring to specific technical specifications as referred to in the provision or, should the contracting entity wish so, by referring to functional requirements or performance of the products concerned. It appears from paragraph 3 that these two methods can be used individually or in a combination. Further, there is no ranking order of the two methods and so the contracting entity can choose between the two different methods, if both can be used in a given situation. However, it is also stated in Article 42 (3) of the Public Sector Directive that reference should be made to either technical specifications as defined in Annex VII or to functional descriptions “without prejudice to mandatory national technical rules, to the extent that they are compatible with Union law”. This means that where in Member States mandatory rules compatible with Union Law have been laid down, the contracting entity is not obliged to use the European technical rules or set up a functional description. The aim of the provision is to ensure that existing objective differences between Member States are respected in connection with the specification of the subject-matter at issue. An example of such differences could be computer keyboards, where linguistic differences mean that the keyboards are not designed in the same way in Member States. Other specifications than those defined in Annex VII or determined by means of a functional description can only be applied where differences are of such an objective nature. Subjective wishes of the contracting entity shall not legitimize derogation from the specification methods of Article 42 (3)(a)(d). 11 The two approaches are both carried on to the new directives with basically identical content. The only change is that the functional approach is now the first approach mentioned. The purpose behind this change seems to be to send the signal that the functional approach should be used when this is possible. It is not an assumption without merit that using functionality might bring the best competitive situation while promoting a broader range of solutions and products. In recital 74 of the preamble it is stated: 10

“Consequently, technical specifications should be drafted in such a way as to avoid artificially narrowing down competition through requirements that favour a specific economic operator by mirroring key characteristics of the supplies, services or works habitually offered by that economic operator. Drawing up the technical specifications in terms of functional and performance requirements generally allows that objective to be achieved in the best way possible. Functional and performance-related requirements are also appropriate means to favour innovation in public procurement and should be used as widely as possible.”

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42.3.1. Specification by means of performance and functionality This part of the provision is the newest part of Article 42 (included from Directive 12 2004/18). It enables specification of the subject-matter of the contract by means of an indication of performance or functional requirements. It is explicitly stated that also environmental characteristics can be included in this context. This is yet another example of the increased visible presence of environmental considerations in the Public Sector Directive. At the same time it must be stressed that also the former Directives offered the option of involving environmental considerations when specifying the task. The last part of Article 42 (3)(a) stipulates that specification by reference to perfor- 13 mance or functional requirements “must be sufficiently precise to allow tenderers to determine the subject-matter of the contract and to allow the contracting authorities to award the contract”. This provision was originally incorporated to avoid that the use of performance as method of specification promotes the use of negotiated procedure with prior publication of a tender notice, as “performance requirements must be sufficiently precise to allow comparable offers and to allow the contracts to be awarded without negotiation”.2 The significance of this option of specification with regard to alternative offers has also been considered (see the comment on Article 45). Where only a specific performance is indicated, no specific method of fulfilling the performance requirement can be specified. In other words, a description of performance will allow the use of different solutions in connection with the same public procurement, as long as the solutions meet performance requirements. It must be assumed that the possibility of diversity offered in connection with this functional description does not imply that offers should be considered as alternative offers. Deviations from what is specified in the procurement documents shall only be treated as reservations. It should be pointed out that even though the option of specification by means of a description of functionality potentially limits the field of application for the provision in Article 45 on alternative bids, the option of accepting and submitting alternative bids still exists, provided that the conditions in Article 45 are fulfilled. In any case, the specification will not be too broad or imprecise, as it is prescribed in this part of the provision that the specification must be “sufficiently precise to allow tenderers to identify the subject-matter of the contract and to allow the contracting authorities to award the contract”. 42.3.2. Use of technical specifications If specifications are drawn up pursuant to Article 42 (3)(b), each reference shall be 14 accompanied by the words “or equivalent”. This requirement was laid down in order to avoid that tenderers regard the references to particular technical specifications as unavoidable requirements and not as the references they really are. In the Directives prior to 2004/18, the requirement for such an addition only existed in connection with the use of trademarks, certain makes, etc. (cf. the former rules which corresponded to Article 42(4) of the Public Sector Directive). It must be assumed that the use and interpretation of this part of the specifications will take into consideration the extensive case law already established on the said requirement. It could be considered, if a similar amendment of the TFEU would be appropriate. According to current practice relating to Article 34, the contracting entity shall add “or equivalent” when using trademarks etc. as reference products. It could be considered, if 2

See the proposal to Directive 2004/18, COM (2000) 275, comments on Article 24.

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the same would be required for contracting entities which, as an example, use national technical specifications as reference, because the latter could basically be just as difficult to meet as proper trademarks and the like. Particularly for potential tenderers from other Member States this might be difficult, and therefore such requirements might be considered to be a quantitative restriction of import inconsistent with Article 34. The list in Article 42 (3)(b) seems exhaustive. 42.3.2.1. Definitions Annex VII of the Public Sector Directive lays down a series of definitions of various technical norms. More specifically, the terms “technical specification”, “standard”, “European Technical Assessment”, “common technical specification” and “technical reference” are defined. 16 In the context of technical specifications, the definitions used in connection with works contracts differ from those used in the case of public supply or services contracts. In regard to works contracts technical specifications means “the totality of the technical prescriptions contained in particular in the procurement documents, defining the characteristics required of a material, product or supply, so that it fulfils the use for which it is intended by the contracting authority; those characteristics include levels of environmental and climate performance, design for all requirements (including accessibility for disabled persons) and conformity assessment, performance, safety or dimensions, including the procedures concerning quality assurance, terminology, symbols, testing and test methods, packaging, marking and labelling, user instructions and production processes and methods at any stage of the life cycle of the works; those characteristics also include rules relating to design and costing, the test, inspection and acceptance conditions for works and methods or techniques of construction and all other technical conditions which the contracting authority is in a position to prescribe, under general or specific regulations, in relation to the finished works and to the materials or parts which they involve”.3 In regard to public supply or service contracts a technical specification is “defining the required characteristics of a product or a service, such as quality levels, environmental and climate performance levels, design for all requirements (including accessibility for disabled persons) and conformity assessment, performance, use of the product, safety or dimensions, including requirements relevant to the product as regards the name under which the product is sold, terminology, symbols, testing and test methods, packaging, marking and labelling, user instructions, production processes and methods at any stage of the life cycle of the supply or service and conformity assessment procedures”.4 17 In the annex standards are found in three different situations. In general, the term standard covers “a technical specification, adopted by a recognised standardisation body, for repeated or continuous application, with which compliance is not compulsory, and which is one of the following:” a) “international standard’ which covers a standard adopted by an international standardisation organisation and made available to the general public, b) “European standard” meaning a standard adopted by a European standardisation organisation and made available to the general public, or c) “‘national standard” covering a standard adopted by a national standardisation organisation and made available to the general public. 18 According to Annex VII (3) a European Technical Assessment means the documented assessment of the performance of a construction product, in relation to its essential 15

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characteristics, in accordance with the respective European Assessment Document, as defined in point 12 of Article 2 of Regulation (EU) No 305/2011 of the European Parliament and of the Council (Regulation (EU) No 305/2011 of the European Parliament and of the Council of 9 March 2011 laying down harmonised conditions for the marketing of construction products and repealing Council Directive 89/106/EEC). Furthermore, a common technical specification means a technical specification in the field of ICT laid down in accordance with Articles 13 and 14 of Regulation (EU) 1025/2012.5 Finally, the term technical reference covers any deliverable produced by European standardisation bodies, other than European standards, according to procedures adapted to the development of market needs, see Annex VII (5). 42.3.2.2. Function and aim of standards Regulation through standards is a special form of harmonisation (see below). The 19 aim of imposing a duty to use standards and other forms of technical specifications in connection with tenders is to remove one of the major opportunities of creating obstacles to foreign companies in connection with public procurement. If rules on the use of technical specifications were not laid down, Member States would still be able to specify a public supply referring to national technical specifications, which will often exclude or make it very difficult for companies from other Member States to participate in tenders. This is due to the fact that companies often do not plan their production to comply with national standards of other Member States. This means that in several cases such markets will remain closed for foreign companies, as the companies cannot document that their product complies with the national standards of the particular Member State. The imposition of the requirement for technical specifications and standards should 20 be seen in the light of the common European principle of mutual recognition; see more on this in the introduction of the book. At European level it is required that Member States mutually recognise documents and declarations which prove that a company in actual fact has a certain capacity or possesses specific qualities. Where a company has achieved documentary proof for certain qualities etc. in a Member State, the other Member States shall accept and recognise this proof. With this starting point it can be claimed that standardisation is not needed; where Member States mutually recognise the qualifications certified by other Member States, there will be no need to determine European targets for recognition of qualifications. In this connection it may be remarked that the requirement for mutual recognition is a limited harmonisation measure, whereas the requirement for technical specifications through the extensive standardisation system at European and national level is of a completely different and more integral nature. Thus, the technical specifications present an instrument which is much more efficient than the principle of mutual recognition. The use of technical specifications makes the process of both specification and assessment easier and more transparent, which would not have been the case, where the contracting entity could simply use national standards to specify the task and then undertake a mutual recognition of the products having the same qualities.6 However, the purpose of the requirements for technical specifications and standards 21 will not be served, where no pan-European standards exist, which is the case in a number of areas. One of the negative aspects is that where different standards exist in differAnnex VII (4). However, the principle of mutual recognition still has some importance in connection with public procurement; see e.g. Case 45/87, Commission vs. Ireland (Dundalk) below. On mutual recognition see the introductory chapter. 5

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ent countries, this might constitute an actual barrier to the trade between Member States, as companies in one country will often adapt to standards in the country at issue. Conversely, it will often be so that many companies in other Member States have not adapted their production so as to meet technical specifications of those other Member States. 22 Another factor of generally negative impact in connection with all types of standards and technical specifications is the relation between specifications and how they are drawn up on the one hand, and the technological development on the other hand. It takes time to develop and implement a technical standard so that it achieves the official status of a standard. In areas where the technological development is progressing with considerable speed, it means that when a technical specification has been approved as such, the new standard has already been overtaken by the technological development. In other words, standards may quickly become obsolete. 42.3.2.3. The standardisation system The system of technical specifications and standards present a method for harmonisation of the rules in the Member States. In Community law there are two basic methods of harmonisation: total harmonisation and harmonisation according to the new method. Total harmonisation is characterised by the fact that the act of harmonisation regulates the entire field in question and that Member States cannot lay down rules which derogate from the Directive. As opposed to this, the new method covers the following basic principles: 1) harmonisation directives shall be limited to defining essential requirements with regard to the products in order to secure consumer safety etc., 2) the drawing up of technical specifications is left to the different bodies of technical standardisation, 3) the technical specifications are not given the status of mandatory requirements, but will keep their status as optional standards, and 4) the national authorities shall assume that the products made in accordance with the harmonised technical specifications will comply with the safety requirements laid down in the Directive. The technical standards per se are not binding. They acquire legal force through the legislation implementing them. This implementation may take different forms, but in general the implementation will take place through reference to the standards at issue. 24 The technical specifications and standards can be divided into two types: production standards and performance standards. Production standards are often seen as standards describing “the means to be used to ensure that the required characteristics are actually attained”.7 Performance standards describe “the charactistics its subject-matter is required to have without describing its make-up or the means that have to be used to achieve the required result”.8 One of the problems that may arise through the use of standards for public procurement is illustrated by means of the difference between the two types of standards. The problem may arise when a standard is a performance standard, thus describing the characteristics of the actual product. Although characteristics of the product are important to determine the suitability of the product in connection with public procurement, the physical appearance of the product is also important. In the procurement procedure the contracting entity must take into account not only the characteristics of the product, but also how the physical features of the product will fit into the remaining part of the public procurement task. Often both characteristics and the physical design of the product are standardised. In these situations there will be inconsistency between the two levels; see e.g. Case 45/87 Commission vs. Ireland (Dundalk). 23

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Standardisation is handled by special standardisation bodies. The bodies are found 25 on national, European and international level. There are standardization organs at national level. The tasks of the body include, among others, standardisation at national level and participation in the standardisation process at European and other international level. At European level the standardisation task is handled by CEN,9 CENELEC10 and ETSI,11 and the international standardisation by the International Standardization Organisation (ISO), ITU12 and IEC.13 42.3.2.4. Hierarchy of specifications Article 42 (3)(b) stipulates that specification can be in the form of a reference to the 26 technical specifications (as defined in Annex VII) and, “in order of preference, …”. This wording implies that, like in the previous provisions of the former Directives there is a listed hierarchy of the technical specifications. This means that the contracting entity shall follow the ranking order defined in (3)(b). The Directive specifies only one criteria for when derogation from the European spe- 27 cifications can be allowed, as it stipulates in Article 42 (3)(b) that e.g. national standards can be used, where European specifications do not exist. This means that the possibilities of derogation with regard to European specifications have been restricted considerably compared to earlier. This amendment must be said to be inappropriate. One way of interpreting it could be that if no European specifications are adequate, a non-adequate European specification or a functional description of the desired product shall be used. This interpretation does not seem fitting for various reasons. First, Article 42(3) seems to indicate a liberty of choice between the two methods, which will not be the case, if you are forced into a functional description of a product through the lack of adequate European specifications. Second, for a series of products it will not be possible to fittingly specify by reference to performance. Even though this interpretation is inappropriate, it is probably the interpretation which was intended. It might be said that the option of a functional description means that the exceptions mentioned will not be needed to the same extent, as the functional description will often cover those situations. However, there may still be situations, where a functional description will not be sufficient and where there will thefefore be a need for use of one of the lower ranked technical specifications defined in Article 42(3)(b). Another possibility is that the wording “when these do not exist”, when used about European specifications, can be interpreted in a broad sense and can thus also cover e.g. situations where specifications are not adequate or projects represent real innovation. It is difficult to find a safe basis for such an interpretation in the wording of Article 42 (3) (b), and as an exemption is at issue, the provision must be interpreted restrictively. This probably means that only when these technical specifications do not exist can the contracting entity choose a national specification. It is possible to combine reference to technical specifications with a functional description, which may reduce the need for application of Article 42 (3)(b). No matter which interpretation is chosen, the answer will be inappropriate either in regard to the wording of the act or the practical reality.

Committee de Européenne de Normalisation. Comité Européen de Normalisation Electrotechnique. 11 European Telecommunications Standards Institute. 12 International Telecommunications Union. 13 International Electrotechnical Commission. 9

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42.3.3. Combination of performance requirements and reference to technical specifications 28

Article 42 (3)(c) and (d) offer the option of combining the two methods, either by specifying performance or functional requirements with reference to the specifications in subparagraph b) as a means of presuming conformity with such performance or functional requirements, or by joint reference to both. This type of combined specifications is applied, where something different can be found in the two types of reference, or in other words where the technical specifications found in sub-paragraph b) relate to other characteristics than the performance of the product. Obviously it is important for the contracting entity to make sure, when using both types of specifications in combination, that the two types of specifications are not inconsistent. The body of rules do not stipulate tools to handle such ambiguous specifications, however, it must be assumed that matters like the nature of the actual service may give an indication of the type of specification that will be appropriate or even obvious. If the use of the two different types of specifications cannot easily be solved, the conclusion might be that the contracting entity will have to cancel the actual public procurement procedure.

42.4. Reference to trademarks and specifications In Article 42 (4) it is stipulated that unless the subject-matter of the contract justifies it, Member States must prohibit that the contract documents for a specific job include technical specifications that mention products of a specific make, originating from a specific supplier or a particular manufacturing process with the effect of favouring or excluding certain companies or products. Reference to “a specific make or source, or a particular process, or to trade marks, patents, types or a specific origin or production” is specifically prohibited. However, such a reference is permitted – if accompanied by the words “or equivalent” – in those cases where the contracting authorities cannot describe the subject-matter of the contract in specifications that are sufficiently precise and intelligible for all parties involved. 30 Apart from this, the reluctance is due to the fact that the use of a reference product has unfortunate consequences for the competitive situation. First, the use of a reference product may be perceived by tenderers as a preference rather than a reference, i.e. as a token of a wish by the contracting entity to award the contract to a tenderer who bases his offer on the reference product at issue and, second, the use of reference products imply the risk that a great similarity to the reference product will be required before the contracting entity will accept offers based on other products. Reference to specific makes or trademarks may be used, if a description is not possible pursuant to Article 42 (3). It must be assumed that the generally implied freedom of choice between the two specification methods (reference to technical specifications respectively drawing up of performance requirements) does not apply in connection with the use of Article 42 (4). This means that before Article 42 (4) can be used, both specification methods must have been rejected due to lack of precision or intelligibility. This must also be a consequence of the nature of Article 42 (4) as an exemption clause. Only where it is not possible to specify by reference to technical specifications, by reference to performance requirements or by a combination of these methods can the method in Article 42 (4) be used. In this context, it could be considered if the field of application for this part of the provision has been limited by the implementation of the method of setting up performance requirements. Previously the contracting entity could use the provision, if no precise or intelligible specifications existed. As the number of technical spe29

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cifications has not changed through the adoption of the new Public Sector Directive, but specification method number two has been introduced and must be checked before use of Article 42 (4), the number of situations where the exemption clause can be used have been reduced. This is the result, although case law until now shows a very restrictive use of the provision already before these new rules. Article 42 (4) requires a lack of intelligibility and precision when describing the sub- 31 ject-matter by means of a specification before the exemption clause can be used. These notions should probably be interpreted to mean that the precision must be assessed on whether the contracting entity can adequately specify his requirements for the job by using standards or functional requirements. To the extent that the standard does not have a sufficient degree of detail, the standard will presumably still have to be used as a starting point, and the contracting entity can then make the further specification required to adequately describe the subject-matter depending on the needs of the contracting entity.14 This also complies with Article 42 (3)(c) and (d), which describe the options of combining reference to technical specifications and the setting of performance requirements. In such cases the provision on “or equivalent” can presumably not be used. The core fields of application are situations where the standard is off target, that is where the standard describes a product based on other criteria than those decisive for the contracting entity and where a performance description will not conform to the required product. Presumably, the notion intelligible will rarely result in problems when referring to technical specifications, as most standards are prepared with the exact purpose of describing the characteristics of a product in an intelligible manner. Intelligibility may present a problem, where the contracting entity strives for a different use of the standard, because the required product is distinct from the standard in one or more points. Intelligibility may potentially also be a problem in cases where the contracting entity has drawn up performance requirements. In case 368/10, Commission v Netherlands, the Commission held that use of the label 32 MAX HAVELAAR was a breach of Article 42(4). The Court stated that the characteristics of MAX HAVELAAR was based on four criteria: that the price to be paid, must cover all costs and include an additional premium in relation to the market price, that the production must be financed in advance and that between the importer and the producer of the goods there must be a long term trade relation.15 The Court briefly stated that such criteria were not covered by the definition of a technical specification as found in Article 42(1), rendering Article 42(4) inapplicable. For more on the case, see the commentary on Article 43 on labels. In case C-359/93 Commission vs The Netherlands (UNIX), Nederlands Inkoopscen- 33 trum NV had published a tender notice concerning the supply and maintenance of a meteorological station. As specification of an operating system the contracting entity referred to the trademark “UNIX” which is a trademark used for connecting several computers of different makes. The “UNIX” trademark is American. The contracting entity failed to add the words »or equivalent«. The Court had to decide, whether the reference to “UNIX” was inconsistent with the provisions of the Public Procurement Directive on specifications and with Article 34.

14 If one chooses the view that where it is not possible to adequately describe the subject-matter by means of a specification, the contracting entity may choose not to use a specification and just use a trademark, this will allow too extensive access to the use of such reference types. It should be remembered that the provision in Article 42 (4) of the Public Sector Directive is the last resource in terms of specifying the subject-matter in public procurement procedures. 15 C-368/10, Commission v Netherlands, paragraph 73.

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As regards the use of “UNIX” as frame of reference, The Netherlands contended that the “UNIX” system in the field of information technology was to be regarded as a technical specification and that, accordingly, it was unnecessary to add the words "or equivalent".16 Both the Court and the Advocate General contested the claim,17 and in recital 9 of his Opinion the Advocate General stated that the system “was produced within one of the unofficial bodies set up by producers and consumers for the purpose of speeding up the standardization process, to be precise, X/OPEN, which undertakes the standardization of operational systems based on AT&T' s UNIX. It is only when the results of the work carried out by those bodies have been adopted by the administrative authorities that the technical specifications thus drawn up become standards”. The Court concluded that the fact that the words “or equivalent” were not added after the term “UNIX” might not only discourage traders using systems similar to “UNIX” from submitting tenders, but might also – contrary to Article 30 (now 34) – create obstacles for imports in intraCommunity trade, as the contract would then be reserved exclusively for suppliers who intended to use the system specifically indicated. The Court added that “accordingly, the contracting authority should have added the words “or equivalent” after the term UNIX”.18 Case C-328/96 Commission vs Republic of Austria (UNIX II), concerned (as above) a procurement procedure concerning a contract for building of a government administrative building and a cultural centre in Sankt Pölten in Austria. Apart from the infringement of the Directive concerning the coordination of procedures for the award of public works contracts, the Commission also pleaded an infringement of Article 30 of the EC Treaty (now Article 34). This claim was based on two indications in the contract documents. The first concerned an indication in point 2.10 entitled “Samples of specified/ tendered products/makes/ materials” which stated that where the technical quality was equivalent and the offered price the same, materials from Lower Austria or supplies from Lower Austrian firms would be preferred. Second, the Commission pleaded infringement of Article 30 (now 34) of the Treaty because a specific trademark (“UNIX”) was used for the specification of the operating system to be used in the administrative centre. Austria did not contest any of the points mentioned, and the Court only held that the Republic of Austria failed to fulfill its obligations pursuant to Article 34 of the Treaty. 34 A decisive factor according to Article 42 (4) of the Public Sector Directive is how to assess what can be considered an “equivalent” product. Such assessment is linked with the product comparison; see 42.5.2. The product comparison covers the comparison between the reference product and the offered product that will take place in connection with the use of Article 42 (4) and Article 42 (3)(b). This comparison needs to be made in order to determine, if a product offered complies with the specified product required by the contracting entity. Below are some reflections on the notion “equivalent”. The problem in terms of equivalent products is to delimit more specifically what may be considered such a product. The delimitation is difficult and if “incorrect”, it will have consequences either for the competitive situation or for the right of the contracting entity to specify characteristics of the subject-matter. First, a narrow definition/delimitation of the notion “equivalent” products will imply a restriction of competition and, second, a wider interpretation of the concept will result in the self-determination of the contracting entity being restrained. The first will happen, as in reality only products considered to fully meet the requirements of the contracting entity can participate in the tender, whereas the restraint in self-determination of the contracting entity will be realised by C-359/93, Commission vs The Netherlands, paragraph 24. Opinion of the Advocate General, recital 9 and the Court Judgment, paragraph 26. 18 Recital 28.

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the fact that products which only to some extent comply with the conditions of the contracting entity, will be able to compete for the contract, which means that the requirements and conditions set by the contracting entity will not be fully met at the level contemplated by the contracting entity by means of the specification. As a result, the optimum definition of “equivalent” products must lie between these two extremes and, to the extent possible, take the competitive situation and the discretion of the contracting entity into consideration. The following demonstrates that such a delicate balance is not easy. With regard to Article 42, a product comparison needs to be made pursuant to both paragraphs 4, 5 and 6, cf. paragraph 3. However, paragraphs 5 and 6 of Article 42 set a certain framework for the product comparison and for the matters that can be incorporated into the assessment. See the comments on paragraphs 5 and 6. In the Public Sector Directives there are no guidelines as to how the product comparison should be carried out. Similar problems exist and are discussed in other parts of international law. With inspiration from similar problems (in terms of product comparison) the following gives some examples of how the comparison can be addressed. Case 45/87 Commission vs Ireland (Dundalk), concerned a public project for con- 35 struction of a pipeline to carry water from the River Fane to a treatment plant and then to an existing water supply system. In the specifications the contracting entity (Dundalk Urban District Council) had inserted a clause stipulating that: “Asbestos cement pressure pipes shall be certified as complying with Irish Standard Specification 188:1975 in accordance with the Irish Standard Mark Licensing Scheme of the Institute for Industrial Research and Standards. All asbestos cement water mains are to have a bituminous coating internally and externally. Such coatings shall be applied at the factory by dipping.” Tenders based on a product from a Spanish company were rejected, as the pipes which were provided for use in the tenders did not comply with the required standard. The Commission brought an action before the Court under Article 258, claiming infringement of (now) Article 34 of the TFEU as well as of Article 10 of Directive 71/305/EC (then in force) concerning the co-ordination of procedures for the award of public works contracts. It should be added that an international standard (ISO 160) existed on the market. However, to some degree it deviated from the Irish standard in that the diameter of the international standard was measured as the internal diameter, whereas the diameter of the Irish standard was measured as the external diameter.19 The Court did not discuss, whether the Irish specification was inconsistent with the Public Sector Directive, as the job at issue was not subject to the Directive and as the fact that the contracting entity had chosen to publish a contract notice for the job did not imply that the contracting entity was subject to the Directive. Referring to Article 34 TFEU, the Court stated that the incorporation into the contract documents of a clause like the one at issue might cause companies producing or using the same pipes as those certified as complying with Irish standards to refrain from tendering; cf. recital 19. The considerations of the Court concerning product comparison pursuant to Article 34 must be held also to be of value in connection with the provisions of the Public Sector Directives. The Irish government maintained that it was necessary to specify the standards to which the pipes were to be manufactured, as the pipes to be used had to fit into the existing water supply network. Pipes which complied with the international standard were not sufficiently compatible. The Court rejected the Irish argument by stating that it was 19

According to the Court these physical and mechanical characteristics are not disputed, cf. recital 31.

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not the requirements per se that were the object of the Commission’s complaint, but rather the fact that the authorities in Dundalk refused to verify whether the requirements in terms of the physical characteristics of the product were fulfilled, cf. recitals 21 and 22.20 The Court held that the Irish authorities could have incorporated “the words ‘or equivalent’ after the reference to the Irish standard, as provided for in Directive 71/305/EC where it is applicable” and could thus “have verified compliance with the technical conditions without from the outset restricting the contract only to tenderers proposing to utilize Irish materials”. In Case C-59/00, Vestergaard, the Court held that there is no lower threshold limit for use of the provisions of the Treaty and that the provision requiring indication of ”or equivalent” will thus also be applicable below the threshold of the Directives in consequence of the obligations that rest with the contracting entities in accordance with the TFEU. In cases C-359/93, Commission vs the Netherlands (UNIX), and C-328/96, Commission vs Republic of Austria (UNIX II), the Court also applied Article 34 of the TFEU to the specification. On these rulings see above in this paragraph. 36 Based on case law concerning Article 34 it may be considered, if a similar ban against the use of reference products in the context of services may be expected to come into force pursuant to Article 56 of the Treaty. Basically, it is conceivable, however, that two things make the laying down of such a ban (or rather the use of such a reference method) less likely. First, there are certain differences between case law concerning Article 34 and case law concerning Article 56 of the Treaty. That being the case, it is presumably to be expected that a specification by means of reference services, where it is not made clear to the participating companies that also other services than the one at issue can be accepted by the contracting entity, will not be consistent with Article 56. Second, the nature of services as compared to the nature of products will mean that such a method of reference can rarely be used in a sensible manner. A service does not have only one defined and definite nature like products do. As services can thus vary and are not bound by a certain form, these are also more difficult to capture in a technical specification. A specification by reference to a standard or another service, a reference service, will therefore not be as obvious in the case of services, and the problem discussed not as pressing. 37 It is important to remember that it is only the part of Article 42(4) that relates to “or equivalent” that has merit in regards to TFEU. The remaining part of Article 42(4) is not applicable to situations outside the Directives, see C-278/14, SC Enterprise Focused Solutions SRL, para. 30.

42.5. Assessment of conformity of bids with specifications 38

This provision is new. It is intended to cover a need not previously covered with regard to assessment of whether a product actually conforms with the technical specifications describing the product at issue. To some extent the provision is based on case law resulting from cases like Case 45/87 Commission vs Ireland (Dundalk) regarding the duty of the contracting entity not to reject offers which are based on specifications other than

20 The increased autonomy of the contracting entity does not imply that it can avoid making a thorough assessment of the product, cf. the proposal of the Advocate General in the Dundalk case. The contracting entity must be under the obligation to examine, if the product in question actually satisfies the intended purpose of the product. This must be considered a general obligation of the contracting entity when assessing the submitted tenders and it can also be regarded as a prerequisite for the use of the type of references which takes place in public procurement procedures. The technical specifications are drawn up to describe the characteristics that a product must satisfy.

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those required. Further, a more formalized structure has been implemented for the assessment of whether a product conforms to the technical specifications indicated. 42.5.1. Proof of conformity with specifications The provision covers certain needs in connection with the product comparison, how- 39 ever, it must still be assumed that some issues are still missing in the European regulation. See more on this in section 42.5.2. Basically the provision stipulates that a contracting entity cannot reject a tender which does not comply with the specifications to which it has referred (paragraph 3, sub-paragraph b)), if the tenderer can prove that his tender satisfies the requirements defined in the specifications. Thus, it is for the tenderer to prove conformity of his tender, which seems reasonable, not only because the tenderer deviates from the specifications referred to by the contracting entity, but also because the tenderer will most likely have the best possibility of providing such a proof. The tenderer must prove conformity in an appropriate manner. It appears from the 40 provision that an appropriate manner “might be constituted” by technical documentation from the manufacturer or a test report from a recognized body. The possibilities offered of proving conformity in an appropriate manner are not exhaustive, cf. the wording “might be constituted”. Thus, it must be assumed that proof of conformity can also be by other means. The wording of paragraph 5 points toward Article 44 which regulates the regime of test reports, certification and other means of documentation. See the commentary to this provision. The tenderer must prove conformity to the satisfaction of the contracting authority. 41 This expression seems to render the provision open to and thus the indication of a level on which the tenderer can hardly comment beforehand. However, the wording is consistent with the fact that the contracting entity, when specifying precisely the type of product needed, has and should have great self-determination. Second, it can hardly be written in a more precise manner. It must be assumed that some inspiration can be found to determine the level of satisfaction by means of the “or equivalent” assessment in Article 42(4). See the remarks in the comment on paragraph 4. 42.5.2. Product comparison A product comparison related to the specification of a product in connection with a 42 public procurement procedure concerns the comparison between the product offered and the reference delimiting the subject-matter of the contract. In other words, the product comparison shall determine, if the conformity of the product with the reference is of such an extent that the tender shall be considered when awarding the contract. So the product comparison is important for both forms of specifications, both when referring to technical specifications and when specifying by use of a functional description. Article 42, paragraph 5 stipulates some rules for how to make the product comparison, but there are still some uncertainties in the European regulation. Below a number of factors will be discussed which may be important for the product comparison. In connection with all specifications the question will arise how it can be examined if a product conforms to the requirements laid down in the contract documents. Except for those cases where the contracting entity has used a specific technical specification and a tenderer has based his tender on a product certified in accordance with the standard at issue, there will always be a need for making a product comparison.

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42.5.2.1. Degree of compliance and elements of crucial importance 43

A product shall be considered equivalent if – and only if – the product satisfies the requirements laid down in the specifications defined by the contracting entity. The degree of compliance will to a certain extent be at the discretion of the contracting entity. Thus, the contracting entity does to some extent set the boundaries for the degree of compliance required from the products on which the submitted tenders base. The situation may be different, if the specification is of such a nature that it can be complied with in varying degrees. Here the Court can intervene and assess the degree of compliance or even decide that the degree of compliance required by the contracting entity puts unreasonable restrictions on competition. This will probably most frequently be the case in connection with a performance based description and more rarely when referring to technical specifications, as the latter will often set a mandatory level of compliance. Another question is to which extent the Court will regard some parts of the product description as unnecessary. This question is closely linked with the question about the degree of self-determination of the contracting entity. If, e.g., a municipality needs to purchase radios for schools etc., the specification can contain not only requirements in terms of functional elements, but also requirements in terms of the aesthetic characteristics of the product. Although aesthetics do not concern the performance of the product, design may still be of a great importance to the contracting entity. Ordinary consumers probably have different preferences as regards the appearance of products like radios and stereo equipment, and the same also applies to contracting entities.21 In theory, the contracting entity can define specifications in such a manner that only one single or a few products can meet the specifications.22 Presumably the contracting entity cannot simply specify completely irrelevant product requirements. Such a reference will imply that it will permissible to disregard product requirements not directly related to the performance of the product, when deciding whether another product can be regarded as equivalent to the one specified by the contracting entity. The specification of the job of course relates to the nature of it. If machinery is purchased, functional matters should carry great weight, whereas a purchase of furniture should allow the contracting entity to include also matters such as design in the specification. In this context it may be considered if a similar rule can be established in connection with a takeover of existing equipment belonging to the contracting entity for the performance of a job. An example could be procurement of buses for a county which has so far performed the bus service in the region and where the contract documents stipulate that the tenderer awarded the contract shall purchase the said buses and use these for the bus service which is the subject-matter of the contract. The question is if this requirement of the contracting entity for purchase of its equipment (of a specific brand, of course) by tenderers wishing to be considered in connection with the award of the contract falls within the scope of Article 42. When examining whether the matter falls within the scope of the Article, it might make a difference, if the equipment in question were not to be used for the job at issue and if suppliers using other products could come into consideration, provided they simply submit offers for the “old” equipment of the contracting entity. The problem is, however, that such practice may involve further costs for some 21 Most often personal aesthetic preferences will not be an issue in connection with public procurement, however, in some respects aesthetic requirements of the product may be made. 22 It is natural that there may be situations, where only one single or a few products satisfy the needs of the contracting entity. These are not primarily the situations to which the following relates.

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tenderers, as a purchase of the remaining equipment will not be of any benefit to tenderers who are not using the equipment for other jobs. As a consequence, tenderers will either be left with equipment they cannot use or they will have to incorporate costs of sale or other disposal of the equipment into the price offered. In both cases, it will probably have an impact on their competitive situation in the actual procurement. Even in cases where the tenderer can sell the equipment, this may result in further costs. What decides the application of the provision is whether the tenderer using the equipment at issue for his operation will gain a competitive edge towards his competitors. Often the situation is that the tenderer in question can use the equipment for performance of the job. However, there may be situations where the equipment must be used together with equipment of the contracting entity and where the latter equipment requires compatibility with that of the tenderer. In such cases, it may cause some concern that the contracting entity can require purchase of the existing equipment. But often the equipment at issue can also be used jointly with the equipment of the tenderer, in which case there may be no problems. 42.5.2.2. Matters of significance to the product comparison The restrictions on the right of the contracting entity to define the desired product – 44 restrictions, which have to be imposed for reasons of competition – assumedly concern both the right of the contracting entity to define the job (determination of needs) and the manner in which the contracting entity specifies the job, i.e. the use of technical specifications. Of course, the contracting entity will have an extensive, but presumably not a full, right of self-determination when specifying its needs. The assessment of those matters which in terms of competition are of decisive importance to the specification of a job can be based on many factors.23 The product comparison should be based on the use of the product. Thus, it becomes decisive, for which purpose and in which context the product should be used. This assessment is of specific nature, and it may contain both subjective and objective elements. The assessment can take the general or traditional use of the product as its starting point, but the main focus shall be on the specific purpose. It can be considered, whether a requirement for relevance can be set in the context of specification and product comparison. The requirement can be defined in such a manner that the contracting entity shall not take measures of competitive importance to tenderers, if such measures concern product or contract issues that are not of a certain (subjective or objective) relevance to the job at issue. The requirement primarily manifests itself in connection with the assessment of the lawfulness of the specifications drawn up by the contracting entity.

42.6. Proof of conformity with functional requirements This part of Article 42 is new, which obviously is linked with the fact that the option 45 of specifying by means of functional descriptions is a novelty in the Directive. This part of Article 23 has the same purpose as Article 42 (5) with regard to specification by means of technical specifications, which is to ensure that offers based on another specifi23 It should be considered if the new rules restrict the autonomy of the contracting entity by stipulating that the specification shall be functional. In this context, it could also be considered, if the new Directives impose a restriction on the options of the contracting entity of letting other considerations than functional considerations be decisive (such as aesthetics). The reply to this probably has to be negative. It still ought to be possible to attach importance to matters like aesthetics and design, if the product affords natural grounds for it.

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cation method are not rejected simply because they formally do not meet the requirements. 46 Pursuant to paragraph 6 offers which comply with certain types of technical specifications may not be rejected, if these technical specifications address the functional requirements laid down by the contracting entity. The technical specifications in question are: “a national standard transposing a European standard, a European technical approval, a common technical specification, an international standard or a technical reference system established by a European standardisation body”. Technical specifications which are not mentioned in paragraph 6 are national standards, national technical approvals or national technical specifications for the design, calculation and implementation of works and the use of products. The provision must be taken to mean that offers based on the latter category of technical specifications may be rejected. The wording of the provision indicates that two elements must be assessed in relation to paragraph 6. First, it must be assessed if the technical specification addresses the functional requirements defined by the contracting entity. Second, tenderers must prove that the product offered in compliance with the standard satisfies the performance requirements of the contracting entity. The wording of the provision could be taken to mean that if a tenderer proves compliance with the standard (which, as it will be remembered, aims at describing the same functional characteristics as the ones described by the contracting entity), then tenderers’ burden of proof must be said to have been lifted. Another question is how to handle offers based on technical specifications that are not mentioned in paragraph 6. In general, such offers can be rejected, as there is no presumption that the technical specification complies with the functional description, and the indicated national technical specifications cannot constitute the connecting link between the functional description and the offer. The situation must be different, if the tenderer in his offer proves that the offer satisfies the functional requirements set by the contracting entity. A specification by reference to a functional description will always require some kind of proof of the actual characteristics of the product offered. It must therefore be assumed that where a tenderer has used a technical specification which is not mentioned in paragraph 6 and which does not address functional characteristics, the contracting entity shall still take the offer into consideration, if the tenderer has proved in his offer that the product offered (irrespective of compliance with the technical specification) actually satisfies the functional requirements. 47 Similarly, as was the case according to paragraph 5, the tenderer must prove that the standards on which the products offered are based satisfy the performance requirements of the contracting authority. This must be proved by whatever appropriate means and to the satisfaction of the contracting authority, as was also the case in paragraph 5 of Article 42. See also the comment on paragraph 5. As in the case of paragraph 5 the provision in Article 42 (6) also contains an explicit reference to Article 44 which regulates the use of test reports, certification and other kinds of documentation.

Article 43 Labels 1. Where contracting authorities intend to purchase works, supplies or services with specific environmental, social or other characteristics they may, in the technical specifications, the award criteria or the contract performance conditions, require a specific label as means of proof that the works, services or supplies correspond

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to the required characteristics, provided that all of the following conditions are fulfilled: (a) the label requirements only concern criteria which are linked to the subjectmatter of the contract and are appropriate to define characteristics of the works, supplies or services that are the subject-matter of the contract; (b) the label requirements are based on objectively verifiable and non-discriminatory criteria; (c) the labels are established in an open and transparent procedure in which all relevant stakeholders, including government bodies, consumers, social partners, manufacturers, distributors and non-governmental organisations, may participate; (d) the labels are accessible to all interested parties; (e) the label requirements are set by a third party over which the economic operator applying for the label cannot exercise a decisive influence. Where contracting authorities do not require the works, supplies or services to meet all of the label requirements, they shall indicate which label requirements are referred to. Contracting authorities requiring a specific label shall accept all labels that confirm that the works, supplies or services meet equivalent label requirements. Where an economic operator had demonstrably no possibility of obtaining the specific label indicated by the contracting authority or an equivalent label within the relevant time limits for reasons that are not attributable to that economic operator, the contracting authority shall accept other appropriate means of proof, which may include a technical dossier from the manufacturer, provided that the economic operator concerned proves that the works, supplies or services to be provided by it fulfil the requirements of the specific label or the specific requirements indicated by the contracting authority. 2. Where a label fulfils the conditions provided in points (b), (c), (d) and (e) of paragraph 1 but also sets out requirements not linked to the subject-matter of the contract, contracting authorities shall not require the label as such but may define the technical specification by reference to those of the detailed specifications of that label, or, where necessary, parts thereof, that are linked to the subject-matter of the contract and are appropriate to define characteristics of this subject-matter. Literature: Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, p. 306.

This provision carries forward Article 23(6) of Directive 2004/18/EC on the coordi- 1 nation of procedures for the award of public works contracts, public supply contracts and public service contracts (the ‘2004 Public Sector Directive’). There is an almost identical provision in Article 61 of Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors (the ‘Utilities Directive’). In Directive 2009/81/EC on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security (the ‘Defence and Security Directive’) there is a provision corresponding to the provision in the 2004 Public Sector Directive. There is no express provision on labels in Directive 2014/23/EU on the award of concession contracts (the ‘Concessions Directive’). The provision in Article 43 is derived from the earlier rules on technical specifications. The use of labels is one of the methods for taking care of environmental concerns.

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But there are still other possibilities for taking care of environmental concerns within the scope of Article 42, namely in all those situations in which the specifications of the task incorporate environmental provisions. For further on this see the commentary on Article 42. 2 Article 2 of Directive 2014/24/EU on public procurement (the ‘2014 Public Sector Directive’) contains definitions of both ‘label’ and ‘label requirements’ (see paragraphs 23 and 24). A ‘label’ means ‘any document, certificate or attestation confirming that the works, products, services, processes or procedures in question meet certain requirements’. ‘Labelling requirement’ means ‘the requirements to be met by the works, products, services, processes or procedures in question in order to obtain the label concerned’. 3 The aims behind these rules on labels are set out in recital 75, which states as follows: – Contracting authorities that wish to purchase works, supplies or services with specific environmental, social or other characteristics should be able to refer to particular labels, such as the European Eco-label, (multi-)national eco-labels or any other label provided that the requirements for the label are linked to the subject-matter of the contract, such as the description of the product and its presentation, including packaging requirements. It is furthermore essential that those requirements are drawn up and adopted on the basis of objectively verifiable criteria, using a procedure in which stakeholders, such as government bodies, consumers, manufacturers, distributors and environmental organisations, can participate, and that the label is accessible and available to all interested parties. It should be clarified that stakeholders could be public or private bodies, businesses or any sort of non-governmental organisation (an organisation that is not a part of a government and is not a conventional business). – It should equally be clarified that specific national or government bodies or organisations can be involved in setting up label requirements that may be used in connection with procurement by public authorities without those bodies or organisations losing their status as third parties. – References to labels should not have the effect of restricting innovation. 4

Article 43 does not significantly alter the possibilities for taking care of non-economic considerations (including environmental considerations) which have already been available to contracting authorities under the former procurement directives. As is the case in general with the new procurement directives, the possibilities for taking care of non-economic considerations are improved in connection with specifying tasks (and at least made more evident). In principle a contracting authority may specify a task so that it corresponds to its policy on environmental protection, for example. The Court of Justice of the European Union (CJEU) has not ruled on this question, but the Commission has expressed its position in several communications. However, to some extent this may depend on the relevance of the environmental requirements to the task. The freedom of contracting authorities is subject to certain restrictions under the requirement for mutual recognition and the requirement to apply specifications and standards. Such restrictions can reduce or eliminate the scope for a contracting authority to specify a task so as to meet its own demands for environmental protection. In its interpretative communication on the possibilities for integrating social considerations into public procurement, the Commission has pointed out that, in specific areas, contracting authorities are free to demand higher levels of environmental protection than those laid down in the law or in standards, provided this does not restrict access to entering into a contract or discriminate between potential tenderers. On several 554

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occasions the Commission has pointed to the possibility of taking account of environmental considerations when specifying the subject-matter of the contract. First, to some extent it is possible to require the use of specified raw materials, such as the use of recycled materials. Second, a contracting authority can require the use of a specific production process. This may relate to demands for foodstuffs to be organic or for electricity to be ‘green’. It is not a requirement that the use of the special production method should be perceptible in the end product, as shown from these examples. Finally, the Commission points to the possibility of allowing the submission of variant tenders. Such variant tenders can provide for better protection of the environment than required in the standard tender. However, with a view to assessing the environmental advantages, contracting authorities wishing to use this possibility must state the minimum requirements for such variant tenders as well as the relevant sub-criteria for the most economically advantageous tender. For further on variant tenders, see the commentary on Article 45.

43.1. Requiring the use of labels According to Article 43(1), labels can be used in connection with technical specifications, award criteria or contract performance conditions. In general it seems that labels can best be used in connection with technical specifications or contract performance conditions, as labels often demonstrate the fulfilment of certain conditions and do not give any greater possibility of competing on the basis of the label. Article 43 allows a contracting authority to use (multi-)national labels or any other label for specifying, for example, environmental characteristics in the form of functional performance. An (environmental) label is a voluntary label which undertakings are free to apply for and which indicates an undertaking’s compliance with environmental requirements. An example of an environmental label is the EU Ecolabel (the ‘Flower label’). In addition to official labels there are a number of unofficial labels. The possibility for using environmental labels does not depend on use of an official environmental label since the Directive refers to ‘the European Eco-label, (multi-)national eco-labels or any other label’. What matters is whether the conditions laid down are fulfilled. Article 43 allows the use of environmental labels as long as five conditions are fulfilled. First, the label must be suitable for defining the subject matter of the goods or services of the contract. Second, the requirements must be based on objectively verifiable and non-discriminatory criteria. Third, the label must be established by open and transparent procedures in which all relevant stakeholders, including government bodies, consumers, manufacturers, distributors and non-governmental organisations may participate. Fourth, the labels must be available to all interested parties. And fifth, the label requirements must be set by a third party over which the economic operator applying for the label cannot exercise a decisive influence. This last condition was not part of Article 23(6) of the 2004 Public Sector Directive. According to Article 43(1), where a contracting authority does not require works, supplies or services to meet all of a label’s requirements, it must indicate which label requirements are to be complied with. The aim of this part of the provision is to ensure that economic operators need not fulfil more requirements than those demanded by the contracting authority. It is clear from the provision that the principle of mutual recognition must be respected, since contracting authorities must accept all labels that fulfil the stated label requirements.

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Where economic operators have not had the time (within the deadlines) to obtain a label required by a contracting authority, without this being the fault of the economic operator, the contracting authority must accept other appropriate evidence, which may include a technical dossier from the operator. In C-368/10, Commission v the Netherlands (MAX HAVELAAR) the Court concluded that the label EKO did conform to the conditions of being such a label. According to Article 23(6) in the previous Public Sector Directive labels were allowed but only as support of a (primary) specification as found in (then) Article 23(3), now Article 42(3). Now it is allowed to require labels as a direct indication of fulfilment of certain environmental characteristics.

43.2. Requirements not linked to the subject-matter of the contract 10

In Article 43(2) it is emphasised that it is important that a label that is required should relate to the subject-matter of the contract. The provision states that, where a label also sets out requirements not linked to the subject-matter of the contract, contracting authorities may not require compliance with the label as such, but must define the technical specifications by reference to the specifications for the label in question, or parts thereof, that are linked to the subject-matter of the contract. The specifications must be appropriate for defining the characteristics of the subject-matter of the contract. The emphasis of this provision, that a contracting authority may only refer to the relevant specifications of a label when setting out technical specifications, could beneficially be included in the general rules on technical specifications in Article 42. However, this is not the case, so there is a difference between the scope of technical specifications and the use of labels.

Article 44 Test reports, certification and other means of proof 1. Contracting authorities may require that economic operators provide a test report from a conformity assessment body or a certificate issued by such a body as means of proof of conformity with requirements or criteria set out in the technical specifications, the award criteria or the contract performance conditions. Where contracting authorities require the submission of certificates drawn up by a specific conformity assessment body, certificates from equivalent other conformity assessment bodies shall also be accepted by the contracting authorities. For the purpose of this paragraph, a conformity assessment body shall be a body that performs conformity assessment activities including calibration, testing, certification and inspection accredited in accordance with Regulation (EC) No 765/2008 of the European Parliament and of the Council. 2. Contracting authorities shall accept other appropriate means of proof than those referred to in paragraph 1, such as a technical dossier of the manufacturer where the economic operator concerned had no access to the certificates or test reports referred to in paragraph 1, or no possibility of obtaining them within the relevant time limits, provided that the lack of access is not attributable to the economic operator concerned and provided that the economic operator concerned thereby proves that the works, supplies or services provided by it meet the requirements or criteria set out in the technical specifications, the award criteria or the contract performance conditions.

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3. Member States shall make available to other Member States, upon request, any information related to the evidence and documents submitted in accordance with Article 42(6), Article 43 and paragraphs 1 and 2 of this Article. The competent authorities of the Member State of establishment of the economic operator shall provide this information in accordance with Article 86. This provision is new to the Public Sector Directive. There is a corresponding provi- 1 sion in the Utilities Directive, but there is no corresponding provision in the Defence and Security Directive or the Concessions Directive. Among other things, Article 44 deals with proof of compliance with technical specifications, as referred to in Article 42(6), and proof of compliance with label certification, as referred to in Article 43. The provision contains general rules whereby a contracting authority may require 2 economic operators to provide a test report from a conformity assessment body, as well as rules on the obligation of contracting authorities to accept other appropriate means of proof than those referred to in paragraph 1, subject to certain conditions. Three conditions must be fulfilled before a tenderer can use other means of proof. First, the economic operator must have had no access to the certificates or test reports required or no possibility of obtaining them within relevant time limits. Second, the lack of access must not be attributable to the economic operator. And third, the economic operator must still be able to prove that the works, supplies or services offered meet the requirements or criteria set out by the contracting authority.

Article 45 Variants 1. Contracting authorities may authorise or require tenderers to submit variants. They shall indicate in the contract notice or, where a prior information notice is used as a means of calling for competition, in the invitation to confirm interest whether or not they authorise or require variants. Variants shall not be authorised without such indication. Variants shall be linked to the subject-matter of the contract. 2. Contracting authorities authorising or requiring variants shall state in the procurement documents the minimum requirements to be met by the variants and any specific requirements for their presentation, in particular whether variants may be submitted only where a tender, which is not a variant, has also been submitted. They shall also ensure that the chosen award criteria can be applied to variants meeting those minimum requirements as well as to conforming tenders which are not variants. 3. Only variants meeting the minimum requirements laid down by the contracting authorities shall be taken into consideration. In procedures for awarding public supply or service contracts, contracting authorities that have authorised or required variants shall not reject a variant on the sole ground that it would, where successful, lead to either a service contract rather than a public supply contract or a supply contract rather than a public service contract. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 798; Poulsen, Jakobsen and Kalsmose-Hjelmborg, EU Oublic Procurement Law, p. 516; Martin Burgi, ‘Can Secondary Considerations in Procurement Contracts be a Tool for Increasing Innovative Solutions?’, in Ølykke, Risvig and Tvarnø (eds), EU Procurement Directives – modernisation, growth & innovation, 2012, p. 282; Michael Steinicke,

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‘The Public Procurement Rules and Innovation’, in Ølykke, Risvig and Tvarnø (eds), EU Procurement Directives – modernisation, growth & innovation, 2012, p. 264.

Article 45 carried forward the former rules on variant tenders, though with several changes. Among the new elements are: an express reference to the distinction between obligatory and permitted variant tenders; that variant tenders can be used in connection with all the award criteria; and that variant tenders must be linked to the subject-matter of the contract. There are also other clarifications and new expressions of the terms in the provision. There are corresponding rules in Article 64 of the Utilities Directive and in Article 19 of the Defence and Security Directive (however, the latter follows the previous rules as in Article 24 of the 2004 Public Sector Directive). There are no express rules on variant tenders in the Concessions Directive, but there are some similarities with the rules on variant tenders; see, for example, Article 41(3) on innovative solutions with an exceptional level of functional performance. 2 The rules on technical specifications allow for a contracting authority to specify a task either by references to standards or other technical specifications, or to functional requirements. This last usually allows a broader scope for tenders than where specifications are based on technical specifications. Such broader tenders should not be assessed as variant tenders but as ordinary tenders. 3 Article 45 allows tenderers to submit variant tenders in certain circumstances and for contracting authorities to take these into account. The Public Sector Directive contains no definition of a variant tender. A variant tender is a tender that is in line with other tenders submitted in a procurement procedure. Thus the same rules apply to the contracting authority’s treatment of variant tenders as for ordinary tenders, apart from the special conditions laid down for variant tender in Article 45. As its designation suggests, a variant tender will differ on one or more points from ordinary tenders. There are both quantitative and qualitative restrictions in the rules on variant tenders. Quantitative restrictions mean that tenderers may not submit more than one tender unless variant tenders are accepted. Qualitative restrictions mean that a variant tender should contain a proposal for a different kind of solution than that proposed in the procurement documentation. See below for further on Article 45(1). It is not clear what kinds of differences can be regarded as constituting a variant tender. According to Article 45(1), ‘Variants shall be linked to the subject-matter of the contract’. For example, if a tender differs from an ordinary tender in its legal or financial aspects, should this be seen as a variant tender? On the face of it, it would not be a variant. From the first discussions on the idea of introducing rules on variant tenders it was emphasised that such tenders should offer alternatives for the performance of a task, which must relate to the task itself and not the contractual conditions for its performance. However, it is probably possible that both the financial and the legal aspects of a tender could lead to a tender being regarded as a variant within the meaning of Article 45. There is no question that there must be a minimum difference between an ordinary tender and a variant tender and that a price difference alone will not be sufficient for a tender to be characterised as a variant. 4 There are certain similarities between variant tenders and reservations. However, as there are differing legal consequences, depending on whether there is a variant tender or a reservation, it is important to distinguish between the two. In distinguishing between reservations and variant tenders, the following assessment can be indicative. First, does the contract notice allow variant tenders to be submitted? Second, does the contract notice lay down minimum requirements and more detailed conditions for variant tenders? 1

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If there are not such requirements, a tenderer cannot submit a variant tender and any variations which a tender may contain in relation to the contract notice must be dealt with as a reservation. Third, where it is possible to submit a variant tender, does a variation of a tender concern the subject-matter of the contract notice or merely provisions of less material importance? One way to assess this can be to see if it is possible to value the variations. Where there is a larger or more fundamental difference between a contract notice and a tender, this can be difficult to evaluate and can be an indication that the tender is a variant tender. Where a task is specified on the basis of description of its functional requirements (see Article 42), there will be a greater possibility of considering tenders that contain solutions other than those which the contracting authority may have envisaged initially. While such solutions may have traditionally been characterised as variant tenders, they could now be offered within the framework of an ordinary tender. This could prompt the thought that the distinction between variant tenders and reservations no longer exists and that these should be dealt with under the same rules. However, the fact that variant tenders and reservations are similar does not mean they should not be distinguished. The fact that there is separate regulation of variant tenders underlines the need to distinguish between the two. There is also nothing in the Public Sector Directive or its travaux préparatoires to indicate that the distinction between variant tenders and (fundamental) reservations has been eliminated.1 There is also no theoretical basis for the Public Sector Directive which would require variant tenders and reservations no longer to be treated separately. It is possible that Article 42 will present a challenge to the application of the rules on reservations, but this is an insufficient basis for eliminating the distinction between them. Another question concerns the extent to which it is possible to allow variant tenders 5 when the negotiated procedures provided for in the Directive are used. The intention of allowing variant tenders is that it should be possible to obtain solutions other than those which the contracting authority may have envisaged initially. Where a negotiated procedure is used it will usually be possible to open up for such alternatives in the negotiations. Thus it can be argued that there is no obvious need for allowing variant tenders since negotiated procedures meet the same need as variant solutions. On the other hand there is nothing in the Directive that prevents or excludes the use of variant tenders in connection with, for example, a competitive procedure with negotiation pursuant to Article 29. Another factor is that, depending on the circumstances, the use of negotiated procedures can be difficult to reconcile with the conditions for the use of variant tenders. The clearest example is that a competitive dialogue procedure pursuant to Article 30 does not start with the submission of tenders, as with an open or restricted procedure, but starts by clarifying the contracting authority’s needs for all tenderers. Thus competitive dialogue is not a procedure that fits in with the submission of variant tenders, indeed it seems that Article 30(6) only allows the final tenders to be based on the solutions discussed during the dialogue. The extent to which a contracting authority had an obligation to admit variant ten- 6 ders in the same way as ordinary tenders was not clear under the previous provisions. Article 45(2) now makes it clear that all tenders must be assessed according to the same criteria and be included on the same terms. 1 See Case T-514/09 Bpost NV, para. 79, where it was stated ‘that the applicant appears, wrongly, to be assimilating the concept of a variant with that of a departure.’ This makes it clear that there is a distinction between the two kinds of departures from the conditions of a contract notice.

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According to Article 45(1), variant tenders may not be accepted unless this is expressly stated in the contract notice. Thus if, despite the lack of authorisation to submit variant tenders, a variant tender is submitted, the contracting authority may not include the variant in the competition.

45.1. Statement of whether variant tenders are permitted etc. The 2004 Public Sector Directive introduced a requirement for contract notices to state whether or not variant tenders will be accepted. This is carried forward in Article 45(1) of the 2014 Public Sector Directive. Prior to this, contracting authorities could only admit variant tenders to participate in a competition if nothing was said about this in the contract notice. This practice was inappropriate and the change was reasonable and naturally retained in the new Directive. 8 Article 45(1) distinguishes between mandatory and permitted variant tenders. This distinction between two kinds of variant tenders is not new and could be seen in Case C-87/94 Commission v Belgium (Walloon buses). The Advocate General distinguished between mandatory and permitted variant tenders. When a variant is mandatory, it is a requirement in order for a tender to comply with the terms of the contract notice; the tenderer must offer alternative solutions to a specific element in the tender. Such a variant will typically be a less extensive part of the whole as it will be a tender within a tender. In contrast, a permitted variant will be in line with all other tenders, merely with the difference that it will deal with an alternative solution to the task. According to the 2014 Directive it appears that mandatory variants are tenders which fully replace or compete with ordinary tenders and are thus not merely partial variants within the framework of an ordinary tender. It can be questioned whether a contracting authority may require variant tenders to part-contracts where the authority has divided a contract into several lots. It must be assumed that this is permissible. There is nothing in the regulations or the case law to prevent variant tenders for parts of contracts. Article 45(1) requires the contract notice to make it clear whether a variant tender may be submitted or must be submitted. If this is not made clear, it must be assumed that tenderers may submit but are not required to submit variant tenders. In the current form for the contract notice (at point II.2:10) it is stated that a contracting authority must put a cross for whether variant tenders will be accepted. There is not room to write whether there is an obligation to submit a variant tender. If a variant tender is not submitted when this is stated to be a requirement, the tenderer must be rejected. This must apply to both ordinary and variant tenders, as both are covered by the requirements. This follows generally from the established case law of the CJEU, according to which the contracting authority’s own rules for a procurement may not be departed from.2 Article 45(1) requires variant tenders to be linked to the subject-matter of the contract. The principle must be that a variant tender may only relate to the product or service which the contract concerns. Conversely there is a question whether the contract’s legal and financial conditions can be said to be linked to the subject-matter of the contract.3 7

45.2. Variant tenders and award criteria 9

Under the earlier procurement directives a variant tender could only be used if the contracting authority had chosen to apply the award criterion of the most economically 2 3

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advantageous tender, i.e. an overall assessment of the relationship between price and other characteristics, such as quality. The basis for this was that variant tenders were regarded as offering different solutions for fulfilling the task, possibly based on the use of different technology or a different method. The idea was that different solutions should be comparable and that it was impossible to base an award on price alone when different solutions could result in large differences in price, and a variant tender would stand apart from the ordinary tenders for a contract. On this basis, in many cases a purely price-based competition (awarding the contract to the lowest tender) would not be appropriate, since differences between the solutions offered for the task would often make a price comparison impossible. The sub-criteria stated by the contracting authority should thus cover both the qualities of both ordinary tenders and variant tenders. This approach has not been carried forward in the 2014 Public Sector Directive; see the end of Article 45(2). This provides that contracting authorities ‘shall also ensure that the chosen award criteria can be applied to variants meeting those minimum requirements as well as to conforming tenders which are not variants.’ The CJEU has established that the rules on award criteria can only apply to variant tenders that have been lawfully taken into consideration in accordance with the previous rules on variants; see Case C-421/01 Traunfellner, paragraph 34. It must be assumed that it is largely up to the contracting authority whether a specific award criterion can be used. The wording seems to indicate that there is a question of whether the individual criterion can be used. It must be considered whether there are any circumstances in which some specific award criterion cannot be used. It is clear that if the price is restricted in some way or other, or even fixed, or if the comparison is between very different kinds of solution, then it seems that price cannot be the only criterion. The level of concordance between ordinary tenders and variant tenders must be related to the fact that it must be possible to evaluate the tenders according to the same award criteria and they must thus be comparable within the frameworks of the sub-criteria. The extent of minimum requirements, the degree of detail etc. must thus have the purpose of ensuring the comparability of tenders.

45.3. Laying down minimum requirements Article 45(2) states that ‘contracting authorities authorising or requiring variants shall 10 state in the procurement documents the minimum requirements to be met by the variants.’ There is no direct indication of the form these minimum requirements should take. Thus, minimum requirements could be included in a list specifying all the minimum requirements, or they could be clearly marked in the text of the procurement documentation. There is also a question of whether it is necessary to state explicitly whether a condition is a minimum requirement. In Case C-421/01 Traunfellner the contract documents had referred only to a provi- 11 sion of national legislation requiring that a variant tender should ‘ensure the performance of work which is qualitatively equivalent to that for which tenders have been invited’, without further specifying the comparative parameters by which such equivalence was to be assessed. In other words, no specific minimum requirement was stated that had to be fulfilled for a variant tender to come into consideration. The CJEU stated: This being so, it is clear from the very wording of the second paragraph of Article 19 of the Directive that, where the contracting authority has not excluded the submission of variants, it is under an obligation to set out in the contract documents the minimum specifications with which those variants must comply.

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Consequently, the reference made in the contract documents to a provision of national legislation cannot satisfy the requirement laid down in the second paragraph of Article 19 of the Directive. The CJEU expanded on this by pointing out that: Tenderers may be deemed to be informed in the same way of the minimum specifications with which their variants must comply in order to be considered by the contracting authority only where those specifications are set out in the contract documents. This involves an obligation of transparency designed to ensure compliance with the principle of equal treatment of tenderers, which must be complied with in any procurement procedure governed by the Directive. In this case the CJEU had to decide whether making a reference to a statement in Austrian legislation was a satisfactory way of laying down minimum requirements. The CJEU did not expressly decide whether this kind of statement would be acceptable, as long as the statement was given directly in the procurement documentation rather than in national legislation. On the basis of general considerations of the purpose of the rules on minimum requirements, and with reference to the Opinion of the Advocate General in the case, it must be assumed that wording in the procurement documentation, that a variant tender should ‘ensure the performance of work which is qualitatively equivalent to that for which tenders have been invited’, will not be sufficient as the only statement of a minimum requirement. Minimum requirements must be understood as specific requirements for the product or service in question, but the wording given here is more in the nature of an objective than a minimum requirement. It is presumably not possible to state any rules that limit the substantive minimum requirements. It is thus up to the contracting authority to determine what the minimum requirements are in each case. It may be possible to modify this starting point where the contracting authority states a general minimum requirement to allow for such different kinds of tenders that it is not effectively possible to compare them. In such a situation the contracting authority will presumably have exceeded the limits for laying down minimum requirements. In his Opinion in Case C-421/01 Traunfellner, Advocate-General Alber made a number of comments on ‘equivalence’ between ordinary and variant tenders. The AdvocateGeneral’s comments can be summarised as saying that the purpose of laying down minimum requirements is to ensure that there is a sufficient degree of comparability between tenders for the same contract. Advocate-General Alber also said that the term ‘state’ means to ‘explain and describe in greater detail’ the minimum requirements; see point 18 of the Opinion. 12 According to Article 45(2), in addition to stating the minimum requirements which a variant tender must fulfil, contracting authorities must state any specific requirements for the presentation of tenders. This provision is carried forward from the 2004 Public Sector Directive. It must be assumed that the purpose of the provision is to give contracting authorities the possibility of making requirements for the presentation of tenders so as to identify as clearly as possible differences between ordinary and variant tenders. 13 A variant tender may not be rejected because it changes a task that is offered as a contract for services into a contract for the purchase of goods, or vice versa. This provision carried forward Article 24 of the 2004 Public Sector Directive. The aim of this provision must be to prevent contracting authorities rejecting tenders on the basis of the change to the character of the task. The risk of this will only arise in contracts for nearly equal elements of services and goods.

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Article 46 Division of contracts into lots 1. Contracting authorities may decide to award a contract in the form of separate lots and may determine the size and subject-matter of such lots. Contracting authorities shall, except in respect of contracts whose division has been made mandatory pursuant to paragraph 4 of this Article, provide an indication of the main reasons for their decision not to subdivide into lots, which shall be included in the procurement documents or the individual report referred to in Article 84. 2. Contracting authorities shall indicate, in the contract notice or in the invitation to confirm interest, whether tenders may be submitted for one, for several or for all of the lots. Contracting authorities may, even where tenders may be submitted for several or all lots, limit the number of lots that may be awarded to one tenderer, provided that the maximum number of lots per tenderer is stated in the contract notice or in the invitation to confirm interest. Contracting authorities shall indicate in the procurement documents the objective and non-discriminatory criteria or rules they intend to apply for determining which lots will be awarded where the application of the award criteria would result in one tenderer being awarded more lots than the maximum number. 3. Member States may provide that, where more than one lot may be awarded to the same tenderer, contracting authorities may award contracts combining several or all lots where they have specified in the contract notice or in the invitation to confirm interest that they reserve the possibility of doing so and indicate the lots or groups of lots that may be combined. 4. Member States may implement the second subparagraph of paragraph 1 by rendering it obligatory to award contracts in the form of separate lots under conditions to be specified in accordance with their national law and having regard for Union law. In such circumstances the first subparagraph of paragraph 2 and, where appropriate, paragraph 3 shall apply. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 415 and 463.

The division of contracts into lots has long been a practice associated with public pro- 1 curement contracts. Despite this, prior to the current Directive there has been only little regulation of the division of contracts into lots in the directives. For example, they have not contained any express provisions on how contracts divided into lots should be evaluated or on the possibilities for submitting tenders on one or more lots. The 2014 Public Sector Directive introduced express provisions laying down the framework for the division of a contract into lots (Article 46). Parts of this provision can be seen as codifying the previous practice and parts of it are new. A similar, but not identical, provision has been included in Article 65 of the Utilities Directive, but there is no similar provision in the Defence and Security or the Concessions Directive. 2 The background to this provision is set out in Recital 78: “Public procurement should be adapted to the needs of SMEs. Contracting authorities should be encouraged to make use of the Code of Best Practices set out in the Commission Staff Working Document of 25 June 2008 entitled ‘European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts’, providing guidance on how they may apply the public procurement framework in a way that facilitates SME participation. To that end and to enhance competition, contract-

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ing authorities should in particular be encouraged to divide large contracts into lots. Such division could be done on a quantitative basis, making the size of the individual contracts better correspond to the capacity of SMEs, or on a qualitative basis, in accordance with the different trades and specialisations involved, to adapt the content of the individual contracts more closely to the specialised sectors of SMEs or in accordance with different subsequent project phases”.

46.1. Possibility for dividing a contract into lots and the obligation to give information if the division of a contract into lots is not chosen 3

The first part of the provision merely confirms what was already the case, that a contracting authority may divide a contract into lots if it so wishes. There are no conditions determining when a contract may be divided into lots. According to Article 46(1), second paragraph, if a contracting authority chooses not to divide a contract into lots, information about this must be given in the procurement documentation or in an individual report; see Article 84. There is no express requirement as to how comprehensive such information should be. Similarly there is no requirement to give other information, such as why it has been decided to divide a contract into two lots rather than three or more. The background to this part of Article 46 is set out in recital 78: “The contracting authority should have a duty to consider the appropriateness of dividing contracts into lots while remaining free to decide autonomously on the basis of any reason it deems relevant, without being subject to administrative or judicial supervision. Where the contracting authority decides that it would not be appropriate to divide the contract into lots, the individual report or the procurement documents should contain an indication of the main reasons for the contracting authority’s choice. Such reasons could for instance be that the contracting authority finds that such division could risk restricting competition, or risk rendering the execution of the contract excessively technically difficult or expensive, or that the need to coordinate the different contractors for the lots could seriously risk undermining the proper execution of the contract”.

It is the contracting authority that decides how any division of a contract into lots should be structured, i.e. how many lots and the basis for the division. Recital 78 exemplifies this: “Such division could be done on a quantitative basis, making the size of the individual contracts better correspond to the capacity of SMEs, or on a qualitative basis, in accordance with the different trades and specialisations involved, to adapt the content of the individual contracts more closely to the specialised sectors of SMEs or in accordance with different subsequent project phases”.

46.2. Possibilities for submitting tenders 4

Article 46(2) refers to three things about which information must be given in the publication of a contract notice. First, it must be made clear whether tenders may be submitted for one, for several or for all of the lots. Second, it must be made clear whether there is a limit to the number of lots that may be awarded to one tenderer. And third, contracting authorities must indicate the objective and non-discriminatory criteria or rules they intend to apply to determine which lots will be awarded if a tenderer tenders for more lots than can be awarded. A number of questions arise in relation to the requiring that contracting authorities to indicate objective and non-discriminatory criteria or rules for evaluating tenders. In addition to the obvious question, as to what constitutes objective and non-discriminatory criteria or rules, it can still be necessary to consider how the new rules relate to whether the award of a contract must be based on an evaluation of each of the lots into which contract is divided or an overall evaluation of the contract. On this see section 46.3. 564

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It is unclear, on the basis of the above, whether there is merely a requirement to make public that tenders can be submitted for several lots of divided contracts or whether information should also be given about how any discounts will be dealt with. It is questionable whether, when awarding lots of divided contracts, it is in accordance with the rules to add together the prices of the various tenders submitted by each tenderer, with the deduction of the discounts offered by the tenderer. The provision states that such criteria should be laid down if one tenderer tenders for more than the number of lots of a divided contract that can be awarded. There can well be situations where several tenderers tender for more than the number of lots of a divided contract that can be awarded. If there are 10 lots, and the number of lots that can be awarded to each tenderer is capped at 3, the situation could well arise where two tenderers each offer the best tenders in relation to 4 lots. Objective and non-discriminatory criteria must provide a solution to this situation. This could involve a complex calculation if all tenderers were permitted to submit multiple tenders and the contract were divided into many lots. The more lots into which a contract is divided, the more tenders permitted from each tenderer and the more tenderers, the more complex will be the award procedure and the greater will be the need for objective and non-discriminatory criteria or rules. Under the new rules, the obligation to lay down objective and non-discriminatory 5 criteria and rules is only relevant if there is a risk of a tenderer being awarded too many lots of a divided contract than provided for by the contracting authority, for example 4 lots being awarded to the same tenderer when the contracting authority has set the limit at 2. Since a contracting authority usually cannot say with certainty that a tenderer will not be awarded more tasks than laid down beforehand (unless it is only permitted to submit a tender for a corresponding number of lots), contracting authorities will often find themselves in the situation where a limit is set on the number of lots and must necessarily lay down such objective and non-discriminatory criteria. Another question, already referred to, is whether a contracting authority may lay down criteria for the award of lots of a divided contract where no limit has been set on the number of lots that can be awarded to the same tenderer. Contracting authorities may well want to lay down special criteria for the award of lots, for example on the connection between a number of lots, even if there is no limit to the number of lots that can be awarded to an individual tenderer. Similarly, there could be a need to lay down such criteria where a limit has been set to the number of lots that can be awarded but where this limit has not been reached. It must be assumed that a contracting authority also has the possibility of laying down objective and non-discriminatory criteria for making awards when only one tender can be submitted by and one award made to an individual tenderer. The legislator has not stated what conditions constitute objective and non-discrimi- 6 natory criteria. It is a broad concept, as can be seen from the use of the term in Article 65 on reducing the number of otherwise qualified candidates to be invited to participate in a selection process. The application of the rules in practice shows that there can be many and very different criteria for such a quantitative selection. In relation to lots of divided contracts this presumably means that it is possible to lay down many different kinds of criteria. For example, there is probably broad scope for laying down criteria that ensure the access of SMEs to compete for the award of contracts for lots. However, the requirement for criteria to be non-discriminatory presumably means that it is not possible to provide directly that a minimum of 4 lots shall be reserved for award to SMEs. It must be assumed that enabling SMEs to compete for a number of lots can primarily be encouraged by dividing a contract into a greater number of lots or by arranging the

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procurement in such a way that the special skills that can be expected to be covered by SMEs give them good possibilities for competing for individual lots.

46.3. Combinations of lots of divided contracts According to Article 46(3), where more than one lot may be awarded to the same tenderer, Member States may allow contracting authorities to award contracts combining several or all lots where this has been stated beforehand. It is relevant to ask whether, if a Member State has not expressly provided for such a possibility, a contracting authority may nevertheless award contracts that combine several or all lots. It seems that the starting point is that this right requires express implementation by the Member States. However, it might be possible for a contracting authority to include a solution referred to in Article 46(3) as one of the possibilities allowed pursuant to Article 46(2). In this case, as part of the objective and non-discriminatory criteria laid down pursuant to Article 46(2), a contracting authority could require, for example, that one or more lots should be combined with other lots of a contract divided into lots. It must be assumed that this is within the scope of a contracting authority’s options pursuant to Article 46(2). This argument seems to be supported by recital 79, which clarifies the thinking behind Article 46(3): However, the objective of facilitating greater access to public procurement by SMEs might be hampered if contracting authorities would be obliged to award the contract lot by lot even where this would entail having to accept substantially less advantageous solutions compared to an award grouping several or all of the lots. Where the possibility to apply such a method has been clearly indicated beforehand, it should therefore be possible for contracting authorities to conduct a comparative assessment of the tenders in order to establish whether the tenders submitted by a particular tenderer for a specific combination of lots would, taken as whole, fulfil the award criteria laid down in accordance with this Directive with regard to those lots better than the tenders for the individual lots concerned seen in isolation. If so, the contracting authority should be allowed to award a contract combining the lots in question to the tenderer concerned. It should be clarified that contracting authorities should conduct such a comparative assessment by first determining which tenders best fulfil the award criteria laid down for each individual lot and then comparing it with the tenders submitted by a particular tenderer for a specific combination of lots, taken as a whole 8 There have not previously been rules on how a contract consisting of a number of lots should be awarded. Article 46 brings some clarity to the issue, but it is still not entirely clear how awards should be made. In addition to setting out the possibilities for combining certain lots, it is also implicit from the recital that if nothing is stated about whether combined awards can be made, the principle will be that awards should be based on each individual contract and thus not of the basis of the overall situation. This principle is debatable. On the one hand, there would be an overall contract that is divided into smaller lots, with the possibility of tenderers tendering for one or more of the lots. This suggests that each lot has an independent existence. On the other hand, there is only one procurement process and the contracting authority has an obvious interest in having the best and cheapest overall solution. This suggests that the natural approach would be for the contracting authority to look at the overall situation when awarding the contract. However, it must now be assumed that the award will be made on the basis of the individual lots unless otherwise stipulated by the contracting authority. Typically, in addition to the offered price for each of the lots tendered by a tenderer, a discount will be offered which will be triggered if a certain number of lots are awarded 7

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to that tenderer. For example, the tenderer might offer that if it is awarded both Lot A and Lot B, a discount of 5 % will be given on the total price. For example, connections between different lots may be established so that if a ten- 9 derer is awarded one specific lot, it should also be awarded another specific lot. It will be a requirement that the rules or the allocation scale should give information about any combinations or connections between lots. In connection with rules or an allocation scale, a contracting authority can expressly allow tenderers to give a discount. Where this is the case, tenderers can determine that the price offered will be discounted if the contracting authority awards more than one lot, or if the contracting authority awards specific lots. The contracting authority can only take into account the discount rate that will be triggered in connection with an award, and thus give weight to it when making the award. It is debatable whether any restrictions can be put on the kinds of combinations that can be made between different lots. Apart from there being a requirement to comply with the principles, this does not seem to be the case. Likewise, there does not seem to be any requirement to justify the choice of a given allocation scale. There only seems to be a requirement for justification when choosing not to divide a contract into lots; see Article 46(1).

46.4. Obligatory division of a contract into lots The background to Article 46(4), according to which Member States may make it 10 obligatory to award contracts in the form of separate lots, can be seen in recital 78: “Member States should remain free to go further in their efforts to facilitate the involvement of SMEs in the public procurement market, by extending the scope of the obligation to consider the appropriateness of dividing contracts into lots to smaller contracts, by requiring contracting authorities to provide a justification for a decision not to divide contracts into lots or by rendering a division into lots obligatory under certain conditions. With the same purpose, Member States should also be free to provide mechanisms for direct payments to subcontractors”.

Article 47 Setting time limits 1. When fixing the time limits for the receipt of tenders and requests to participate, contracting authorities shall take account of the complexity of the contract and the time required for drawing up tenders, without prejudice to the minimum time limits set out in Articles 27 to 31. 2. Where tenders can be made only after a visit to the site or after on-the-spot inspection of the documents supporting the procurement documents, the time limits for the receipt of tenders, which shall be longer than the minimum time limits set out in Articles 27 to 31, shall be fixed so that all economic operators concerned may be aware of all the information needed to produce tenders. 3. Contracting authorities shall extend the time limits for the receipt of tenders so that all economic operators concerned may be aware of all the information needed to produce tenders in the following cases: (a) where, for whatever reason, additional information, although requested by the economic operator in good time, is not supplied at the latest six days before the time limit fixed for the receipt of tenders. In the event of an accelerated procedure as referred to in Article 27(3) and Article 28(6), that period shall be four days; (b) where significant changes are made to the procurement documents. Michael Steinicke

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The length of the extension shall be proportionate to the importance of the information or change. Where the additional information has either not been requested in good time or its importance with a view to preparing responsive tenders is insignificant, contracting authorities shall not be required to extend the time limits. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 857.

This provision is largely carried forward from Article 38 of the 2004 Public Sector Directive. However, the 2014 Directive is structured so that the specific time limits for the receipt of tenders and requests to participate are set out in the provisions that govern the various procurement procedures; see Articles 27-31. There is a corresponding provision in Article 66 of the Utilities Directive, and a slightly modified version in Article 39 of the Concessions Directive. In Article 33 of the Defence and Security Directive there is a provision that is in line with Article 38 of the 2004 Public Sector Directive. The provision concerns the setting of deadlines for carrying out procurement procedures. The provisions, which apply to EU procurements, concern both deadlines for submitting tenders and deadlines for receiving contract documentation and other information. The duration of a time period can (and must) be adjusted either upwards or downwards, depending on the situation. 2 Recital 80 to the 2014 Public Sector Directive states as follows: 1

“In order to make procedures faster and more efficient, time limits for participation in procurement procedures should be kept as short as possible without creating undue barriers to access for economic operators from across the internal market and in particular SMEs. It should therefore be kept in mind that, when fixing the time limits for the receipt of tenders and requests to participate, contracting authorities should take account in particular of the complexity of the contract and the time required to draw up tenders, even if this entails setting time limits that are longer than the minima provided for under this Directive. The use of electronic means of information and communication, in particular full electronic availability to economic operators, tenderers and candidates of procurement documents and electronic transmission of communications leads, on the other hand, to increased transparency and time savings.”

The legislator has also pointed out, in recital 80 that there should be some possibilities for shortening deadlines: “Furthermore, contracting authorities should have the opportunity to further shorten the time limits for receipt of requests to participate and of tenders in cases where a state of urgency renders the regular time limits impracticable, but does not make a regular procedure with publication impossible”. 1

It is still possible, under the 2014 Public Sector Directive, to use an ‘urgency procedure’, however the urgency procedure is not regulated by Article 47 but by the specific provisions for the procurement procedures (see Article 27(3) and Article 28(6)). 3 The calculation of time limits is subject to Regulation (EEC, Euratom) No 1182/71. The application of the Regulation to the setting of time limits is emphasised by a reference in recital 106 of the 2014 Public Sector Directive, as follows: ‘It should be recalled

1 Only in exceptional situations, where extreme urgency brought about by events unforeseeable by the contracting authority concerned that are not attributable to that contracting authority make it impossible to conduct a regular procedure even with shortened time limits, contracting authorities should, in so far as strictly necessary, have the possibility to award contracts by negotiated procedure without prior publication; see Article 32(2)(c). An example of this is where a natural disaster requires immediate action; see also recital 80.

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that Council Regulation (EEC, Euratom) No 1182/71 applies to the calculation of the time limits contained in this Directive.’ Time limits are one of the factors that are often governed by the Member States’ general contract law and customs. However, since time limits are important for the submission of tenders and requests to participate in a system where time limits are often relatively short, the procurement directives lay down identical rules for calculating time limits for public procurements in all Member States. Thus, the time limits laid down in Regulation (EEC, Euratom) No 1182/71 apply to all public procurements pursuant to the procurement directives. Council Regulation (EEC, Euratom) No 1182/71 of 3 June 1871, on the rules applicable to periods, dates and time limits, provides that ‘public holidays’ means ‘all days designated as such in the Member State or in the Community institution in which action is to be taken’; see Article 2(1) of the Regulation. In other words, each Member State decides what is a public holiday. To ensure transparency on this point, each Member State must send to the Commission a list of the public holidays under the laws of that Member State. These lists are published by the Commission in the Official Journal sent to all Member States, supplemented by information about the public holidays in the Union’s institutions. In setting time limits pursuant to the Regulation, all days other than public holidays, Saturdays and Sundays are working days; see Article 2(2). Under the procurement directives, times limits for tenders and requests to participate (depending on the kind of procurement procedure used) are expressed in days, calculated from the time when the contract notice is sent to the EU Publications Office for publication in the Official Journal; see for example Article 27(1) of the 2014 Public Sector Directive. Pursuant to Article 3(1), second paragraph, of Regulation (EEC, Euratom) No 1182/71, the day during which an event occurs is not be considered as falling within the period in question. Thus for the 35 day time limit in Article 27(1) of the 2014 Public Sector Directive, the day on which the contract notice is sent to the Publications Office is not counted as one of the 35 days. The basis for calculating time limits is stated in Article 3(2)(b) of Regulation (EEC, Euratom) No 1182/71, according to which a period expressed in days shall start at the beginning of the first hour of the first day and shall end with the expiry of the last hour of the last day of the period. However this is subject to the reservation in Article 3(1) and (4). The periods of time limits include public holidays, Saturdays and Sundays unless they are expressly excluded or unless the period of the time limit is expressed in ‘working days’; see Article 3(3) of the Regulation. Public holidays, Saturdays and Sundays are primarily relevant to the time of termination of a time limit. According to Article 3(4) of the Regulation, if the last day of a period is a public holiday, Saturday or Sunday, the period ends at the end of the last hour of the following working day. Exceeding the time limit for submitting tenders or requests to participate in a con- 4 tract award means that the undertaking or tender concerned cannot take part in the competition. If a contracting authority exceeds the time limits determined in the directives, this can mean that all tenderers will have an extended deadline corresponding to the amount of time by which the contracting authority has exceeded the deadline. Where a contracting authority exceeds a time limit by a significant amount, it may be obliged to reopen the procurement procedure.

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47.1. Contracting authorities’ consideration of the complexity of a contract and the time required for tendering 5

Under Article 47(1), when fixing the time limits for the receipt of tenders and requests to participate, contracting authorities must take account of the complexity of the contract and the time required for drawing up tenders; however, this does not affect the minimum time limits set out in Articles 27 to 31. In addition to taking account of the complexity of the contract and the time element, contracting authorities must also take account of other circumstances if they are relevant to the setting of deadlines. It must be assumed that various factors should be taken into account, depending on whether the deadlines apply to the selection phase or the award phase. It must also be assumed that factors that do not concern the contract itself, but do affect the competition or the procurement can, also be taken into account. For example, the following can be relevant to the setting of deadlines: the number of requirements for undertakings to provide documentation; the level of detail of such information; the award criteria used; the conditions for taking part in the competition; and the form of the procurement procedure.

47.2. Extending time limits when site visits are necessary 6

When determining an extension, as required under this provision, the contracting authority must have regard for the circumstances that characterise interested undertakings. Thus, a contracting authority must consider that a foreign undertaking must have as realistic an opportunity to make an on-site visit as domestic undertakings.

47.3. Extension of time limits in the event of delay If additional information is requested by an economic operator in good time and is not supplied by six days before the time limit fixed for the receipt of tenders, the contracting authority must extend the time limits for the receipt of tenders so that all economic operators may be aware of all the information needed to produce tenders. 8 In answering questions relating to a contract, a contracting authority can hold a question and answer meeting. Such a meeting should be held at least 6 days before the expiry of the deadline for submitting tenders. Here again, account must be taken of the character of the questions asked, to the extent that this is known prior to the meeting. This probably means that the contracting authority cannot gather together all the questions and wait to answer them all 6 days before the deadline. If complex questions are asked in good time, it must be assumed that these should be answered in sufficient time to allow tenderers to incorporate the answers in their tenders. According to Article 47(3)(b), an extension to a deadline will be required ‘where significant changes are made to the procurement documents’. The significance of this part of the provision is clear from recital 81, where it is stated: 7

“It should be clarified that the need to ensure that economic operators have sufficient time in which to draw up responsive tenders may entail that the time limits which were set initially may have to be extended. This would, in particular, be the case where significant changes are made to the procurement documents. It should also be specified that, in that case, significant changes should be understood as covering changes, in particular to the technical specifications, in respect of which economic operators would need additional time in order to understand and respond appropriately. It should, however, be clarified that such changes should not be so substantial that the admission of candidates other than those initially selected would have been allowed for or additional participants in the procurement procedure would have been attracted. That could, in particular, be the case where the

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changes render the contract or the framework agreement materially different in character from the one initially set out in the procurement documents”.

The provision also emphasises that the proportionality principle must be respected and that any extension should be reasonable in relation to the significance of the additional information or change to the procurement documents. In order to clarify the circumstances described in the first part of Article 47(3), the 9 provision concludes by stating that if the additional information has not been requested in good time or if it is not significant for the preparation of tenders, then a contracting authority is not required to extend the time limit. According to the first part of this provision, there can only be a requirement to extend a time limit if the conditions are fulfilled, so it seems unnecessary to point out the an extension will not be necessary if the conditions are not fulfilled.

Section 2 Publication and transparency Article 48 Prior information notices 1. Contracting authorities may make known their intentions of planned procurements through the publication of a prior information notice. Those notices shall contain the information set out in Annex V part B section I. They shall be published either by the Publications Office of the European Union or by the contracting authorities on their buyer profiles in accordance with point 2(b) of Annex VIII. Where the prior information notice is published by the contracting authorities on their buyer profile, they shall send a notice of the publication on their buyer profile to the Publications Office of the European Union in accordance with Annex VIII. Those notices shall contain the information set out in Annex V part A. 2. For restricted procedures and competitive procedures with negotiation, sub-central contracting authorities may use a prior information notice as a call for competition pursuant to Article 26(5), provided that the notice fulfils all of the following conditions: (a) it refers specifically to the supplies, works or services that will be the subject of the contract to be awarded; (b) it indicates that the contract will be awarded by restricted procedure or competitive procedure with negotiation without further publication of a call for competition and invites interested economic operators to express their interest; (c) it contains, in addition to the information set out in Annex V part B section I, the information set out in Annex V part B section II; (d) it has been sent for publication between 35 days and 12 months prior to the date on which the invitation referred to in Article 54(1) is sent. Such notices shall not be published on a buyer profile. However, the additional publication at national level pursuant to Article 52, if any, may be made on a buyer profile. The period covered by the prior information notice shall be a maximum of 12 months from the date the notice is transmitted for publication. However, in the case of public contracts for social and other specific services, the prior information notice

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referred to in point (b) of Article 75(1) may cover a period which is longer than 12 months. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 670 et seq.; Rhodri Williams, ‘New standard forms for Public Procurement notices’, in: PPLR, 2016, NA35-36.

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The provisions in Article 48 are carried forward, with a number of amendments, from Article 35(1) of Directive 2004/18/EC. There are corresponding provisions in Article 67 of Directive 2014/25/EU (the ‘Utilities Directive’). There are no rules on prior information notices in Directive 2014/23/EU (the ‘Concessions Directive’) so such notices cannot be used for entering into concession contracts. Article 30(1) of Directive 2009/81/EC (the ‘Defence and Secriy Directive’) contains a similar provision.

48.1. Prior information notices and buyer profiles The purpose of prior information notices is to make the market aware of the tasks that can be expected to be offered for contracts in the course of the year. They also have the function of enabling contracting authorities to shorten the procurement procedure if a prior information notice contains certain necessary information (see Article 27(2) on open procedures and Article 28(3) on restricted procedures). The rules cover normal contracts as well as framework contracts and dynamic purchasing systems. There are three kinds of prior information notices with differing requirements for publication and with differing consequences: a prior information notice published in the Official Journal of the European Union; a call for competition for contracts published in the Official Journal; and a prior information notice published by a contracting authority on its buyer profile. 3 In addition to publication in the Official Journal, since the adoption of the 2004 Public Sector Directive it has been possible to publish a prior information notice on the contracting authority’s ‘buyer profile’. A ‘buyer profile’ is a website on which a contracting authority can publish information about its purchases. The requirements applicable to such publication are referred to in Article 48(1) and are laid down in point 2(b) of Annex VIII to the Directive as follows: ‘The buyer profile may include prior information notices as referred to in Article 48(1), information on ongoing invitations to tender, scheduled purchases, contracts concluded, procedures cancelled and any useful general information, such as a contact point, a telephone and a fax number, a postal address and an e-mail address.’ This provision also states that the buyer profile may include prior information notices used as a means of calling for competition, published at national level pursuant to Article 52. This wording is very broad, saying that a buyer profile ‘can’ contain the elements referred to. However, if a contracting authority wishes to use its buyer profile to reduce the time-limits for a specific contract, the information must be given. When a prior information notice is published on a contracting authority’s buyer profile, it must comply with the requirements in Annex V, Part A. According to this, information must be given identifying the contracting authority, the type of contracting authority and its main activity, whether the contracting authority is a central purchasing body or involves some other form of joint procurement, the CPV codes (Common Procurement Vocabulary codes) for the subject of the procurement, the internet address of the buyer profile and the date of first publication of the prior information notice on the buyer profile. 4 The use of prior information notices was previously limited to contracts with given threshold values. These threshold values differed according to the kind of services or 2

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goods to be provided under the contract. The background to these thresholds was that it was assumed that the publication of prior information notices was obligatory, so there should be publication for contracts with a value above the thresholds in question. These thresholds have not been carried forward in the new Directive, as the publication of prior information notices is no longer obligatory: they are a method for making the market aware of what purchases may be on the way; a contracting authority can use prior information notices to reduce the time-limits; and in certain circumstances they can be used as a substitute for traditional contract notices. That prior information notices are no longer obligatory is clear from the content and structure of Article 48(1), as well as from its wording: ‘may make known their intentions’: In Case C-272/91 Commission v Italy, the Court of Justice of the European Union (CJEU) made it clear that a contracting authority had an obligation to publish an indicative notice concerning an invitation to tender. However, this position was changed by Case C-225/98 Commission v France in which the CJEU ruled that such indicative notices are only obligatory if the contracting authority wants to reduce the time-limits. A description of the products or services to be covered by a prior information notice must be given by using the CPV codes. This can be seen from Parts A and B of Annex V. In addition, Article 48(2) requires prior information notices used to invite tenders to refer ‘specifically to the supplies, works or services that will be the subject of the contract to be awarded’. It is clear that in these situations the description of the subject of a contract must fulfil the conditions that apply to such a description in traditional contract notices. No method is stipulated for defining the extent of an expected purchase or the models that can be used. It must be assumed that a contracting authority must make a reasonable estimate of the expected purchase. Where a purchase has been made annually it will be natural to base the estimate on past experience. A contracting authority clearly has a motive to assess the expected value of the purchase as accurately as possible since a prior information notice allows time-limits for the actual amount to be reduced. Based on the wording of the provision, it must be assumed that it is also possible to publish information about contracts that are expected to be offered several years in advance. However, this will not apply to prior information notices calling for competition; see Article 48(2), last paragraph. In the case of public contracts for social and other specific services, a prior information notice may cover a longer period than 12 months; see Article 75(1)(b) (see also Article 48(2), last paragraph). A prior information notice may not be published on contracting authority’s buyer profile before it has been sent to the Publications Office of the European Union (see Article 52(3)). Prior information notices must state the date on which they have been sent to the Publications Office. In principle there is no restriction on the use of prior information notices in relation to the various procurement procedures, but it is clear that if a contracting authority wishes to use a prior information notice as a contract notice, this is only possible for restricted procedures and competitive procedures with negotiation; see Article 48(2). Prior information notices may be published in connection with framework agreements and dynamic purchasing systems. In the case of dynamic purchasing systems there are special rules on continued publication; see Article 51(4). Prior information notices also have a special role in connection with public contracts for social and other specific services. According to Article 75(1)(b) of the Public Sector Directive, contracting authorities intending to award a public contract for social and other specific services must make their intention known by publication in accordance

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with Annex V, Part I. According to Article 75(1)(b) this notice must be published continuously. For further on this, see the commentary on Article 51(4)(a).

48.2. Prior information notices as calls for competition The scope for using prior information notices as calls for competition (other than in connection with establishing dynamic purchasing systems in accordance with Article 34(4) or inviting tenders for social and other specific services in accordance with Article 75(1)) is restricted to non-state contracting authorities (or special categories thereof) and to restricted procedures and competitive procedures with negotiation. According to the provision this is limited to the situations referred to in Article 26(5). This provision states that Member States may provide that in specified circumstances sub-central contracting authorities or specific categories thereof may make calls for competition by means of a prior information notice. In other words, this is only possible when the transposition of the Directive allows for it. Moreover, Article 26(5) on the function of prior information notices in these situations provides that where a call for competition is made by means of a prior information notice, economic operators that have expressed an interest following the publication of the prior information notice shall be invited to confirm their interest in writing by means of an invitation to confirm interest in conformity with Article 54. 10 The use of a prior information notice as a call for competition must also fulfil the four conditions listed in Article 48(2)(a) to (d). To a large extent these conditions will be complied with by providing the information referred to in Annex V, Part B. 11 Unlike with normal prior information notices, it is not possible to publish such a call for competition in the buyer profile (see paragraph 1 above). However, if a contracting authority wishes to make supplementary publication at national level (within the framework of Article 52), it is possible to do so in a buyer profile. 9

Article 49 Contract notices Contract notices shall be used as a means of calling for competition in respect of all procedures, without prejudice to the second subparagraph of Article 26(5) and Article 32. Contract notices shall contain the information set out in Annex V part C and shall be published in accordance with Article 51. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 646; Rhodri Williams, ‘New standard forms for Public Procurement notices’, in: PPLR, 2016, NA 35-36.

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This provision carries forward Article 35(2) and (3) of Directive 2004/18/EC (the ‘2004 Public Sector Directive’). There are corresponding provisions in Article 69 of Directive 2014/25/EU (the ‘Utilities Directive’), Article 31 of Directive 2014/23/EU (the ‘Concessions Directive’) and Article 30(2) of Directive 2009/81/EC (the ‘Defence and Security Directive’).

49.1. The contract notice 2

The contract notice is possibly the most important single element of a procurement pursuant to the Directives. The contract notice enables undertakings in the EU to obtain information about all contracts covered by the Directives.

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As is clear from this provision, all public procurement procedures are initiated by 3 publication of a contract notice. Thus open procedures, restricted procedures, competitive procedures with negotiation, competitive dialogue and innovation partnerships are all initiated by publication of a contract notice.1 Only a negotiated procedure without prior publication is not initiated by publication of a contract notice. Design contests must also be initiated by publication of a contract notice. The primary difference between ordinary procurement procedures and design contests is that design contests are based on different information requirements, as set out in Annex V, Part E (information to be included in design contest notices) and Annex V, Part F (information to be included in notices of the results of a contest); see Article 79. Publication takes place via the Tenders Electronic Daily Supplement (S) to the Official Journal of the European Union; see http://simap.ted.europa.eu.

Article 50 Contract award notices 1. Not later than 30 days after the conclusion of a contract or of a framework agreement, following the decision to award or conclude it, contracting authorities shall send a contract award notice on the results of the procurement procedure. Such notices shall contain the information set out in Annex V part D and shall be published in accordance with Article 51. 2. Where the call for competition for the contract concerned has been made in the form of a prior information notice and the contracting authority has decided that it will not award further contracts during the period covered by the prior information notice, the contract award notice shall contain a specific indication to that effect. In the case of framework agreements concluded in accordance with Article 33, contracting authorities shall not be bound to send a notice of the results of the procurement procedure for each contract based on that agreement. Member States may provide that contracting authorities shall group notices of the results of the procurement procedure for contracts based on the framework agreement on a quarterly basis. In that case, contracting authorities shall send the grouped notices within 30 days of the end of each quarter. 3. Contracting authorities shall send a contract award notice within 30 days after the award of each contract based on a dynamic purchasing system. They may, however, group such notices on a quarterly basis. In that case, they shall send the grouped notices within 30 days of the end of each quarter. 4. Certain information on the contract award or the conclusion of the framework agreement may be withheld from publication where its release would impede law enforcement or otherwise be contrary to the public interest, would harm the legitimate commercial interests of a particular economic operator, public or private, or might prejudice fair competition between economic operators. Literature: Sue Arrowsmith, The Law of Public and Utilities, p. 836 et seq.; Peter Braun, ‘Requirements to state reasons for procurement decisions: a note on the recent case law of the General Court’, in: PPLR, 2011, p. NA 19-23; Rhodri Williams, ‘New standard forms for Public Procurement notices’, in: PPLR, 2016, NA35-36.

1 Depending on the circumstances, for a restricted procedure with prior publication a prior information notice can be used as an alternative; see Article 48 and Article 26(5).

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The provisions in Article are carried forward from Article 35(4) of Directive 2004/18/EC (the ‘2004 Public Sector Directive’). There are corresponding provisions in Article 70 of Directive 2014/25/EU (the ‘Utilities Directive’), Article 32 of Directive 2014/23/EU (the ‘Concessions Directive’) and Article 30(3) of Directive 2009/81/EC (the ‘Defence and Security Directive’).

50.1. Notification of awards of contracts/framework contracts 2

Where a procurement contest results in the award of a contract, the contracting authority must send a contract award notice within 30 days of the award. The calculation of the 30 days is to be based on the rules in Council Regulation (EEC, Euratom) No 1182/71; see recital 106 to the Directive. Such notices are to be sent to the Publications Office of the European Union. This requirement applies to all kinds of procurement procedures except design contests. However, design contests are subject to a corresponding requirement pursuant to Article 79 and Annex V, Part F.

50.2. Prior information notices and framework agreements. In the case of framework agreements entered into in accordance with Article 33, contracting authorities do not have to send notice of each contract entered into on the basis of the framework agreement. In principle only the award of the framework contract itself must be notified. 4 However, the provision also provides for Member States to require quarterly reporting of contracts based on framework agreements. 3

50.3. Dynamic purchasing systems 5

In contrast to the rules on framework agreements, each contract entered into under dynamic purchasing systems must be notified with the same time limit as applies to normal contracts; see Article 50(3). However there is a possibility of grouping together several contracts entered into during the same quarter in a single notification. Here the time limit for notification is 30 days from the end of the quarter in question. The wording of the provision suggests that it is calendar quarters that apply, so the first quarter ends on 31 March and so on.

50.4. Withholding publication 6

Where the publication of information would impede law enforcement, it can be withheld. This must apply both to EU laws and national laws that are in accordance with EU laws. Information may also be withheld if its publication would otherwise be contrary to the public interest, would harm legitimate commercial interests, or might prejudice fair competition between economic operators. This can include the commercially confidential information of private law undertakings. There may also be some interest in protecting a contracting authority’s future negotiating stance. See further in the commentary on Article 55(3).

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Article 51 Form and manner of publication of notices 1. Notices referred to in Articles 48, 49 and 50 shall include the information set out in Annex V in the format of standard forms, including standard forms for corrigenda. The Commission shall establish those standard forms by means of implementing acts. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 89(2). 2. Notices referred to in Articles 48, 49 and 50 shall be drawn up, transmitted by electronic means to the Publications Office of the European Union and published in accordance with Annex VIII. Notices shall be published not later than five days after they are sent. The costs of publication of the notices by the Publications Office of the European Union shall be borne by the Union. 3. Notices referred to in Articles 48, 49 and 50 shall be published in full in the official language(s) of the institutions of the Union chosen by the contracting authority. That language version or those language versions shall constitute the sole authentic text(s). A summary of the important elements of each notice shall be published in the other official languages of the institutions of the Union. 4. The Publications Office of the European Union shall ensure that the full text and the summary of prior information notices referred to in Article 48(2) and calls for competition setting up a dynamic purchasing system, as referred to in point (a) of Article 34(4) continue to be published: (a) in the case of prior information notices, for 12 months or until receipt of a contract award notice as provided for in Article 50 indicating that no further contracts will be awarded during the 12-month period covered by the call for competition. However, in the case of public contracts for social and other specific services, the prior information notice referred to in point (b) of Article 75(1) shall continue to be published until the end of its originally indicated period of validity or until receipt of a contract award notice as provided for in Article 50 indicating that no further contracts will be awarded during the period covered by the call for competition; (b) in the case of calls for competition setting up a dynamic purchasing system, for the period of validity of the dynamic purchasing system. 5. Contracting authorities shall be able to supply proof of the dates on which notices are dispatched. The Publications Office of the European Union shall give the contracting authority confirmation of the receipt of the notice and of the publication of the information sent, indicating the date of that publication. Such confirmation shall constitute proof of publication. 6. Contracting authorities may publish notices for public contracts that are not subject to the publication requirement laid down in this Directive provided that those notices are sent to the Publications Office of the European Union by electronic means in accordance with the format and procedures for transmission indicated in Annex VIII. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 646; Rhodri Williams, ‘New standard forms for Public Procurement notices’, in: PPLR, 2016, N A35-36.

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The provisions in Article 51 of Directive 2014/24/EU on public procurement (the ‘Public Sector Directive’) are carried forward in almost identical form from Article 36 of Directive 2004/18/EC (the ‘2004 Public Sector Directive’). Article 71 of Directive 2014/25/EU (the ‘Utilities Directive’) contains corresponding provisions, while Article 33 of Directive 2014/23/EU (the ‘Concessions Directive’) contains a provision on the preparation and publication of notices. Similar in Articles 31 and 32 of Directive 2009/81/EC (the ‘Defence and Security Directive’).

51.1. The preparation of notices for the Official Journal of the European Union 2

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Article 51(1) of the Public Sector Directive lays down the obligation to prepare notices for the Official Journal of the European Union in accordance with the standard forms referred to in Annex V of the Directive. The Commission is required to lay down frameworks for the various notices referred to in Articles 48 to 50 in accordance with the procedure laid down in Article 89(2). The Commission has laid down such frameworks in Regulation (EU) 2015/1986 which established standard forms for publishing procurement notices and repealed Regulation (EU) No 842/2011 which contained forms for publication under the previous Directives. All the standard forms can be found at simap.ted.europa.eu, and they can be downloaded in pdf. format or filled in and filed electronically directly with the Publications Office of the European Union. Article 51(1) requires notices to include the information demanded in the standard forms. This is a strict requirement but it is often overlooked. Only where the standard forms use the terms ‘if applicable’ or ‘if this information is known’ can information be omitted, and only if it is not relevant to the procurement procedure chosen. On some points it is directly stated either that information shall not be given in connection with a specific kind of procurement procedure, or conversely that information shall only be given in connection with a specific kind of procurement procedure. It is not possible to give specific guidance on other points, so a contracting authority must determine in relation to each point whether information is relevant and indicate the information required. In Case C-359/93 UNIX the contracting authority had failed to indicate in its notice the persons authorised to be present at the opening of tenders or the date, time and place of opening. It was argued that it was only necessary to stipulate these points if the contracting authority intended to restrict access to the opening of tenders. The Court of Justice of the European Union (CJEU) ruled that this information should be given in all cases. Publication of a notice in the Official Journal that a contracting authority wishes to procure a specific service or goods is perhaps the most important single event in the procurement procedures in the EU procurement directives. The purpose is to ensure that all interested undertakings have the possibility of becoming aware of procurement contracts and assessing whether a proposed purchase is of such a nature and extent that the undertaking would be interested in taking part in the procurement procedure. This purpose should be borne in mind when preparing a contract notice. A contracting authority should describe the purchase it intends to make, and the nature and extent of the purchase, as well as the basic contractual terms, sufficiently for an interested undertaking to assess the relevance of the procurement to it. A contracting authority should also describe the most important elements of the procurement procedure. A contracting authority must also be aware that the information about the subject of the procurement, the terms and the procedure given in the contract notice are binding 578

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in the sense that there is not an unlimited right to make changes subsequently. The purpose of the contract notice is also important in this connection as it must be assumed that with any procurement there will be undertakings that choose not to take part because of the information given in the notice. It is seldom possible to know how many such undertakings there may be, which they are and why they have chosen not to take part; but the presumed existence of such undertakings restricts the right of contracting authorities to change the terms and conditions set out in a contract note. Furthermore, a contracting authority must be aware that the risk that potential tenderers may have chosen not to take part in a procurement procedure is decisive important to any assessment of the existence of a breach of the procurement rules: see, for example, Article 72 on the modification of contracts during their term. In principle, other than purely practical information such as the contracting authority’s designation of the contract offered for tender, all the matters described in a contract notice may be assumed to be potentially relevant to such an unknown group of undertakings. If, after publication of a contract notice in the Official Journal, it is necessary to 7 amend some non-significant of the notice, the contracting authority may send a correction to the Publications Office with a view to the publication of a corrected notice. In most cases such corrected publication should also extend the deadline for the submission of tenders or for applying for prequalification so that undertakings that are first interested in taking part in the procurement after the amendment is made have sufficient time to obtain the documentation and to draw up a tender or apply for prequalification. However, once undertakings have been selected and encouraged to submit tenders there is no possibility of correcting information published in a contract notice. If the published terms and conditions are to be amended other than to an insignificant extent, the procurement procedure should normally be cancelled and a new procedure should be published in the Official Journal, with the delays consequent thereon. As something new, compared with the 2004 Public Sector Directive, Article 51 requires information to be given to the Commission about modifications to a contract during its term (see Annex V part G and Article 72(1)).

51.2. Publication deadlines for notices The provision requires contract notices to be sent to the Publications Office and pub- 8 lished in accordance with Annex VIII. The formats and rules for electronic transmission can be found at simap.ted.europa.eu. The rules in Annex VIII primarily state that contract notices must be published by the Publications Office, that it is possible to make a supplementary publication of the contracting authority’s buyer profile, and that the Publications Office must confirm receipt of the notice sent (see also Article 51(5)). The notice must be published not later than five days after it has been sent, not five days after it has been received. The costs of publishing contract notices are borne by the EU, including the costs of 9 translating and summarising notices.

51.3. The language and costs of publication of contract notices Contract notices are only published in their full form in their original language (not 10 in all the official EU languages). The contracting authority decides which language to use for publication so may choose a language other than the official language of the contracting authority’s Member State.

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This applies to procurement notices for public procurements, restricted procedures, competitive procedures with negotiation, competitive dialogue, dynamic purchasing systems and notices concerning design contests. A summary of the main points of a contract notice is simultaneously published in all the official EU languages, though only the version in the original language is authentic.

51.4. Continuing publication There are special rules for prior information notices which function as contract notices for restricted procedures and competitive procedures with negotiation (see Article 48(2)) and for calls for competition setting up a dynamic purchasing system. The rules require the Publications Office to ensure that there is continued publication of certain kinds of contract notices. The need for continued publication arises from the fact that such notices do not have a natural termination, as in the case of traditional contract notices. 12 In the case of prior information notices, the Publications Office is required to ensure that notices that have the purpose of calling for competition (see Article 48(2) and Article 75(1)) must continue to be published either until the end of their originally indicated periods of validity or until a contract award notice indicates that no further contracts will be awarded on the basis of the prior information notice. 13 With dynamic purchasing systems (see Article 34(4)), there must be continuing publication of the contract notice establishing a dynamic purchasing system during the whole period of validity of the system. According to the rules on dynamic purchasing systems, a contracting authority can choose to make a system for a fixed period (for example six years) or for an unlimited period. Since such a system will not have built into it the publication of further notices before each contract is awarded, continued publication is necessary to inform economic operators that may not have seen the original notice of the existence of the system. 11

51.5. Proof of sending of notices Contracting authorities must be able to supply proof of the dates on which notices are sent. Typically, where transmission is made electronically dispatch of the transmission will be registered so it will not usually be a problem to prove the date of dispatch. 15 The second paragraph of Article 51(5) requires the Publications Office to give contracting authorities confirmation of receipt of a notice and the date of publication. Such confirmation is regarded as proof of publication, but not of the sending by or receipt of the notice from the contracting authority. 14

51.6. Voluntary publication 16

Article 51(6) allows contracting authorities to voluntarily publish notices for public contracts that are not subject to the obligation to carry out a procurement procedure pursuant to the Directive. A contracting authority may seek to establish a favourable competitive situation or to see whether there is any potential for competition. The scope for making voluntary publication pursuant to Article 51(6) only exists where there is no obligation to publish under one of other directives (the Utilities Directive, the Concessions Directive or the Defence and Security Directive). For instance, a notice can be published where a contract is for a value that is below the threshold or if one of the exceptions in the Public Sector Directive applies. For example, a contracting authority may decide to publish a notice in connection with entering into an innovation partnership, even if this is not required pursuant to Article 14 (which makes agreements 580

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on services on research and development fall outside the scope of the directive in certain circumstances). Another example can be where, pursuant to Article 12(2), a contracting authority may award a contract to another legal person under the same control as itself without carrying out a procurement procedure, but where it nevertheless wishes to establish a competitive situation and so makes voluntary publication. On the one hand Article 51(6) has increasing significance as the CJEU has established that contracting authorities have certain obligations to make it known that a purchase is to be made, even if there is no obligation to make a public procurement under the Directive. The general Treaty provisions and the general principles of EU law determine this obligation. These provisions and principles do not mean there is a requirement to publish a notice in the Official Journal, but if a contracting authority can do so it will certainly fulfil the somewhat unclear requires for publication derived from the CJEU’s case law. On the other hand the provision has diminishing significance as procurement transactions are increasingly covered by the Procurement Directives and the Member States have increasingly adopted rules requiring publication of smaller contracts. A contracting authority that publishes a contract notice voluntarily must be assumed to be bound by the statements in the notice. The situation is less certain with regard to elements not stated in a contract notice and which are not a necessary consequence of other matters dealt with in a contract notice. It must be assumed that contracting authorities will be bound, as information given in a contract notice will give undertakings that become aware of the notice, and its description of the process and the purchase, expectations about other elements of the procedure. The set forms for the publication of notices do not provide for a statement of whether the publication is obligatory or voluntary. If there were such provision, tenderers would presumably be more careful about the terms applicable to the procurement in the case of voluntary publication. Finally, it is possible to add comments in a contract notice, and if, under this heading, it is stated that a notice relates to a procurement procedure that differs from traditional procurement procedures, the contracting authority will presumably not be bound to follow the rules of the Directive.

Article 52 Publication at national level 1. Notices referred to in Articles 48, 49 and 50 and the information contained therein shall not be published at national level before the publication pursuant to Article 51. However, publication may in any event take place at the national level where contracting authorities have not been notified of the publication within 48 hours after confirmation of the receipt of the notice in accordance with Article 51. 2. Notices published at national level shall not contain information other than that contained in the notices dispatched to the Publications Office of the European Union or published on a buyer profile, but shall indicate the date of dispatch of the notice to the Publications Office of the European Union or its publication on the buyer profile. 3. Prior information notices shall not be published on a buyer profile before the dispatch to the Publications Office of the European Union of the notice of their publication in that form. They shall indicate the date of that dispatch. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 673.

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This provision is carried forward from Article 36(5) of Directive 2004/18/EC (the ‘2004 Public Sector Directive’). There are corresponding provisions in Article 72 of Directive 2014/25/EU (the ‘Utilities Directive’), Article 33(4) of Directive 2014/23/EU (the ‘Concessions Directive’) and Articles 32(5) of Directive 2009/81/EC (the ‘Defence and Security Directive’). 2 Under Article 52, a procurement notice may not be published in national periodical or via other media before the notice has been published to the Commission. This differs from Article 36(5) of the 2004 Public Sector Directive under which there could be national publication once a notice had been sent to the Publications Office of the European Union. This effectively means that contracting authorities must wait until the earliest point when there could be national publication under the 2004 Public Sector Directive. The Publications Office must publish a procurement notice within five days of its being sent by the contracting authority (see Article 51(2)). Thus there is a maximum ‘delay’ of five days compared with the previous regime. However, since publication can be made before the expiry of the five days, this can reduce this difference. In any event, publication may be made at national level where a contracting authority has not been notified of the publication within 48 hours after confirmation by the Publications Office of the receipt of the notice. The purpose of this is not clear, but it must be assumed that this applies if confirmation of receipt of the procurement notice either contains a date for publication that will exceeded the 48 hours or if the confirmation does not give any date of publication (if required under Article 51(5), last paragraph). Where the Publications Office uses the full five days for publication and the contracting authority is made aware of this in the confirmation of receipt of the notice, the contracting authority will not be able to publish at national level prior to publication by the Publications Office, even if this is more than 48 hours after the confirmation. 3 It must be assumed that the prohibition in Article 52 (of publication at national level before publication at EU level) applies to all forms of dissemination of information to a wider group, including local media. The provision does not state whether giving information about a procurement contract to individual undertakings by direct contact is also covered by the prohibition. Such contacts will presumably be prohibited under the principle of equal treatment even if they are not explicitly prohibited by Article 52. 1 Presumably sending a copy of a procurement notice to selected undertakings is only permitted if it complies with the same rules as apply to publication at national level. If an undertaking has been informed about a procurement at an earlier date, this may give that undertaking a time advantage. For the purpose of evidence, the date of sending a procurement notice to the Commission should be stated in any national publication that takes place in advance of EU publication. Article 52 also states that national publication of a procurement notice may not contain any information not contained in the notice sent to the Publications Office or published on a buyer profile. This is to ensure that undertakings from the contracting authority’s home Member State are not given any advantage in obtaining information about the task or the contest which is first made available to other undertakings when they obtain the supplementary procurement documentation. 4 According to Article 52(3), prior information may not be published on a buyer profile before a procurement notice is sent to the Commission. Moreover, prior information no1

1 However, see Article 40, according to which contracting authorities may seek advice from independent experts or authorities or from market participants before launching a procurement procedure, with a view to preparing a procurement and informing economic operators of their procurement plans and requirements.

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tices must indicate the date of their dispatch. Publication must be in accordance with Annex VIII(2)(b) and Annex V, Part B. A buyer profile is provided on a website where a contracting authority posts information connected with their public contracts. The legislator has undoubtedly introduced this possibility for contracting authorities with a view to increasing the information available about public purchases. The only direct legal effect of such buyer profiles is as a substitute for prior information notices with a view to reducing deadlines for subsequent tenders.

Article 53 Electronic availability of procurement documents 1. Contracting authorities shall by electronic means offer unrestricted and full direct access free of charge to the procurement documents from the date of publication of a notice in accordance with Article 51 or the date on which an invitation to confirm interest was sent. The text of the notice or the invitation to confirm interest shall specify the internet address at which the procurement documents are accessible. Where unrestricted and full direct access free of charge by electronic means to certain procurement documents cannot be offered for one of the reasons set out in the second subparagraph of Article 22(1), contracting authorities may indicate in the notice or the invitation to confirm interest that the procurement documents concerned will be transmitted by other means than electronic means in accordance with paragraph 2 of this Article. In such a case, the time limit for the submission of tenders shall be prolonged by five days, except in the cases of duly substantiated urgency referred to in Article 27(3), Article 28(6) and in the fourth subparagraph of Article 29(1). Where unrestricted and full direct access free of charge by electronic means to certain procurement documents cannot be offered because contracting authorities intend to apply Article 21(2) of this Directive, they shall indicate in the notice or the invitation to confirm interest which measures aimed at protecting the confidential nature of the information they require and how access can be obtained to the documents concerned. In such case, the time limit for the submission of tenders shall be prolonged by five days, except in the cases of duly substantiated urgency referred to in Article 27(3), Article 28(6) and in the fourth subparagraph of Article 29(1). 2. Provided that it has been requested in good time, the contracting authorities shall supply to all tenderers taking part in the procurement procedure additional information relating to the specifications and any supporting documents not later than six days before the time limit fixed for the receipt of tenders. In the event of an accelerated procedure as referred to in Article 27(3) and Article 28(6), that period shall be four days. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 659.

The provisions in Article 53 are carried forward, with some amendments, from Arti- 1 cle 39 of Directive 2004/18/EC (the ‘2004 Public Sector Directive’). The basis of the requirement for the availability of procurement documentation is different; previously electronic access to documentation was the exception, but now it is the rule.

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Article 73 of Directive 2014/25/EU (the ‘Utilities Directive’), Article 34 of Directive 2014/23/EU (the ‘Concessions Directive’) and Article 34 of Directive 2009/81/EC (the ‘Defence and Security Directive’) contain provisions similar to those in Article 53 of Directive 2014/24/EU.

53.1. Availability of procurement documents on the internet There were previously differences about when procurement documentation should be made available, as it was only in connection with public procurement that the documentation should be available from the date of publication of the procurement notice. With the other procurement procedures it was primarily in connection with applications to participate that additional procurement documentation should be made available. This situation has been changed so that all the procurement documentation must be available from the date of publication of a procurement notice or a prior information notice. The extent to which information should be published together with the procurement notice is debatable. Certain information will only be available for publication subsequently, e.g. some of the documents formed through the dialogue phase of the competitive dialogue – information that will later form the basis of the final bids from the tenderers. 3 Article 53 requires contracting authorities to give unrestricted and full direct access to the procurement documents, free of charge. The condition that access must be unrestricted presumably means that any interested party must be given the opportunity to gain access and that no conditions may be attached to giving such access. The requirement for direct access presumably means that there must not be a need to access one or more linked websites from the initial website in order to get the information. Finally, the requirement for there to be full access by electronic means requires all the relevant information to be available on the website whose address is given and that it must not be necessary to supplement this information in some other form. These conditions presumably do not mean that a contracting authority may not require the use of a user name and a password, but that they do mean that there must not be some qualification, such as an approval procedure, once a user profile has been created. These requirements must also mean that there should be uninterrupted access to the information at all hours of the day until the deadline expires. However, contracting authorities will be able to carry out any necessary updating. A ‘procurement document’ means: ‘any document produced or referred to by the contracting authority to describe or determine elements of the procurement or the procedure, including the contract notice, the prior information notice where it is used as a means of calling for competition, the technical specifications, the descriptive document, proposed conditions of contract, formats for the presentation of documents by candidates and tenderers, information on generally applicable obligations and any additional documents’; see Article 2(1)(13). See further in the commentary on this provision. In relation to a contract notice, ‘procurement documentation’ goes into greater detail, supplementing and clarifying information given in a contract notice. There can be a requirement that a contract notice and its related procurement documentation should, together, give sufficient information so that tenderers can prepare competitive tenders and candidates can prepare competitive applications. While the model for contract notices states what information shall be given to undertakings, nowhere is there an express statement of the requirements for procurement documentation. However, there are rules which state that if certain information is not given 2

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in the contract notice it must be given in a subsequent document which is often specified, for example in procurement documentation. 53.1.1. Documents transmitted other than by electronic means Article 22(1) of the Public Sector Directive requires that all communication and in- 4 formation exchange under the Directive should be by using electronic means of communication. However, Article 53 allows an exception to the requirement that all procurement documentation must be made available in electronic form. Article 22(1), second paragraph states: ‘Notwithstanding the first subparagraph, contracting authorities shall not be obliged to require electronic means of communication in the submission process in the following situations: (a) due to the specialised nature of the procurement, the use of electronic means of communication would require specific tools, devices or file formats that are not generally available or supported by generally available applications; (b) the applications supporting file formats that are suitable for the description of the tenders use file formats that cannot be handled by any other open or generally available applications or are under a proprietary licensing scheme and cannot be made available for downloading or remote use by the contracting authority; (c) the use of electronic means of communication would require specialised office equipment that is not generally available to contracting authorities; (d) the procurement documents require the submission of physical or scale models which cannot be transmitted using electronic means.’

For further on these situations see the commentary on Article 22(1). Article 53(1) provides that where it is not possible to provide unrestricted and full di- 5 rect access to certain procurement documents by electronic means free of charge, contracting authorities may indicate in their contract notice or invitation to confirm an interest that the procurement documents concerned will be transmitted by some other means. It must be assumed that this means that contracting authorities shall transmit such documentation on request. If this were not the case economic operators would not have any certainty about how information which cannot be obtained directly by electronic means will be provided. According to its wording, Article 53(1) refers to ‘certain procurement documents’. This means that all the documents and information that can be covered by unrestricted and full direct access by electronic means shall be provided in this way, and that only documentation that cannot be provided by electronic means may be provided in some other form. The provision does not state how such information should be provided, but it will involve various forms of physical delivery of the documentation. 53.1.2. Protection of confidential information Article 53(1), third paragraph, allows contracting authorities to have special regard 6 for protecting the confidential nature of information, and so restrict full electronic access to procurement documentation. It refers to Article 21(2) of the Directive which states: ‘Contracting authorities may impose on economic operators requirements aimed at protecting the confidential nature of information which the contracting authorities make available throughout the procurement procedure.’

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be fulfilled. First, in the notice or the invitation to confirm an interest the contracting authority must indicate which measures they require in order to protect the confidential nature of the information, and they must indicate how access to the documents concerned can be obtained.

53.2. Additional information Article 53(2) of the Public Sector Directive provides that, if a request for additional information is made in good time, contracting authorities must give all tenderers taking part in a procurement procedure additional information relating to the specifications and any supporting documents. This additional information must be given no later than six days before the expiry of the time limit for the receipt of tenders. The time limit is calculated so that the day before the period expires is day 1, the day before that is day 2, and so back to day 6. The contracting authority must supply the additional information before the end of the last hour of day 6. The additional information can be of various kinds, but it will all be information which, for one reason or another, the contracting authority has not included in the procurement documentation. 8 The additional information must have been ‘requested in good time’. The provision does not say when a request must be regarded as having been made in ‘good time’. It must be assumed that a request that gives a contracting authority which acts with reasonable haste the possibility of obtaining the information is a request made ‘in good time’. An assessment of this will depend on the extent and complexity of the information and the time which the contracting authority is given for obtaining the information. 9 It must be assumed that the same time limits apply to information requested relating to applications to participate (in cases other than those involving public procurement), i.e. that the information must be given at least six days before the expiry of the time limit for applying to participate. The provision only refers to the time limit for submitting tenders but not to requests to participate. 10 If a request for additional information is not submitted in time, it must be assumed that the contracting authority does not have an obligation to answer the questions raised. The same must be assumed to be the case if the six-day time limit is exceeded, though the contracting authority will probably have the option to extend the time limit for submitting tenders. In the case of an accelerated procedure, the requested information must be received by the tenderer four days before the expiry of the time limit for tendering, in line with the general cutting short of time limits for this procedure. 7

53.2.1. Amendments to procurement documentation 11

It will often be possible for a contracting authority to make minor corrections to the information in the contract notice and procurement documentation. It must be assumed that such corrections must be of such a kind that they cannot be expected to affect an undertaking’s decision to take part in a procurement procedure. If a substantial correction is made there may have be potential tenderers who have refrained from submitting tenders but who would have submitted tenders if the terms original of the procurement had been formulated as they appear after the correction. Consideration for potential tenderers is thus relevant to the scope for making corrections after a procurement procedure has been initiated. The fact that the procurement documentation must be made available already in connection with publication of the contract notice raises the question of whether it is possible to restrict access to the procurement documentation to those who wish to participate

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in the subsequent procedure. There seems to be some lack of symmetry between the earlier provisions and the current provisions with regard to who is entitled to what information and when. For example, previously participants in restricted procedures did not have access to information in the procurement documentation (other than the contract notice) other than information about applications to participate. Further information will typically be available when those who have expressed an interest receive an invitation to submit a tender. This alteration can be looked at in one of two ways: either there has been a change to the expectations as to transparency for economic operators, or the expectations are unchanged and it is possible to restrict access to procurement documentation in the case of procurement procedures where there is an intermediary stage of applying to participate. Two arguments can be made about this. First, there is nothing in Article 53 to indicate that a distinction can be made between the two kinds of procurement procedures with regard to access to procurement documentation. Second, it can be said that in principle the new rules merely treat the need for information in public procurement procedures as equivalent to that in the other procurement procedures; this is both sensible and reasonable. Under the principle of transparency, regardless of the procurement procedure, all economic operators have the same need for transparency concerning a contract at an early point in time with a view to assessing the contract and deciding whether to participate in the procurement in question. If additional documentation is first given at a later date, it is arguable that economic operators may decide on their participation in a procurement on the basis of only some of the information they would have received if the contract had been a public procurement. Previously it was often possible to make more substantial changes to the procurement 12 documentation than to the contract notice. This was because the scope for making changes to a contract notice was restricted out of consideration for potential tenderers. There was greater scope for making changes to procurement documentation since in many cases only those economic operators who had expressed an interest in taking part in a procurement procedure (and had submitted an application to participate) would have information about the procurement documentation. In these situations consideration for potential tenderers was not really relevant. The most important restrictions on making changes to procurement documentation thus related to timing; tenderers should have time to take account of any such changes in preparing their tenders. The longer the procurement process has run without a correction being made, the more difficult will it be for participants to adjust to the new circumstances. This is also the basis for the sixday rule in Article 53(2). Within these time limits, the scope for making a change must depend on balancing the extent and significance of any changes against the time of adjusting to the changes. More extensive changes to procurement documentation (which must be of an acceptable extent in relation to the information published in the contract notice) are permissible if they are made immediately after the contract notice has been sent to participants. However, if the participants are first informed of changes halfway through the allotted time period, then contracting authorities will not have the same wider scope for making changes and only more minor changes will be allowed. It is not clear from the Directive what changes to the procurement documentation are 13 allowed. There must clearly be some limits to what changes are allowed. If the changes are too extensive this will mean that the procurement procedure cannot be carried out, but less extensive changes must be permissible. While the enacting provision in the Directive does not give any indication of what changes are permissible, one of its recitals does give an aid to the interpretation. Recital 81 of the Public Sector Directive states:

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“It should be clarified that the need to ensure that economic operators have sufficient time in which to draw up responsive tenders may entail that the time limits which were set initially may have to be extended. This would, in particular, be the case where significant changes are made to the procurement documents. It should also be specified that, in that case, significant changes should be understood as covering changes, in particular to the technical specifications, in respect of which economic operators would need additional time in order to understand and respond appropriately. It should, however, be clarified that such changes should not be so substantial that the admission of candidates other than those initially selected would have been allowed for or additional participants in the procurement procedure would have been attracted. That could, in particular, be the case where the changes render the contract or the framework agreement materially different in character from the one initially set out in the procurement documents”.

The points made in this recital are not reflected in any of the substantive provisions of the Directive. According to the wording of the recital it appears that there are three categories of changes to procurement documentation: 1) insignificant changes, 2) significant changes, and 3) fundamental changes. The consequences changes will vary according to their categorisation. For changes to procurement documentation that will not affect the number of participants in a procurement procedure or which concern matters that will not substantially affect the preparation of tenders, other than some formal or procedural matters, the reaction will be extending the time limits. More substantial changes (influencing on the number of potential participants) would be forbidden or – if carried through – require a new tender procedure. 14 A possible way to make changes to procurement documentation acceptable can be to extend the time limit for applying to participate or to submit tenders. An extension of a time limit will naturally not have the same effect where changes to information may be assessed to be relevant to potential tenderers who have refrained from participating in a procurement procedure. If the new deadline is appropriate, it will merely reflect the time required to take account of the changes and thus it will not be something that affects the decision of potential tenders who have chosen not to participate. However, the length of a time limit can itself be a affect whether other economic operators would have participated if they had known about the extended time limit. Time limits for applications to participate in a procurement are always given in contract notices for restricted procedures and negotiated procedure with prior publication. If such time limits are extended significantly during the course of a procurement procedure because of corrections or changes to the procurement documentation, the situation could arise where a longer time limit than that given in the contract notice could have led to wider participation in the procedure. There will often be a connection between significant changes to the terms of a procurement and major changes to time limits. There is a question as to whether a change to a time limit directly related to changes to the procurement documentation is not, in reality, an extension of the time limit given in the contract notice for preparing a tender, but is only intended to allow time extra time for making adjustments caused by the changed procurement documentation. On this basis it could be argued that there is no reason to have regard for potential tenderers who might have been interested in taking part in the procurement procedure if the time limits had had the extended duration from the start, since the time limits would not have had their final duration if the changes to the information had been contained in the original documentation. For this argument to be given full effect it must be assumed that an extension to a time limit only covers the time necessary to incorporate the corrections and no more. It will naturally be difficult to establish this and it is in any case uncertain whether this situation would be considered significant since, as stated, it is difficult to eliminate the uncertainty associated with the setting of extensions to time limits.

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It should also relevant that in such cases the time limit is only extended because other changes make it necessary to allow more time for preparing tenders or applications to participate. Where a contracting authority decides to extend a time limit because it finds, upon further evaluation, that there is insufficient time to prepare a competitive and comprehensive tender in accordance with the procurement terms, such an extension will often be such a change as to attract the interest of new tenderers. Some changes to the procurement documentation can, of course, be so extensive as to essentially change the basis for the procurement expressed in the contract notice. On changes to tenders and applications to participate, see the commentary on Article 18. On the general right to amend tenders, see Article 18 on the ban on negotiation.

Article 54 Invitations to candidates 1. In restricted procedures, competitive dialogue procedures, innovation partnerships and competitive procedures with negotiation, contracting authorities shall simultaneously and in writing invite the selected candidates to submit their tenders or, in the case of a competitive dialogue, to take part in the dialogue. Where a prior information notice is used as a call for competition pursuant to Article 48(2), contracting authorities shall simultaneously and in writing invite the economic operators which have expressed their interest to confirm their continuing interest. 2. The invitations referred to in paragraph 1 of this Article shall include a reference to the electronic address on which the procurement documents have been made directly available by electronic means. The invitations shall be accompanied by the procurement documents, where those documents have not been the subject of unrestricted and full direct access, free of charge, for the reasons set out in the second or third subparagraph of Article 53(1) and have not already been made otherwise available. In addition, the invitations referred to in paragraph 1 of this Article shall include the information set out in Annex IX. Literature: Sue Arrowsmith, The Law and Public and Utilities Procurement, p. 900.

This provision largely carries forward Article 40 of Directive 2004/18/EC (the ‘2004 1 Public Sector Directive’). There are corresponding provisions in Article 74 of Directive 2014/25/EU (the ‘Utilities Directive’), and Article 34 of Directive 2009/81/EC (the ‘Defence and Security Directive’). The Concessions Directive 2014/23/EU does not contain similar rules, but do have some of the elements in Article 37 on procedural guarantees.

54.1. Invitations issued simultaneously and in writing Where there are restricted procedures, competitive dialogue procedures, innovation 2 partnerships and competitive procedures with negotiation, contracting authorities must invite selected partners to submit tenders simultaneously and in writing. The requirement for invitations to be in writing means that oral communication is not adequate. A telephone call to candidates will thus not fulfil the requirements of the provision. Article 54(1) requires contracting authorities to send their invitations ‘simultaneously’. The use of the word ‘invite’ suggests that it is the actions of the contracting authority that are the important for this provision rather than the candidates’ reception of invita-

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tions. The requirement that invitations should be made simultaneously and in writing must be assumed to mean that approaches to potential tenderers must be made in the same way, in other words using the same medium and form. In some cases the use of different media could result in potential tenderers receiving invitations at different times, which can be inappropriate since the purpose of these requirements must be that all potential tenderers are given the same time to prepare tenders. If the focus is on the actions of the contracting authority in sending out invitations, any differences in the timing of the reception of invitations will not be directly contrary to the rules, even though such timing differences may be unfortunate. It is possible that different media could be used in special situations, as long as it is ensured that invitations are issued at the same time and preferably that the reception of invitations takes place at the same time. Invitations relate to two different situations, depending on the kind of procurement procedure in question. With restricted procedures, competitive dialogue procedures, innovation partnerships invitations are for the submission of tenders, whereas with competitive procedures with negotiation invitations are for candidates to take part in a negotiation. In the case of competitive dialogue procedures, innovation partnerships and competitive procedures with negotiation candidates will be invited to submit documentation that will form the basis for negotiations in the three procedures. 3 Article 54(1), second paragraph, applies the same rules to invitations where a prior information notice has been used as a call for competition pursuant to Article 48(2). This can only concern restricted procedures and competitive dialogue procedures. In contrast to the usual situation, the rules in Article 48(2) on prior information notices require contracting authorities to invite economic operators to confirm their continued interest rather than to submit a tender.

54.2. Communication of the procurement conditions etc. There are two methods for making procurement documentation available to undertakings participating in the further competition. The starting point is that an invitation should be sent which refers to the electronic address where the materials are made available. If the procurement documentation is not made available electronically, it must be included with the invitation, unless it has already been made available by some other means. Under Article 53, it is only in limited situations where procurement documentation is not made available: see Article 53(1), second and third paragraphs, and the reference to Article 22(1) (electronic communication) and Article 21(2) (confidentiality). 5 The provision in Article 54(2) is not entirely clear. It states that invitations should include a reference to the electronic address where there is direct access to the procurement documents by electronic means. According to the new wording of Article 53(1), access to the procurement documentation must be given from the date of publication pursuant to Article 51. As discussed in the commentary on Article 53(1), this means that the documentation must be available already from the date of publication of the contract notice. Thus the procurement documentation must be made available before receipt of requests to participate, so this provision in Article 54(2) seems redundant. If compatibility between these provisions is to be sought, it must be on the basis that there is a reference to information that is part of the procurement documentation which is first made available at the same time as the issuing of invitations to submit a tender. For example, documents on which a final tender is based in connection with competitive dialogue procedures will naturally first be available at a subsequent date to the contract notice (pursuant to Article 53) and an invitation to participate in a dialogue (Article 54).1 This suggests that the requirement to make documentation available applies to 4

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documentation that can be made available at the time when the requirement arises (i.e. upon publication of a contract notice or publication of a prior information notice). Other documentation must be made available at a point in the proceedings when this is possible and relevant. Article 54(2) requires invitations to submit a tender, participate in a dialogue or con- 6 firm an interest to contain the information set out in Annex IX to the Directive. The Annex contains requirements both for invitations where a contract notice has been published and invitations where a prior information notice has been issued. For example, this can involve a reference to a published invitation to tender, and this requirement can be satisfied by giving the number of each contract notice. Annex IX, point 1(b) (and for competitive dialogue, point 1(c)), requires invitations to state the deadline for the receipt of the tenders, the address to which the tenders must be sent and the language or languages in which the tenders must be drawn up. Deadlines must be set in accordance with the guidelines in Article 47. Annex IX, point 1(d) requires invitations to refer to any possible additional documents to be submitted, either in support of verifiable declarations made by the tenderer in accordance with Articles 59 and 60 and, where appropriate, Article 62, or to supplement the information referred to in, and under the conditions laid down in, Articles 59, 60 and 62. This part of the provision lacks clarity. It refers to declarations made in accordance with Articles 59, 60 and 62 and to information required in these same articles. This suggests that the documents that must be submitted are related to the selection of candidates, but this cannot be right as this part of the procedure must have been concluded by the issuance of the invitation to tender etc. There are references to the provisions on the European Single Procurement Document (ESPD), proof, quality assurance standards and environmental management standards. Even though, at the conclusion of the procurement process (in connection with the award) there is still a requirement to provide correct documentation in good time to the winning tenderer, this requirement relates solely to this stage, not to the stage of issuing invitations to submit tenders but to the stage when tenders have been submitted and evaluated. Contracting authorities must also state the relative weighting of the criteria for the award of a contract or, if it is not possible to give the weighting, the descending order of importance of the criteria; see Annex IX, point 1(e). It is not necessary to state these if the contracting authority has already stated them in the contract notice, an invitation to confirm an interest, technical specifications or a descriptive document.

Article 55 Informing candidates and tenderers 1. Contracting authorities shall as soon as possible inform each candidate and tenderer of decisions reached concerning the conclusion of a framework agreement, the award of the contract or admittance to a dynamic purchasing system, including the grounds for any decision not to conclude a framework agreement, not to award a contract for which there has been a call for competition, to recommence the procedure or not to implement a dynamic purchasing system. 2. On request from the candidate or tenderer concerned, the contracting authority shall as quickly as possible, and in any event within 15 days from receipt of a written request, inform:

1

See Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 904.

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(a) any unsuccessful candidate of the reasons for the rejection of its request to participate, (b) any unsuccessful tenderer of the reasons for the rejection of its tender, including, for the cases referred to in Article 42(5) and (6), the reasons for its decision of non-equivalence or its decision that the works, supplies or services do not meet the performance or functional requirements, (c) any tenderer that has made an admissible tender of the characteristics and relative advantages of the tender selected as well as the name of the successful tenderer or the parties to the framework agreement, (d) any tenderer that has made an admissible tender of the conduct and progress of negotiations and dialogue with tenderers. 3. Contracting authorities may decide to withhold certain information referred to in paragraphs 1 and 2, regarding the contract award, the conclusion of framework agreements or admittance to a dynamic purchasing system, where the release of such information would impede law enforcement or would otherwise be contrary to the public interest, would prejudice the legitimate commercial interests of a particular economic operator, whether public or private, or might prejudice fair competition between economic operators. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 1339 et seq.

This provision is carried forward from Article 41 of Directive 2004/18/EC (the ‘2004 Public Sector Directive’). There are corresponding provisions in Article 75 of Directive 2014/25/EU (the ‘Utilities Directive’), Article 40 of Directive 2014/23/EU (the ‘Concessions Directive’) and Article 35 of Directive 2009/81/EC (the ‘Defence and Security Directive’). 2 The provision largely corresponds to that in the earlier Directive, and the purpose of the provision is set out in recital 82: 1

‘It should be clarified that the information concerning certain decisions taken during a procurement procedure, including the decision not to award a contract or not to conclude a framework agreement, should be sent by the contracting authorities, without candidates or tenderers having to request such information. It should also be recalled that Council Directive 89/665/EEC provides for an obligation for contracting authorities, again without candidates or tenderer having to request it, to provide the candidates and tenderers concerned with a summary of the relevant reasons for some of the central decisions that are taken in the course of a procurement procedure. It should finally be clarified that candidates and tenderers should be able to request more detailed information concerning those reasons, which contracting authorities should be required to give except where there would be serious grounds for not doing so. Those grounds should be set out in this Directive. To ensure the necessary transparency in the context of procurement procedures involving negotiations and dialogues with tenderers, tenderers having made an admissible tender should, except where there would be serious grounds for not doing so, also be enabled to request information on the conduct and progress of the procedure.’

According to the recital there is a link to the Remedies Directives. On the relevant provisions in the Remedies Directives, see the commentary on Article 2 a of Council Directive 89/665/EEC on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts in Part V of this Commentary. 4 It appears from the recital that candidates and tenderers are entitled to request information about the procurement procedure and how it is carried out. This is new in relation to Article 55(2). See the commentary on Article 55(2) below for further on the new elements of the provision. 3

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55.1. Informing candidates and tenderers of decisions Under Article 55(1) of the Public Sector Directive, a contracting authority has an obligation to inform each candidate or tenderer of decisions reached on the award of a contract. This obligation applies regardless of the more detailed content of the decision to award the contract. Thus a contracting authority must give information about its decisions, whether to award a contract or to refrain from awarding a contract. Article 55 refers expressly to framework agreements and dynamic purchasing systems, so there is no doubt that the obligation to inform covers contracting authorities’ decisions on these. The decisions covered by Article 55(1) unquestionably cover the final decision of a contracting authority about parties with whom a contract is to be entered into or who should be admitted to a purchasing system. However, it is not clear whether a contracting authority’s decisions on selecting candidates for restricted procedures, competitive dialogue procedures, and competitive procedures with negotiation are also covered by Article 55(1). It would seem to stretch the meaning of ‘decisions reached concerning the conclusion of a … contract’ quite far if it were to cover decisions on the selection of undertakings given the possibility of submitting tenders while other undertakings are rejected. However, compliance with the transparency principle and the principle of equal treatment, as well as regard for the effective enforcement of the Public Sector Directive, would favour a contracting authority informing all candidates about who has been selected so a rejected candidate can have a reasonable opportunity to appeal against their rejection at the prequalification stage. At the same time, the fact that the provision refers to candidates as well as tenderers indicates that decisions made prior to the award phase are also covered. If only decisions in the award phase were covered there would be no need to refer to candidates, since at that point in the process all economic operators will be tenderers rather than candidates. Article 55(1) covers the situation where the grounds for an award decision must be given. Where a contracting authority has decided not to award a contract that has been put out to tender or decided to recommence the procedure, Article 55(1) requires candidates and tenderers to be informed of the grounds for this. The notification given must be clear and unambiguous and may not contain incorrect or misleading information. It would be contrary to transparency principle and Article 55(1) if the grounds given were not the true grounds for the contracting authority’s decision. Article 55(1) does not require a contracting authority to give reasons why a contract has been awarded or reveal the winning tenderer’s name. However, Article 55(2)(c) requires contracting authorities to give this information to any tenderer who submits an admissible tender and who makes a written request for the information. In certain situations there can be weighty reasons why a contracting authority may refrain from giving information about the award of a contract; see the commentary on Article 55(3). The reference to candidates and tenderers must be assumed to be without qualification, in other words it must apply to all candidates and tenderers who have taken part in the procurement procedure. For example, there is no requirement for a tender to have been admissible in order for the tenderer to receive a statement of reasons. Thus, in principle, all candidates and tenderers have a right to receive a statement of reasons. This differs from the provision in Article 55(2) where in several cases there is a requirement that a tender should have been admissible. A contracting authority has no obligation to give information of its decisions to economic operators that have not taken part in the Michael Steinicke

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procurement procedure. There may be economic operators that have contemplated taking part in a procurement procedure but have refrained from doing so for some reason, and it is possible that such entities will be interested in knowing how the procedure has been conducted and concluded. However, practical reasons, such as the contracting authority’s knowing the identity of which entities could have an interest in the information, would make an obligation to inform difficult if not impossible to fulfil. The reason why Article 55(1) requires candidates and tenderers to be informed without their having submitted an admissible tender can be the practical ground that an undertaking that has sought participation but not been selected will naturally be interested in knowing whether the procurement procedure will be repeated, and if so, why. 10 It must be assumed that notice must be given to all candidates and tenderers at the same time. This is not stated in Article 55(1) but is based on the principle of equal treatment and the purpose of the provision which is to give rejected candidates and tenderers the possibility of understanding the outcome of the procurement procedure and the possibility of submitting an appeal as soon as possible. 11 The information must be given to candidates and tenderers ‘as soon as possible’; see Article 55(1). It is unusual in the Procurement Directives that no specific time limit is laid down by when the information must be given, and the lack of a time limit can mean that contracting authorities are less attentive to the requirement to inform. However, the requirement to inform ‘as soon as possible’ can be stricter than the usual approach in the Procurement Directives of laying down specific time limits. Thus the timing requirements for the information to be given to candidates and tenderers about a contracting authority’s decision on the award of a contract must presumably be interpreted strictly, particularly as the purpose is to inform candidates and tenderers of the contracting authority’s decision at a time that can still be relevant to the award if the decision is found to be unlawful. 12 Under Article 55(1) of the Public Sector Directive, information can be given to candidates and tenderers orally. However, since the information can help understanding of the process and affect the decisions of tenderers and candidates as to whether to request further information pursuant to Article 55(2), it would seem more appropriate for a contracting authority to communicate its decision in writing. Moreover there is a greater possibility of informing all tenderers and candidates simultaneously if it is given in writing. If a tenderer or candidate asks for the information to be given in writing, a contracting authority is obliged to do so. In this case written information must presumably be sent to all tenderers or candidates at the same time so as to ensure equal treatment with respect to the information given to economic operators.

55.2. Request for the reasons for a contracting authority’s rejection of a tender or request to participate 13

The Procurement Directives do not lay down an obligation for contracting authorities to give reasons for their decisions on how tenders or requests to participate are dealt with or assessed when the results are communicated to individual tenderers or applicants to participate in a procurement procedure. The summary of reasons that must be given after a decision is made will allow each undertaking to know whether their tender has been included in the competing tenders and thus whether it has been assessed as less competitive than another tender or whether their tender has been excluded on the grounds of failure to comply with the terms of the procurement or for any other reason. For tenders submitted pursuant to the Directive, the summary of reasons will thus provide a good basis for asking the contracting authority for more detailed reasons pursuant

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to Article 55(2), though only if the summary of reasons does not already contain the information that the contracting authority is required to give pursuant to Article 55(2). Article 55(2) of the Directive gives unsuccessful tenderers or applicants to participate 14 in a procurement procedure the possibility of asking the contracting authority for a reason for its decision. The reasons which a contracting authority is required to give under Article 55(2) depends on whether the undertaking has submitted an admissible tender that has been assessed against competing tenders on the basis of the award criteria laid down, or whether the undertaking’s tender or application to participate has been judged inadmissible so that the undertaking has been excluded from the competition at an earlier stage: – An unsuccessful candidate shall be informed of the reasons for the rejection of their request to participate. First, this covers candidates that have been rejected because of their failure to fulfil 15 the general requirements for candidates in an examination of their suitability, including failing to submit information and evidence of their general or other qualifications; see Article 56(1). Second, it covers candidates that have not been selected where, in restricted procedures, competitive procedures with negotiation, competitive dialogue procedures or innovation partnerships, contracting authorities limit the number of qualified candidates they will invite to tender or to conduct a dialogue with because they have limited in advance the maximum number of tenderers, as long as there is the required minimum number of candidates; see Article 65. A contracting authority only has an obligation to inform an unsuccessful candidate of the reason for their rejection if the candidate has made a written request for a statement of the reasons for the rejection. These reasons may only relate to that candidate’s application and the requirements laid down in the procurement notice and procurement documentation; any reference to other applications is not relevant. – An unsuccessful tenderer shall be informed of the reasons for the rejection of their tender This covers situations where an undertaking’s tender has been rejected as inadmissi- 16 ble, i.e. where a tender or application is rejected because of a failure to conform to the procurement requirements or because the tender has been rejected for some other reason, such as a failure to meet the time limit. In these cases the contracting authority is only obliged to inform the tenderer of the reason for the rejection of the tenderer’s own tender and the information only relates to the requirements laid down in the procurement notice and procurement documentation; any reference to other tenders is not relevant. In Article 55(2) it is emphasised that a reason must be given if a tender does not meet the technical specifications laid down or does not show that its proposed solutions fulfil the technical specifications in an equivalent manner (see Article 42(5)). A reason must also be given where functional requirements are laid down instead of technical specifications and where it is not shown that the proposal will satisfy the general technical specifications for performing the stipulated functional requirements; see Article 42(6). The contracting authority must state why, in its judgement, the technical requirements are not fulfilled in an equivalent manner, or why the goods or services offered to not satisfy the service or functional requirements. – Any tenderer that has submitted an admissible tender shall be informed of the characteristics and relative advantages of the tender selected as well as the name of the

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successful tenderer or, in the case of a framework agreement, the parties to the framework agreement. This provision covers the cases where a tenderer has submitted an admissible tender which has participated in competition with other tenders, but where another tender has been judged best according to the award criteria. In this situation a tenderer has a legitimate interest in obtaining information about which other tenderer has been awarded the contract and the characteristics of the successful tender that have led to it being judged best. If a tenderer has submitted an admissible tender and asks for the reason for its rejection, the contracting authority must inform that tenderer of the characteristics and relative advantages of the selected tender as well as the name of the successful tenderer or the parties to the framework agreement. 18 The purpose of giving an unsuccessful tenderer or candidate the right, upon request, to be informed of the reason for their rejection is to give the tenderer or candidate the possibility of assessing whether the contracting authority’s decision is properly justified and more generally to ensure the transparency of the procurement procedure. The determination of whether a decision is properly justified and the level of detail that must be given must be determined in the light of this purpose. When a tenderer asks for the reason for the rejection of their tender for a public procurement contract, they will not necessarily know whether their tender has been included in the assessment of tenders in accordance with the award criteria or whether it has been rejected at an earlier stage. Even if a tenderer’s request for a reason is generally worded (which will now only seldom be the case for contracts under the Public Sector Directive because of a contracting authority’s obligation to give a summary of reasons), a contracting authority will have an obligation to respond to the request by giving the relevant reasons for the unsuccessful outcome for that tenderer. It must be a minimum requirement under Article 55(2) of the Directive that the contracting authority should inform the tenderer as to whether their tender was admissible and was thus assessed against the award criteria. If a tender or application is rejected on the ground that it does not fulfil the conditions or is in some way defective, the specific defects must be referred to. It will not be sufficient merely to state that a tender does not fulfil the conditions of the procurement procedure or that it does not include the necessary information to enable an assessment to be made of the undertaking’s general qualifications. The reasons given must specifically state the point on which the tender or application fails to fulfil the stated requirements; see the reference to Article 42(5) and (6). If a tender is rejected by a comparison with other tenders on the basis of the award criterion of the best price-quality ratio, the reasons given must refer to the characteristics and relative advantages of the chosen tender, and give the name of the successful tenderer. Thus, a contracting authority must at least give information about whose tender has been chosen and the specific circumstances that have led to that tender being judged better than the tender submitted by the undertaking requesting reasons for the rejection of their tender. If the award criterion is the best price-quality ratio, the contracting authority must state which sub-criteria in the accepted tender are judged better than the equivalent sub-criteria in the tender submitted by the undertaking requesting reasons for the rejection of their tender, for example a lower price, better service or some other element that has been decisive for the competition. On the other hand, under Article 55(2) of the Public Sector Directive a contracting authority is not required to give a detailed account of its approach to the assessment of the winning tender or the tender submitted by the undertaking requesting reasons for its rejection in relation to the best price-quality ratio criterion or any sub-criteria. 17

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Case T-183/00 Strabag and Case T-4/01 Renco both concerned the procurement pro- 19 cedure for same contract for the maintenance of the buildings of the Council of Europe. The Court of First Instance found that the Council had given sufficient reasons pursuant to (now) Article 55(2) by: 1) giving the name of the tenderer to whom the contract had been awarded; 2) stating that the chosen tenderer had submitted the most economically advantageous tender (now the tender with the best price-quality ratio); and 3) in relation to each of the two unsuccessful tenderers, that the one’s tender had not been better than the winning tender in relation to any of the sub-criteria, and that the other’s tender had been assessed as being at the same level as the chosen tender on the basis of the qualitative criteria, but that it had not been chosen on the grounds of the price offered. The Court thus found that the unsuccessful tenderers could thereby see the specific reasons why their tenders had not been chosen. In Case T-169/00 Esedra, which concerned the Commission’s procurement of day nursery management services, the reasons for the tender in question being unsuccessful were that it had been submitted by a group of companies but did not list all the tendering companies by name, and that the unsuccessful tender had scored fewer points than the winning tender in the assessment of the tenders against the award criteria. This was found sufficient to enable unsuccessful tenderers to exercise their rights and to ensure the basis for subsequent proceedings. – A tenderer that has made an admissible tender must be informed of the conduct and progress of negotiations and dialogue with tenderers This is a new element in this provision and is distinguished by its focus on the process rather than on decisions. What is interesting in this connection is the selection that takes place in the course of the negotiation or dialogue, where tenderers may be eliminated. The provision does not state whether insight should be given in relation to other tenderers and their continuing in the competition. What is important is that tenders should be informed of the reasons for their elimination from negotiations. The reasons given for the rejection of a tender must be correct and must be sufficient to support the decision of the contracting authority. If an incorrect reason is given this will mean that the obligation to give reasons in Article 55(2) will not have been fulfilled. Moreover, if an incorrect reason is given this can be relevant to a subsequent assessment of whether the contracting authority has had a proper basis for rejecting a tender on the ground of its failure to comply with the terms of the procurement. However, the fact that a contracting authority has given an insufficient reason does not prevent from subsequently relying on the same reason. There is no requirement as to the form in which a contracting authority should state its reasons pursuant to Article 55(2), which does not even require reasons to be given in writing. However, there must be regard for the purpose of the provision, which is that the reasons given must enable an unsuccessful tenderer to give due consideration to the reasons. Thus the reasons for rejection must be given in such a way that the tenderer has a proper opportunity to consider the rejection; this can require the reasons to be given in writing. Given the question of evidence about what information has been given to unsuccessful tenderers or candidates and when the information has been given, it will usually be in the contracting authority’s interest to give the information in writing. This conclusion is supported by the fact that a request for the reasons for the rejection of a tender or application must be made in writing, so it must be appropriate for the reasons themselves to be given in writing. The reasons must be given as quickly as possible, and the Directive states that this should in any event be within 15 days from receipt of a written request for the reasons. The calculation of this deadline is to be in accordance with Regulation (EEC, Euratom)

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No 1182/71 determining the rules applicable to periods, dates and time limits, see also recital 106 to the Public Sector Directive. For unsuccessful candidates and tenderers to have a genuine possibility of considering and perhaps appealing against the award of a contract, there must be strict interpretation of ‘as quickly as possible’. However, in practice this should be less strict than the corresponding requirement under Article 55(1), where the contracting authority has full control over when the procurement process is terminated with the award of a contract or a termination of the process, and where the authority can thus prepare a notice of this to be sent to candidates and tenderers. Under to Article 55(2), a request for a reason for rejection can arrive at any time, and while in principle the response should amount to passing on readily available information, the contracting authority will need to consider how best to communicate the information. In any case, where a contracting authority has contractual obligations to the chosen tenderer by accepting their tender, the condition ‘as quickly as possible’ should not be applied with undue strictness. Under all circumstances the reasons must be given within 15 days of receipt of a request for them. However, exceeding this time limit or failing to provide reasons ‘as quickly as possible’ normally has no consequence other than that the time limit is exceeded.

55.3. Withholding information 24

In certain circumstances Article 55(3) of the Public Sector Directive allows a contracting authority to withhold or restrict the information referred to in paragraphs (1) and (2) of the Article on the award of a contract, the conclusion of a framework agreement or admittance to a dynamic purchasing system. However, Article 55(3) does not authorise a contracting authority to totally refrain from providing information about its decisions to award contracts. An authority may withhold specific information if there proper reasons for doing so. Refraining from giving information can be justified under Article 55(3) if its dissemination: – would impede law enforcement, – would otherwise be contrary to the public interest, – would prejudice the legitimate commercial interests of a particular economic operator, whether public or private, or – might prejudice fair competition between economic operators.

Previously Article 41 of the 2004 Public Sector Directive, on withholding information, only made an express reference to paragraph (1). Article 55(3) now refers to both paragraphs (1) and (2), which makes a lot of sense, since both paragraphs deal with information about a contracting authority’s award of a contract, entry into a framework agreement or admittance to a dynamic purchasing system; paragraph (2) is intended to cast light on the basis for the contracting authority’s decisions on this. Usually the rules on confidentiality referred to in Article 55(3) mainly apply where the authority’s reasons concern information about the winning tender and the identity of the winning tenderer. Such considerations will seldom apply when a reason is to be given for why an undertaking’s tender or application has been rejected. 26 Article 55(3) of the Directive puts a limit on the principle that applicants and tenderers have a right to full information about the outcome of the procurement process and to the full reasons for the rejection of their applications or tenders. In line with the general principles of interpretation of EU law, Article 55(3) must be interpreted restrictively and with regard to the principle of proportionality, so that a contracting authority must make 25

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a specific assessment of the circumstances of each case, weighing transparency against confidentiality. Maintaining confidentiality must also take account of whether the information is available or can be expected to be made available by other means. Which circumstances are covered by Article 55(3) and the weight to be given to these circumstances, whereby a contracting authority can refrain from giving certain information in general or in its reasons for rejecting a tender or an application, depend on an interpretation of EU law. The case law on national rules that allow exemptions from freedom of information laws cannot be directly transposed for interpreting Article 55(3). However, it must be assumed that a contracting authority cannot refrain from disclosing information pursuant to Article 55(3) if the tenderer would in any case be able to obtain access to the information under national freedom of information rules.

Section 3 Choice of participants and award of contracts Article 56 General principles 1. Contracts shall be awarded on the basis of criteria laid down in accordance with Articles 67 to 69, provided that the contracting authority has verified in accordance with Articles 59 to 61 that all of the following conditions are fulfilled: (a) the tender complies with the requirements, conditions and criteria set out in the contract notice or the invitation to confirm interest and in the procurement documents, taking into account, where applicable, Article 45; (b) the tender comes from a tenderer that is not excluded in accordance with Article 57 and that meets the selection criteria set out by the contracting authority in accordance with Article 58 and, where applicable, the non-discriminatory rules and criteria referred to in Article 65. Contracting authorities may decide not to award a contract to the tenderer submitting the most economically advantageous tender where they have established that the tender does not comply with the applicable obligations referred to in Article 18(2). 2. In open procedures, contracting authorities may decide to examine tenders before verifying the absence of grounds for exclusion and the fulfilment of the selection criteria in accordance with Articles 57 to 64. Where they make use of that possibility, they shall ensure that the verification of absence of grounds for exclusion and of fulfilment of the selection criteria is carried out in an impartial and transparent manner so that no contract is awarded to a tenderer that should have been excluded pursuant to Article 57 or that does not meet the selection criteria set out by the contracting authority. Member States may exclude the use of the procedure in the first subparagraph for, or restrict it to, certain types of procurement or specific circumstances. 3. Where information or documentation to be submitted by economic operators is or appears to be incomplete or erroneous or where specific documents are missing, contracting authorities may, unless otherwise provided by the national law implementing this Directive, request the economic operators concerned to submit, supplement, clarify or complete the relevant information or documentation within an appropriate time limit, provided that such requests are made in full compliance with the principles of equal treatment and transparency.

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4. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 to amend the list in Annex X, where necessary, to add new international agreements that have been ratified by all Member States or where the existing international agreements referred to are no longer ratified by all Member States or they are otherwise changed, for instance in respect of their scope, content or denomination. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, Vol. 1, chap. 12; Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, chap. 7; Steinicke and Groesmeyer, EU’s Udbudsdirektiver, p. 1089-1120. Trepte, Peter, Public Procurement in the EU – A Practioner’s Guide; Adrian Brown, ‘The Court of Justice rules that a contracting authority may accept the late submission of a bidder's balance sheet, subject to certain conditions: Case C-336/12 Danish Ministry of Science, Innovation and Higher Education v Manova A/S’, in: PPLR 2014, 1, NA1-NA3; Carina Risvig Hamer, ‘Requesting additional information – Increase of flexibility and competition?’, in: Grith Skovgaard Ølykke & Albert Sanchez Graells (eds), Reformation or Deformation of the EU Public Procurement Rules in 2014 (Edward Elgar Publishing, Cheltenham 2016); Steinicke, Michael, ‘Qualification and Shortlisting’ (chap. 5), in: Trybus, Caranta and Edelstam (eds), EU Law and Public Contracts; Martin Burgi, Martin Trybus and Steen Treumer (eds), Qualification, selection and exclusion in EU procurement, European law series, DFJØ Publishing 2016; Carina Risvig Hamer, Grundlæggende Udbudsret, DJØF Publishing chap. 14. 56.1. General principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56.2. Examine tenders before verifying the grounds for exclusion and selection criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56.3. Incomplete or erroneous applications or tenders. . . . . . . . . . . . . . . . . . . . . . . . . . . 56.4. The Commission is empowered to adopt delegated acts to amend the list in Annex X. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Article 56 contains the overall principles regarding the award of contracts and choice of participants. A similar provision was found in Article 44(1) of Directive 2004/18/EC, but the provision in Article 56 has been updated with several new clarifications and inventions. 2 The aim of the general principles in the provision is to ensure that the tenderer who is awarded the contract is qualified to perform it (and that the tenderer will be able to finish the contract) as well as to ensure that the tenderer has not been convicted of a serious crime or similar. The general principles for the choice of participants and award of contracts are the same in all types of procurement procedures and consist of a selection phase and an award phase. 3 Article 56(1) contains a short summary of the basic conditions that have to be met before awarding the contract. Thus, the contract must be awarded based on the award criteria in Articles 67-69 provided that the tender complies with the requirements, conditions and criteria set by the contracting authority and the tenderer is not excluded in accordance with Article 57. Furthermore, the tenderer must meet the selection criteria set out by the contracting authority in accordance with Article 58. The provision emphasises that the contracting authority must verify that all the conditions are fulfilled and that this must be done in accordance with articles 59-61 (see below Section 56.1.) 4 As a new element in the 2014 Directive; Article 56(2) now explicitly allows for the contracting authority to evaluate the tender before going through the selection phase. Clearly, such an option will only be used in a one-phase procedure, open procedure, but provides the advantage for the contracting authority of being able to look for, e.g., the lowest price first and afterwards examine whether the tenderer fulfils the selection and exclusion criteria. Thus, examining the tenders first may make the evaluation process 1

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easier for the contracting authority, especially in cases where many tenders have been submitted and where the best tender can easily be identified, see below at section 56.2. Furthermore, a provision has been included in Article 56(3), which allows the con- 5 tracting authority to ask the economic operators concerned to submit, supplement, clarify or complete relevant information or documentation in cases where information is missing or appears incorrect in the application or tender submitted. The provision seeks to avoid a situation where the contracting authority has to refuse a good tender on the ground that the tender did not live up to certain formality requirements, see below at section 56.3. Thus, Article 56 establishes the overall setup for the choice of participants in procure- 6 ment procedure, while Article 57 relates to the exclusion grounds, Article 58 deals with selection criteria, and Article 59-62 relates to the documentation requirements in relation to exclusion and selection criteria. Article 64 contains a provision regarding official lists and certificates. Finally Article 63 contains the rules regarding the situation where an economic operator may rely on the capacities of other entities.

56.1. General principles Article 56(1) contains a short summary of the basic conditions that have to be met for 7 awarding a given contract. Firstly, the provision prescribes that contracts shall be awarded on the basis of criteria laid down in accordance with Articles 67 to 69. Thus, the contract shall be awarded to the tenderer who has submitted the most economically advantageous tender. This relates to what the tenderer can offer and not (as much) to the tenderers themselves. See the commentary to Article 67-69 regarding the award phase. Before the contracting authority can start the award phase it must ensure that the ten- 8 der: (a) complies with the requirements, conditions and criteria set out in the contract notice or the invitation to confirm interest and in the procurement documents, taking into account, where applicable, Article 45 (variants)1 (b) comes from a tenderer that is not excluded in accordance with Article 57 and that meets the selection criteria set out by the contracting authority in accordance with Article 58 and, where applicable, the non-discriminatory rules and criteria referred to in Article 65. The first requirement in Article 56(1), litra a) relates to the tender itself and the conditions, which the contracting authority has required in the contract notice, which the tender must ensure. This could, for example, be requirements relating to the performance of the contract such as technical specifications, which lay down the characteristics the contracting authority requires for the works, service or supply, functional requirements, and other relevant aspects that the contracting authority has stated in the procurement documents. The 2004 Directive did not in Article 44(1) (corresponding to Article 56) refer to the fact that the tender had to fulfil the requirements set by the contracting authority. Nonetheless, the new wording in the 2014 Directive Article 56(1) is merely a clarification of the current state of law where such a requirement already exists due to the principle of transparency and equal treatment. Therefore, nothing further should be read into this change of wording in the 2014 Directive. The second requirement in Article 56(1), litra b) relates to the requirements set by the contracting authority in relation to the economic operator and whether the economic operator is qualified to perform a given task (or perhaps more importantly whether the 1

A similar wording is found in Article XV:4 of the GPA.

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economic operator is not qualified). This means that the tenderer must not have been excluded based on the grounds mentioned in Article 57 and the tenderer must meet the selection criteria in Article 58 as established by the contracting authority. In some cases (restricted procedures, competitive procedures with negotiation, competitive dialogue procedures and innovation partnerships), contracting authorities may limit the number of candidates meeting the selection criteria that they intend to invite to tender or to conduct a dialogue. In such cases, the contracting authority must ensure that the objective and non-discriminatory criteria or rules they intend to apply, referred to in Article 65, are fulfilled with regard to reducing the number of candidates or tenderers. See the commentary to Article 65 for further on reducing the number of candidates and tenderers. 9 Thus, all procurement procedures consist of a selection phase and an award phase. The Court of Justice has several times stated that the two phases must be kept separated and take place according to different rules. An evaluation of the two phases may take place simultaneously, but “… the two procedures are nevertheless distinct and are governed by different rules.”2 Thus, the selection phase concerns the tenderers’ suitability to perform a given task, whereas the award phase is an evaluation of the tender submitted for the specific contract in question. A highly relevant (and debated) question is whether consideration of elements linked to the suitability of a tenderer, such as tenderers’ previous experience with the type of contract in question, is allowed during the award phase.3 The discussion seems to be closed with the insertion of the option provided in Article 67 to use as a criterion for awarding a contract: “(b) organisation, qualification and experience of staff assigned to performing the contract, where the quality of the staff assigned can have a significant impact on the level of performance of the contract”. This means that even though experience of staff relates to whether a given operator is qualified (selection phase), the experience of the staff can influence the quality of the works or services, and, therefore, it can be relevant to also include this in the award phase. This would give tenderers the opportunity to compete for the contract on the basis of a comparison by the contracting authority as to which tenderer is the most experienced (i.e. has the most qualified and experienced staff). Therefore, such an evaluation may be used when this will have a significant impact on the level of performance of the contract. For further on the matter, see the commentary to Article 67. 10 The verification as to whether an economic operator meets the exclusion and selection criteria, hence whether the conditions are fulfilled, will take place in accordance with Articles 59 to 61, which contain the rules on means of proof (required documents) to be submitted.4 As can be seen in the wording of the provision in Article 56(1) it is for the contracting authority to verify that the above-mentioned conditions are fulfilled. Thus the question is whether the contracting authority has an obligation to examine tenders in detail, par2 Case C-31/87, Gebroeders Beentjes BV v. the Netherlands [1988] ECR 4635, paragraphs 15 and 16. Case C-532/06, Emm. G. Lianakis AE, Sima Anonymi Techniki Etaireia Meleton kai Epivlepseon and Nikolaos Vlachopoulos v. Dimos Alexandroupolis and Others [2008] ECR I-251, paragraph 26 regarding services. Case C-199/07, Commission v. Greece [2009] ECR I-1669, paragraph 51. 3 See, for example, the special issue of Public Procurement Law Review [2009] edited by Steen Treumer, no. 3, pp. 103-164. In that issue case law from Germany, Italy, Belgium, Norway and Denmark is analysed in the context of before and after Lianakis. 4 Regarding the obligation to verify that the tenders meet the award criteria this follows from case law from the Court of Justice, particular C-448/01, EVN Wienstrom (paras. 45 et seqq.), according to which the principle of equal treatment requires that contracting authorities effectively verify whether tenders meet the award criteria.

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ticular the accuracy of the information that tenderers have given the contracting authority in their tender before the contract is signed.5 It often happens that an unsuccessful tenderer draws attention the winning tenderer’s products or services and that these do not live up to the contracting authority’s requirements, or that the undertaking is covered by one of the exclusion grounds or similar and the question is whether the contracting authority has a duty to examine the tender based on such information. The starting point must be that the contracting authority does not have a general obligation to investigate the tenders submitted. It can be quite costly to conduct such investigations of applicants and tenderers. However, it may be argued that when the contracting authority has specified requirements in the procurement documents, it will be contrary to the principle of equal treatment to award a contract to a tenderer that did not live up to the requirements, hence that the contracting authority should ensure that the information is correct. Another important element is that such verification after the award decision has been made can potentially conflict with the ban on negotiation, especially if the tenderer is given the opportunity to correct elements, which could have influenced the award decision. The verification must therefore only relate to technical clarifications, and not a negotiation that can change the tender. See on the possibility for a tenderer to supplement its tender below Section 56.3. Whether there will be a duty for the contracting authority to examine whether information in a tender is correct will depend on the type of information and what has caused the contracting authority to be in doubt as to whether the submitted information was correct. Article 56(1) also states that “Contracting authorities may decide not to award a con- 11 tract to the tenderer submitting the most economically advantageous tender where they have established that the tender does not comply with the applicable obligations referred to in Article 18(2).” It is for the contracting authority to decide not to award the contract to such a tenderer, and hence it is not mandatory to exclude an economic operator. However, Article 18(2) contains an obligation for Member States to take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law.6 The reference in Article 56(1) to the possibility of excluding such an economic operator shows the importance of public contracts being performed in accordance with applicable obligations in the fields of environmental, social and labour law.7 The importance can also be seen as Article 57(4), which contains the discretionary grounds for exclusion, also states that “Contracting authorities may exclude or may be required by Member States to exclude from participation in a procurement procedure any economic operator in any of the following situations: (a) where the contracting authority can demonstrate by any appropriate means a violation of applicable obligations referred to in Article 18(2).” Thus, noncompliance with obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environ-

5 A particular obligation to verify a tender exists regarding abnormally low tenders, see the commentary on Article 69 regarding abnormally low tenders. 6 Article 18(2) states “Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X.” 7 According to Cluster 2, Strategic use of public procurement, document nr. 5369 /12, of January 2012, p. 26, “This allows to ensure compliance with basic social and environmental law obligations and to prevent encouraging ‘social dumping’.”

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mental, social and labour law provisions listed in Annex X, can justify excluding a tenderer and not awarding the contract to such a tenderer. 12 To sum up, the introductory provision in Article 56(1) regarding the general principles for the award of a public contract, ensures that before the contracting authority can award the contract, the tender itself must be must be admissible, fulfilling all requirements, conditions and criteria set by the contracting authority, and the tenderer must have been subjected to qualitative selection, hence not have been excluded as well as been seen to fulfil the selection criteria.

56.2. Examine tenders before verifying the grounds for exclusion and selection criteria 13

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Article 56(2) states that in one-phase procedures contracting authorities are in principle free to decide about the order in which they wish to examine selection and award criteria. The 2004 Directive did not contain such a provision, but it was not prohibited. Thus, it could be argued that it was already permitted under the 2004 Directive to examine award criteria first and hence the provision is merely a technical clarification. However, the option was not used in practice and with the 2014-Directives explicit reference to that option it is possible that we will se an increase in the use of this method in procurement procedures in the future. An increase of this method might be anticipated due to the fact that the evaluation of tenderers suitability, ESPD and documentation in general has in practice become more complicated with the 2014 Directive despite the intention to make it simpler. Examining the award criteria first may improve the efficiency of the procurement procedure if assessment of the award criteria is relatively easy and straightforward, such as awards on the basis of cost only. In such a case, contracting authorities must, of course, ensure full and proper application of the rules on qualitative selection by subsequently excluding the tenderer having submitted the best tender if it turns out that there is a ground for exclusion or that the selection criteria are not fulfilled.8 Examining the tenders in relation to award criteria before looking at possible grounds for exclusion and examining the selection criteria could be particular helpful in situations where the contracting authority receives many tenders and where it would be very easy to identify the most advantageous tender. This could also be the situation where the contracting authority uses e-auctions in an open procedure, but could also relate to other situations where the contracting authority receives many tenders and where it will be relatively easy for the contracting authority to establish the winning tender. Where contracting authorities make use of that option, they shall subsequently ensure that the verification of absence of grounds for exclusion and of fulfilment of the selection criteria is carried out in an impartial and transparent manner so that no contract is awarded to a tenderer that should have been excluded pursuant to Article 57 or that does not meet the selection criteria in Article 58 set out by the contracting authority. One question relates to the reasons the contracting authority must provide in accordance with Article 55. According to Article 55(2 b) the contracting authority must give any unsuccessful tenderer “… the reasons for the rejection of its tender (…)” The same requirements for the contracting authority’s reasons for the award of the contract must be given to the tenderers and the contracting authority would need to observe a standstill-period in accordance with the Remedies Directive. This also means that the contracting authority must examine the individual tenders and state reasons. However, in these cases it should be sufficient merely to relate to the tender in relation to the award 8

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criteria and not examine whether the exclusion and selection criteria are met and since the option to evaluate tenders before examining the selection criteria often only will be used where evaluation is relatively easy, the reasons the contracting authority must give the tenderers as to why they were not awarded the contract should be relatively easy and fast for the contracting authority to state. See the commentary on Article 49 regarding the requirement to state reasons. Member States may exclude the option of examining tenders before verifying the se- 18 lection criteria, or restrict it to, certain types of procurement or specific circumstances. It seems unlikely that any Member States would exclude the use, as it does not raise any particular concerns. However, limiting the use to specific circumstances for example when the award is based on lowest price could be a possibility. It should be borne in mind that the 2014 Directive introduces an obligation for con- 19 tracting authorities to accept the European Single Procurement Document (ESPD) at the time of submission of requests to participate or of tenders, consisting of an updated self-declaration as preliminary evidence in replacement of certificates issued by public authorities or third parties confirming that the relevant economic operator is not in one of the situations referred to in Article 57 in which economic operators shall or may be excluded. Before awarding the contract, the contracting authority shall require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60 and, where appropriate, Article 62.

56.3. Incomplete or erroneous applications or tenders Article 56(3) permits the contracting authority to request tenderers who have submit- 20 ted information or documentation, which appears to be incomplete or erroneous, to submit, supplement, clarify or complete the relevant information or documentation. A similar provision was not found in Directive 2004/18/EC, though Article 51 contained a provision on additional documentation and information.9 Under the 2004 Directive it was therefore unclear whether contracting authorities were permitted to ask the tenderers to supplement their tender and if so to what extent. According to Article 56(3) national law can limit the option for contracting authori- 21 ties to ask tenderers to supplement their tenders. Thus, Member States are not required to implement the provision, but since it creates additional flexibility for contracting authorities it is assumed that most Member States will in fact implement the provision. It could also be argued that the option is a possibility due to the principle of equal treatment in the sense that contracting authority already has the option without the need to implement it. Even though many stakeholders had asked for a similar possibility, the provision in 22 Article 56(3) was not a part of the Commission’s proposal. Instead, the possibility was inserted in one of the compromise proposals under the Danish EU Presidency.10 At first, it was suggested that it should be mandatory for contracting authorities to ask for missing information etc., 11 but this was at a later stage changed so as to make it a possibility for contracting authorities to ask tenderers to supplement a tender. Hence it will be for the contracting authority to decide whether it wishes to ask tenderers to supplement a tender. The fact that the provision is voluntary for contracting authorities ensures that 9 Directive 2004/18/EC Article 18 states: “The contracting authority may invite economic operators to supplement or clarify the certificates and documents submitted pursuant to Articles 45 to 50.” 10 For further on the legislative background of the provision see Carina Risvig Hamer, ‘Requesting additional information – Increase of flexibility and competition?’, in Grith Skovgaard Ølykke & Albert Sanchez Graells (eds), Reformation or Deformation of the EU Public Procurement Rules in 2014 (Edward Elgar Publishing, Cheltenham 2016).

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tenderers will seek to ensure that the tender submitted is in accordance with the requirements set by the contracting authority as a tenderer may not get the opportunity to submit additional information later on. 23 The fact that such a provision was included under the Danish EU Presidency is not surprising at all since the topic has resulted in a number of cases before the Danish Complaints Board for Public Procurement. The Complaints Board for Public Procurement had, in a long line of cases,12 stated that in situations where tenderers did not submit the required documents, the contracting authority had a duty to reject the tender. The same applied in cases where the tenderer had submitted the required documents, but information in the documents was missing or erroneous.13 One particular case, Manova A/S mod Undervisningsministeriet14 ended with a preliminary ruling from the Court of Justice.15 The Manova case concerned a tenderer for a contract regarding services listed in Annex IIB (the provision of guidance to people hoping to follow a higher educational or vocational training course, which falls within Category 24 of Annex IIB to Directive 2004/18). One of the requirements set by the contracting authority was that tenderers should submit “… a copy of the most recent balance sheet in so far as the tenderer is obliged to draw up such a document”. Two tenderers (the University of Copenhagen and the University of Southern Denmark) did not submit the required balance sheet, which the contracting authority chose to disregard and asked the tenderers to submit them. Another tender, Manova, filed a complaint before the Danish Complaints Board for Public Procurement. The Complaints Board found that the contracting authority did not have a right to ask the two tenderers to submit the missing balance sheets, but, instead, the contracting authority should have rejected the two tenders. The Board based its ruling on the principle of equal treatment. After internal government coordination,16 the Ministry appealed the case to the Danish Court, Østre Landsret (High Court – east) which asked the Court of Justice for a preliminary ruling on the matter. The High Court asked “whether the principle of equal treatment is to be interpreted as precluding a contracting authority from asking a candidate, after the deadline for applying to take part in a tendering procedure, to provide documents describing that candidate’s situation – such as a 11 See Cluster 3: Reducing documentation requirements, Council document no. 9185/12, which suggested in Article 54, 1 a that “Where information or documentation submitted by economic operators in respect of the conditions set out in paragraph 1 is or appears to be incomplete, missing or erroneous, economic operators shall be given the opportunity to supplement, clarify or complete this information or documentation within an appropriate time limit set by the contracting authority. Contracting authorities may also invite economic operators to correct manifest errors or complete missing information needed for the assessment of award criteria, provided that this possibility is applied in full respect of the principles of equal treatment and transparency”[emphasis added]. 12 See for example the Danish Complaints Boards for Public Procurement decision of November 22, 2004, Dansk Restprodukthåndtering A.m.b.a. v. Aarhus Kommune, decision of May 30, 2008, Serviceselskabet for vagtlæger i Region Midt ApS v Region Midtjylland, decision of April 22, 2010, Keto Vikar ApS v Københavns Kommune. 13 E.g. Danish Complaints Boards for Public Procurement, decision of March 10 2009, Munkebjerg Hotel A/S v. Økonomistyrelsen, where the tenderer had submitted the required declaration of honour that they had fulfilled all the obligations, but where the tenderer had crossed or ticked-off wrongly. 14 Decision from the Danish Complaints Board for Public Procurement of March 10, 2010, Manova A/S v. Undervisningsministeriet. 15 Case C-336/12 Danish Ministry of Science, Innovation and Higher Education v Manova A/S [2013]. 16 See Rass Holdgaard & Anni Noes Westergaard, EU-Domstolen korrigerer Klagenævnet for Udbud, Advokaten 1, January 2014, which can be found at http://www.advokatsamfundet.dk/Service/Publikationer/Tidligere%20artikler/2014/Advokaten%201/EUretspolitik.aspx [Last accessed November 2017]. The authors of the article are lawyers at Kammeradvokaten, who represented the Danish government in the case before the CJEU.

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copy of its published balance sheet – which were called for in the contract notice, but were not included with that candidate’s application.”17 The Danish government submitted an opinion in the case arguing the disadvantage of a strict interpretation of the principle of equal treatment including the fact that the requested information was historical and hence would have no impact on the competition.18 As a preliminary point the Court of Justice referred to that although, under Article 21 of Directive 2004/18/EC, public contracts concerning services listed in Annex IIB to that directive are to be subject solely to Articles 23 and 35(4) thereof, the fundamental rules of the Treaty and the general principles of EU law apply to such contracts where they are of certain cross-border interest. The Court also referred to the fact that the principle of equal treatment requires that comparable situations must not be treated differently, and that different situations must not be treated in the same way, unless such treatment is objectively justified.19 The Court then referred to the Slovensko case20 in which the Court had found that the principle of equal treatment “… does not preclude the correction or amplification of details of a tender, on a limited and specific basis, particularly when it is clear that they require mere clarification, or to correct obvious material errors”. Such a correction may take place if the request is sent in an equivalent manner to all tenderers in the same situation, the request must relate to all sections of the tender which require clarification, the request may not lead to the submission, by a tenderer, of what would appear in reality to be a new tender. Finally, when the contracting authority exercising its right to ask a tenderer to clarify its tender, the contracting authority must treat tenderers equally and fairly, in such a way that a request for clarification does not appear unduly to have favoured or disadvantaged the tenderer or tenderers to which the request was addressed, once the procedure for selection of tenders has been completed and in the light of its outcome.21 Based on these considerations from the Slovensko case (which dealt with award of contract) the Court found that these principles could also be applied to applications submitted at the screening stage for candidates in a restricted procedure. Thus, the Court stated that “… the principle of equal treatment must be interpreted as not precluding a contracting authority from asking a candidate, after the deadline for applying to take part in a tendering procedure, to provide documents describing that candidate’s situation – such as a copy of its published balance sheet – which can be objectively shown to pre-date that deadline, so long as it was not expressly laid down in the contract documents that, unless such documents were provided, the application would be rejected. That request must not unduly favour or disadvantage the candidate or candidates to which it is addressed.”22 The Courts ruling in Manova creates flexibility,23 and is in line with the provision in Article 56(3). The CJEU position in Manova has also been confirmed in later cases e.g. Cartiera dell’Adda.24 This case concerned interpretation of the exclusion grounds in Article 45. The national court asked the CJEU whether Article 45 of the 2004 Directive must be interpreted as precluding the exclusion of an economic operator from a tender17 Case C-336/12 Danish Ministry of Science, Innovation and Higher Education v. Manova A/S [2013], OJ C 344, 23.11.2013, p. 34-35, paragraph 25. 18 See Rass Holdgaard og Anni Noes Westergaard, EU-Domstolen korrigerer Klagenævnet for Udbud, Advokaten 1, january 2014. 19 Case C-336/12 Danish Ministry of Science, Innovation and Higher Education v. Manova A/S [2013], OJ C 344, 23.11.2013, p. 34-35, paragraphs 26 and 30. 20 Case C‑599/10 SAG ELV Slovensko and Others [2012], OJ C 151, 26.5.2012, p. 7-8. 21 Case C-336/12 Danish Ministry of Science, Innovation and Higher Education v. Manova A/S [2013], OJ C 344, 23.11.2013, p. 34-35, paragraphs 37-40 and the case law cited therein. 22 Case C-336/12 Danish Ministry of Science, Innovation and Higher Education v Manova A/S, paragraph 40.

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ing procedure on the grounds that the operator has failed to comply with a requirement laid down in the contract documentation to annex to the tender, on pain of exclusion, a statement to the effect that the person designated in the tender as the operator’s technical director has not been the subject of criminal proceedings or a conviction, where, at a date after the expiry of the deadline for submitting tenders, such a statement has been provided to the contracting authority or it is shown that the person in question was identified as the technical director in error. The CJEU found that contracting authority, must comply with the criteria which it has itself established, so that it will be required to exclude from the contract an economic operator who has failed to provide a document or information which he was under an obligation to produce under the terms laid down in the contract documentation. In that case, the contracting authority had, in the specifications for the contract, listed a series of grounds on which a tenderer may be excluded from participation in the procurement procedure. Those grounds included the fact that one of the documents and/or one of the sworn statements is incomplete or irregular, except where any irregularity was of a purely formal nature and may be remedied but was not decisive for the assessment of the tender.25 In a pending case, the CJEU has been asked whether it is possible for a tenderer, after the tender’s submission deadline, to make a reference to the experience of a third party, which was not referred to in the initial tender, hence, whether the tenderer can present documents that evidence its ability to rely on that third-party experience after the submission deadline.26 The General Advocate in the case is of the opinion that the possibility to supplement a tender is to be considered exceptional, but not non-existent. He concludes that in this case supplementing was not possible as reliance on a third party does not amount to a mere clarification or formality. It constitutes in fact a significant change to the tender. 24 Article 56(3) gives the contracting authority permission to request tenderers who have submitted information or documentation, which appears to be incomplete or erroneous to submit, supplement, clarify or complete the relevant information or documentation. Article 56(3) requires that asking for additional information is done in accordance with the principles of equal treatment and transparency, and this is where the CJEU case law and Manova, discussed above, become highly relevant, as the case law limits the type of information that can be supplemented and sets requirements as to how requests for information must be submitted. It is a requirement that before the contracting authority can ask tenderers to supplement a tender, the document in question must be shown to have existed prior to the deadline. This can also been seen in the Advocate General, Bobek’s statement in a pending case, who argues that In my view, the approach of the Court could perhaps best be captured by a metaphor: the information and documentation submitted by a tenderer upon the lapse of the submission deadline represents a snapshot. Only the information and docu23 See also Adrian Brown, The Court of Justice rules that a contracting authority may accept the late submission of a bidder’s balance sheet, subject to certain conditions: Case C-336/12 Danish Ministry of Science, Innovation and Higher Education v Manova A/S, PPLR 2014, 1, NA1-NA3, which states that the Court’s reply is flexible and demonstrates some “welcome common sense”. The Manova case has also been commented by Nina Holst-Christensen, in EU-Ret & Menneskeret, no. 6, December 2013 and Xavier Codina Garcia-Andrade, Why Manova is not Slovensko: a new balance between equal treatment of tenderer and competition, PPLR 2015, NA109-117. Others have found the case law to be strict; see e.g. A. SanchezGraells, ‘CJEU confirms strict approach against acceptance of incomplete submissions in public procurement (C-42/13)’, available at: http://www.howtocrackanut.com/blog/2014/11/ cjeu-confirms-strict-approach-against.html. 24 C-42/13, Cartiera dell’Adda v. CEM Ambiente SpA, EU:C:2014:2345. See also C-324/14, PARTNER Apelski Dariusz v. Zarząd Oczyszczania Miasta. 25 See also C-324/14, PARTNER Apelski Dariusz, EU:C:2016:214, paragraphs 68 and 69. 26 C-387/14, Esaprojekt, application of 14.8.2014 [2014] OJ C431/7.

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mentation already contained in that picture may be taken into account by the contracting authority. This does not prevent the contracting authority from zooming in on any details in the picture that were a bit blurry and requesting an increase in the picture’s resolution in order to see the detail clearly. But the basic information must already have been, albeit in low resolution, in the original snapshot.”27 Adrian Brown states “This requirement is understandable, because it would be unduly favourable to allow the bidder to take advantage of the additional time, beyond the deadline, to create or enhance the document in question. In the current case, given the formal nature of the document, it is likely to have been easy for the bidder to show that the balance sheet in question existed prior to the deadline for applications, but this will not always be the case.” As pointed out by Adrian Brown it can be sometimes be difficult to establish whether information existed prior to the deadline for application. Examples of information, which does exist, could be insurance policies or information as to the turnover of the economic operator. It could be more difficult with regard to a list of references, where such work might have already been performed, but where the tenderer lacks to provide the information. In Esaprojekt28 the General Advocate is of the opinion that the possibility to supplement a tender relating to the reliance on a third party does not amount to a mere clarification or formality. It constitutes in fact a significant change to the tender. On the one hand it could be argued that producing such a document would give that tenderer more time than the other tenderers and that,hence, it should not be possible to submit such documents. However, in many cases such a reference list will already have been made and the question therefore seems to be more whether the economic operator can demonstrate that the information was already available. Arrowsmith seems to be even more flexible and is of the opinion that the “… correction is allowed whenever there is no significant advantage to be gained by late submission”.29 If this line is followed, the example with the references would depend on the amount of time it will take to produce such a reference and whether this gives the undertaking an advantage in the competition. However, it is important that the information exist beforehand. A particularly relevant issue is whether the contracting authority could ask to have 25 the European Single Procurement Document (ESPD) submitted by an economic operator who has failed to submit it or the ESPD lacks information. The Directive is silent on the matter, but it will be a particularly relevant question to answer as the Directive states that, as a starting point, at the time of submission of requests to participate or of tenders contracting authorities shall accept the European Single Procurement Document (ESPD) consisting of an updated self-declaration as preliminary documentation meant to show that the relevant economic operator is not in one of the situations referred to in Article 57 in which economic operators shall or may be excluded and that they meet the selection criteria. Before awarding the contract, the contracting authority shall require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60 and, where appropriate, Article 62. On the one hand it can be argued that the ESPD only contains information, which does not give the economic operator an advantage in case the economic operator fails to submit the ESPD. On the other hand, if the economic operator did not submit the information required in the ESPD (did not complete the ESPD) prior to the submission of a tender and, hence, it could be argued that it would not be possible to submit it. It is submitted, that the contracting authority may ask tenderers to submit the ESPD, but is not obliged to do so. Thus, tenderers are left with the insecurity that the tender C-387/14 Esaprojekt, application of 14.8.2014 [2014] OJ C431/7, paragraph 28. C-387/14 Esaprojekt, application of 14.8.2014 [2014] OJ C431/7. 29 See Sue Arrowsmith, The Law of Public and Utilities Procurement, 2014, p. 695. 27

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may be rejected, which should give the tenderer a reason to seek to remember to submit the ESPD. The reason why contracting authorities should be able to ask for the ESPD is that the contracting authority would later on receive full documentation from the economic operator if the operator is awarded the contract, and it would be quite formalistic if the contracting authority should be required to reject the tenderer on this ground. 26 Another issue is whether the contracting authority can ask for other things than missing documents such as for example samples. The wording of the provision indicates that where documentation to be submitted by the economic operators is missing such can be asked for. Since samples would be used for documentation and can be said to have existed prior to the deadline it should be possible for contracting authorities to ask tenderers to submit samples where such are missing (and where the contracting authority had required such to begin with). 27 Another relevant question is, if the contracting authority is obliged to ask all tenderers to supplement the tender if documents or information are missing. Article 56(3) explicitly states that when the contracting authority requests tenderers to supplement their tender “such requests are made in full compliance with the principles of equal treatment and transparency.”30 The principle of equal treatment requires that “comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified.”31 Thus, if it is the same type of information the tenderers failed to submit, the contracting authority is obliged to ask all tenderers to submit the information. This would presumably even be the case, if the information can be easier for one tenderer to supply than for the others. The situation could, however, be different if it is not the same type of information the tenderers failed to provide. The answer to the question is not obvious and presumably depends on what type of information the economic operators have failed to supply. Different types of mistakes might justify different treatment.32 One question in that regard is if the contracting authority is required to act in the same way in all its procurement procedures in the sense that if the contracting authority in one procedure asks for missing documents he would also need to ask for missing documents in another procurement procedure. The principle of equal treatment requires that comparable situations must not be treated differently. Taking this literally it is likely that the contracting authority could not act differently in the same types of situations e.g. if the ESPD is missing in two procedures. However, the contract involved might justify that the contracting authority acts differently in its procedures for example due to the need for a quick evaluation etc. Thus, if the economic operator lacked information in one procedure and the contracting authority asked him to supplement the tender he cannot expect that the same would apply in another procedure even though the contracting authority is the same. 28 In Manova, the Court of Justice stated that contracting authorities could ask tenderers to supplement their tender “… so long as it was not expressly laid down in the contract documents that, unless such documents were provided, the application would be rejected.”33 30 See also Manova, paragraph 37, which states: “… when exercising its right to ask a tenderer to clarify its tender, the contracting authority must treat tenderers equally and fairly, in such a way that a request for clarification does not appear unduly to have favoured or disadvantaged the tenderer or tenderers to which the request was addressed, once the procedure for selection of tenders has been completed and in the light of its outcome”. 31 See, for example, joined Cases C-21/03 and C-34/03, Fabricom SA v. Belgian State [2005] ECR 2005 I-1559, paragraph 27. See also Case T-125/06, Centro Studi Antonio Manieri Srl v. Council of the European Union [2009] ECR II-69, paragraph 82, and Case C-304/01, Spain v. Commission [2004] ECR I-7655, paragraph 31. 32 See also Fabricius, p. 417-418.

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A similar statement can be found in Cartiera dell’Adda.34 In this case the contracting authority had, in the specifications for the contract, listed a series of grounds on which a tenderer may be excluded from participation in the procurement procedure. Those grounds include the fact that one of the documents and/or one of the sworn statements is incomplete or irregular, except where any irregularity is of a purely formal nature and may be remedied but is not decisive for the assessment of the tender. 35 Thus, the contracting authority had made clear from the start that lack of statements would lead to the exclusion of a tenderer. This is different from the situation where the contracting authority had stated in the specifications that a statement must be submitted without the express consequence that the failure to provide a missing document would have. Thus, according to the Court, in case the contracting authority explicitly has stated that it will not accept a given mistake or a particular missing document, it cannot on a later stage change its mind about such a requirement, but is bound by the requirements it lays down Adrian Brown states “The Court gives the authority in this situation some leeway to accept the late document, provided that the authority had not stipulated categorically that the failure to provide that document would result in exclusion.”36 It must be expressly stated that the contracting authority would reject the tender and it is not sufficient that the procurement documents contain requirements in line with “tenderers shall submit X”. The minimum requirements set by the contracting authority will always contain such phrases and this is not sufficient to conclude that the contracting authority may never ask tenderers to supplement a tender. However, if the contracting authority states “tenderers shall submit X or else the tender will be disqualified”, then the contracting authority will of course be bound by its statement. Thus, it could be recommended that contracting authorities wishing to have the discretion of asking for additional information add in the tender documents that this will be possible.37 When contracting authorities ask tenderers to correct or complete their tenderers, the 29 contracting authority must provide tenders with sufficient time and hence an appropriate time limit must be set. The time tenderers must be given will depend on the type of information requested, the type of procedure and the contract matter. If the missing document is easy for the tenderer to acquire then a short time limit can be sufficient. However, in other cases it will be necessary that the tenderers be given more time. It should be borne in mind that the possibility for contracting authorities to ask a tender to submit missing documents etc. is voluntary for the contracting authority. The request for clarification must fulfil certain criteria: 38 1) The request is sent in an equivalent manner to all tenderers in the same situation, 2) The request must relate to all sections of the tender which require clarification, 3) The request may not lead to the submission, by a tenderer, of what would appear in reality to be a new tender. 4) When the contracting authority makes use of its right to ask a tenderer to clarify its tender, the contracting authority must treat tenderers equally and fairly, in such a way Manova, paragraph 40. C-42/13, Cartiera dell’Adda v. CEM Ambiente SpA, EU:C:2014:2345. 35 Ibid. paragraph 10. 36 Adrian Brown, The Court of Justice rules that a contracting authority may accept the late submission of a bidder’s balance sheet, subject to certain conditions: Case C-336/12 Danish Ministry of Science, Innovation and Higher Education v Manova A/S’, in: PPLR 2014, 1, NA1-NA3. 37 In a case from the Danish Complaints Board, the contracting authority had made such a reference. See decision of February 5, 2015, Falck Danmark A/S v. Region Syddanmark, where the Board found that Manova, paragraph 40 therefore was not relevant in the case. 38 C-336/12, Manova, EU:C:2013:647, paragraphs 34-37, and the case law cited therein. 33 34

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that a request for clarification does not appear to have unduly favoured or disadvantaged the tenderer or tenderers to which the request was addressed, once the procedure for selection of tenders has been completed and in the light of its outcome. According to Article 56(3) of the 2014 Directive it is for the contracting authority to decide whether it wishes to ask tenderers to supplement a tender. However, it is possible that in some very limited situations the contracting authority is required to request tenderers to supplement the tender, based on the principle of proportionality, which in theory could require such.39 This could be the case where the error is obvious and where it is possible to state the right solution without even asking the tenderer. In such a case it could be argued that there may be a risk that the contracting authority would abuse its discretion and not ask a tenderer to supplement a tender, which could be contrary to the principle of proportionality as well as equal treatment.

56.4. The Commission is empowered to adopt delegated acts to amend the list in Annex X Article 56(4) empowers the Commission to amend (update), by way of delegated acts,40 the list in Annex X, which is a list of international social and environmental conventions referred to in Article 18(2)”. Article 18(2) states “Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X.”41 31 Currently the list in Annex X contains the following: 30

– ILO Convention 87 on Freedom of Association and the Protection of the Right to Organise; – ILO Convention 98 on the Right to Organise and Collective Bargaining; – ILO Convention 29 on Forced Labour; – ILO Convention 105 on the Abolition of Forced Labour; – ILO Convention 138 on Minimum Age; – ILO Convention 111 on Discrimination (Employment and Occupation); – ILO Convention 100 on Equal Remuneration; – ILO Convention 182 on Worst Forms of Child Labour; – Vienna Convention for the protection of the Ozone Layer and its Montreal Protocol on substances that deplete the Ozone Layer; – Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal (Basel Convention);

39 See Steen Treumer, ‘Exclusion, qualification and Selection of Candidates and Tenderers in EU Public Procurement’ in Martin Burgi, Martin Trybus and Steen Treumer (eds), Qualification, selection and exclusion in EU procurement, European law series, DFJØ Publishing 2016, p. 26; Sue Arrowsmith, The Law of Public and Utilities Procurement – Volume 1 (3rd ed., Sweet and Maxwell 2014) 694, who refers to a national UK case, where the domestic High Court in Deane Public Works Ltd v. Nothern Ireland Water, however, concluded that there is no general duty to allow corrections. This is also the line the Danish Complaints Board for Public Procurement has followed, see e.g. J. Fabricius, Offentlige indkøb i praksis (3rd ed., Karnov Group 2014), 409. For further on this discussion see see Carina Risvig Hamer, ‘Requesting additional information – Increase of flexibility and competition?’, in Grith Skovgaard Ølykke & Albert Sanchez Graells (eds.), Reformation or Deformation of the EU Public Procurement Rules in 2014 (Edward Elgar Publishing, Cheltenham 2016). 40 For further on delegated acts see the commentary to Article 87. 41 See the commentary on Article 18 for further information.

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– Stockholm Convention on Persistent Organic Pollutants (Stockholm POPs Convention); – Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade (UNEP/FAO) (The PIC Convention) Rotterdam, 10 September 1998, and its 3 regional Protocols. It should be borne in mind that the list only contains international agreements, which 32 have been ratified by all Member States. Thus, as an example ILO 94 does not figure on the list. The Parliament had proposed that the “… Directive should not prevent Member States from complying with ILO Convention 94 on Labour Clauses in public contracts and encourages the inclusion of labour clauses in public procurement.”42 This was not included in the final version of the Directive. Amending the list can be relevant in order to add new international agreements that 33 have been ratified by all Member States or where the existing international agreements referred to are no longer ratified by all Member States or they are otherwise changed, for instance in respect of their scope, content or denomination. It should be recalled that Article 56(1) states that “Contracting authorities may decide 34 not to award a contract to the tenderer submitting the most economically advantageous tender where they have established that the tender does not comply with the applicable obligations referred to in Article 18(2).” Thus, if an economic operator does not comply with these obligations the contracting authority may reject the tenderer. Also Article 57(4) refers to these obligations and states that “Contracting authorities may exclude or may be required by Member States to exclude from participation in a procurement procedure any economic operator in any of the following situations: (a) where the contracting authority can demonstrate by any appropriate means a violation of applicable obligations referred to in Article 18(2);“. Thus, Member States can make it mandatory to exclude an economic operator for breaches of the obligations listed in Annex X.

Subsection 1: Criteria for qualitative selection Article 57 Exclusion criteria 1. Contracting authorities shall exclude an economic operator from participation in a procurement procedure where they have established, by verifying in accordance with Articles 59, 60 and 61, or are otherwise aware that that economic operator has been the subject of a conviction by final judgment for one of the following reasons: (a) participation in a criminal organisation, as defined in Article 2 of Council Framework Decision 2008/841/JHA;1

42 See Parliaments Report, amendment 4 and the justification: “ILO Convention 94 provides that public contracts shall include labour clauses ensuring equal treatment of local workers. Member States having ratified this Convention should not be hindered to respect its provisions. This clarification is particularly important in the context of the judgement of the Court in case C-346/06 (Rüffert).” See also amendment 15 which also states: “This Directive does not prevent Member States from complying with ILO Convention 94 on Labour Clauses in public contracts.” Amendment 35 also suggested a specific reference to ILO 94 in Article 18(2). 1 Council Framework Decision 2008/841/JHA of 24 October 2008 on the fight against organised crime (OJ L 300, 11.11.2008, p. 42).

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(b) corruption, as defined in Article 3 of the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union2 and Article 2(1) of Council Framework Decision 2003/568/JHA3 as well as corruption as defined in the national law of the contracting authority or the economic operator; (c) fraud within the meaning of Article 1 of the Convention on the protection of the European Communities’ financial interests;4 (d) terrorist offences or offences linked to terrorist activities, as defined in Articles 1 and 3 of Council Framework Decision 2002/475/JHA5 respectively, or inciting or aiding or abetting or attempting to commit an offence, as referred to in Article 4 of that Framework Decision; (e) money laundering or terrorist financing, as defined in Article 1 of Directive 2005/60/EC of the European Parliament and of the Council;6 (f) child labour and other forms of trafficking in human beings as defined in Article 2 of Directive 2011/36/EU of the European Parliament and of the Council.7 The obligation to exclude an economic operator shall also apply where the person convicted by final judgment is a member of the administrative, management or supervisory body of that economic operator or has powers of representation, decision or control therein. 2. An economic operator shall be excluded from participation in a procurement procedure where the contracting authority is aware that the economic operator is in breach of its obligations relating to the payment of taxes or social security contributions and where this has been established by a judicial or administrative decision having final and binding effect in accordance with the legal provisions of the country in which it is established or with those of the Member State of the contracting authority. Furthermore, contracting authorities may exclude or may be required by Member States to exclude from participation in a procurement procedure an economic operator where the contracting authority can demonstrate by any appropriate means that the economic operator is in breach of its obligations relating to the payment of taxes or social security contributions. This paragraph shall no longer apply when the economic operator has fulfilled its obligations by paying or entering into a binding arrangement with a view to paying the taxes or social security contributions due, including, where applicable, any interest accrued or fines. 3. Member States may provide for a derogation from the mandatory exclusion provided for in paragraphs 1 and 2, on an exceptional basis, for overriding reasons relating to the public interest such as public health or protection of the environment. OJ C 195, 25.6.1997, p. 1. Council Framework Decision 2003/568/JHA of 22 July 2003 on combating corruption in the private sector (OJ L 192, 31.7.2003, p. 54). 4 OJ C 316, 27.11.1995, p. 48. 5 Council Framework Decision of 13 June 2002 on combating terrorism (OJ L 164, 22.6.2002, p. 3). 6 Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (OJ L 309, 25.11.2005, p. 15). 7 Directive 2011/36/EU of the European Parliament and of the Council of 5 April 2011 on preventing and combating trafficking in human beings and protecting its victims, and replacing Council Framework Decision 2002/629/JHA (OJ L 101, 15.4.2011, p. 1). 2

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Member States may also provide for a derogation from the mandatory exclusion provided in paragraph 2, where an exclusion would be clearly disproportionate, in particular where only minor amounts of taxes or social security contributions are unpaid or where the economic operator was informed of the exact amount due following its breach of its obligations relating to the payment of taxes or social security contributions at such time that it did not have the possibility of taking measures as provided for in the third subparagraph of paragraph 2 before expiration of the deadline for requesting participation or, in open procedures, the deadline for submitting its tender. 4. Contracting authorities may exclude or may be required by Member States to exclude from participation in a procurement procedure any economic operator in any of the following situations: (a) where the contracting authority can demonstrate by any appropriate means a violation of applicable obligations referred to in Article 18(2); (b) where the economic operator is bankrupt or is the subject of insolvency or winding-up proceedings, where its assets are being administered by a liquidator or by the court, where it is in an arrangement with creditors, where its business activities are suspended or it is in any analogous situation arising from a similar procedure under national laws and regulations; (c) where the contracting authority can demonstrate by appropriate means that the economic operator is guilty of grave professional misconduct, which renders its integrity questionable; (d) where the contracting authority has sufficiently plausible indications to conclude that the economic operator has entered into agreements with other economic operators aimed at distorting competition; (e) where a conflict of interest within the meaning of Article 24 cannot be effectively remedied by other less intrusive measures; (f) where a distortion of competition from the prior involvement of the economic operators in the preparation of the procurement procedure, as referred to in Article 41, cannot be remedied by other, less intrusive measures; (g) where the economic operator has shown significant or persistent deficiencies in the performance of a substantive requirement under a prior public contract, a prior contract with a contracting entity or a prior concession contract which led to early termination of that prior contract, damages or other comparable sanctions; (h) where the economic operator has been guilty of serious misrepresentation in supplying the information required for the verification of the absence of grounds for exclusion or the fulfilment of the selection criteria, has withheld such information or is not able to submit the supporting documents required pursuant to Article 59; or (i) where the economic operator has undertaken to unduly influence the decision-making process of the contracting authority, to obtain confidential information that may confer upon it undue advantages in the procurement procedure or to negligently provide misleading information that may have a material influence on decisions concerning exclusion, selection or award. Notwithstanding point (b) of the first subparagraph, Member States may require or may provide for the possibility that the contracting authority does not exclude an economic operator which is in one of the situations referred to in that point, where the contracting authority has established that the economic operator in question will be able to perform the contract, taking into account the applicable

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national rules and measures on the continuation of business in the case of the situations referred to in point (b). 5. Contracting authorities shall at any time during the procedure exclude an economic operator where it turns out that the economic operator is, in view of acts committed or omitted either before or during the procedure, in one of the situations referred to in paragraphs 1 and 2. At any time during the procedure, contracting authorities may exclude or may be required by Member States to exclude an economic operator where it turns out that the economic operator is, in view of acts committed or omitted either before or during the procedure, in one of the situations referred to in paragraph 4. 6. Any economic operator that is in one of the situations referred to in paragraphs 1 and 4 may provide evidence to the effect that measures taken by the economic operator are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion. If such evidence is considered as sufficient, the economic operator concerned shall not be excluded from the procurement procedure. For this purpose, the economic operator shall prove that it has paid or undertaken to pay compensation in respect of any damage caused by the criminal offence or misconduct, clarified the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities and taken concrete technical, organisational and personnel measures that are appropriate to prevent further criminal offences or misconduct. The measures taken by the economic operators shall be evaluated taking into account the gravity and particular circumstances of the criminal offence or misconduct. Where the measures are considered to be insufficient, the economic operator shall receive a statement of the reasons for that decision. An economic operator which has been excluded by final judgment from participating in procurement or concession award procedures shall not be entitled to make use of the possibility provided for under this paragraph during the period of exclusion resulting from that judgment in the Member States where the judgment is effective. 7. By law, regulation or administrative provision and having regard to Union law, Member States shall specify the implementing conditions for this Article. They shall, in particular, determine the maximum period of exclusion if no measures as specified in paragraph 6 are taken by the economic operator to demonstrate its reliability. Where the period of exclusion has not been set by final judgment, that period shall not exceed five years from the date of the conviction by final judgment in the cases referred to in paragraph 1 and three years from the date of the relevant event in the cases referred to in paragraph 4. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, vol. 1, chap. 12 and 19; Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, chap. 7; Hans-Joachim Priess, ‘The rules on exclusion and self-cleaning under the 2014 Public Procurement Directive’, in: PPLR 2014, 3, 112-123; Steinicke and Groesmeyer, EU’s Udbudsdirektiver, p. 1121-1158; Fabricius, Jesper, Offentlige indkøb i praksis, chap. 9; Sope, Williams, ‘Coordinating public procurement to support EU objectives – a first step? The case of exclusions for serious criminal offences’, chap. 12, in Arrowsmith, Sue and Kunzlik, Peter (eds), Social and Environmental Policies in EC Procurement Law New Directives and New Directions; Steinicke, Michael, ‘Qualification and Shortlisting’ (chap. 5), in Trybus, Caranta and Edelstam (eds), EU Law and Public Contracts; Trepte, Peter, Public Procurement in the EU – A practioner’s Guide, chap. 6.; Martin Burgi, Martin Trybus and Steen Treumer (eds.), Qualification, selection and exclusion in EU procurement, European law series, DFJØ Publishing 2016; Carina Risvig Hamer, Grundlæggende Udbudsret, Djøf Forlag 2016, chap. 14; Sylvia de Mars, ‘Exclusion and self-cleaning in Article 57: discretion at the

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expense of clarity and trade?’, in Grith Skovgaard Ølykke & Albert Sanchez Graells (eds), Reformation or Deformation of the EU Public Procurement Rules in 2014 (Edward Elgar Publishing, Cheltenham 2016). 57.1. Mandatory exclusion grounds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.1.1. Participation in a criminal organisation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.1.2. Corruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.1.3. EU Fraud. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.1.4. Terrorism offences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.1.5. Money laundering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.1.6. Child labour and trafficking in human beings . . . . . . . . . . . . . . . . . . . . . . . . . . 57.1.7. Natural persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.1.8. Final judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.2. Breach of obligations relating to the payment of taxes or social security contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.3. Derogations from excluding an economic operator. . . . . . . . . . . . . . . . . . . . . . . . 57.3.1. Overriding reasons relating to the public interest . . . . . . . . . . . . . . . . . . . . . . . 57.3.2. Where exclusion would be disproportionate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.4. Discretionary grounds for exclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.4.1 a. Violation of obligations in the fields of environmental, social and labour law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.4.2 b. Bankrupt or is the subject of insolvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.4.3 c. Grave professional misconduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.4.4 d. Agreements aimed at distorting competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.4.5 e. Conflict of interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.4.6 f. Prior involvement in preparation of the procedure. . . . . . . . . . . . . . . . . . . . . . 57.4.7 g. Significant or persistent deficiencies (bad performance) . . . . . . . . . . . . . . . . 57.4.8 h. Serious misrepresentation in supplying information . . . . . . . . . . . . . . . . . . . . 57.4.9 i. Unduly influence the decision-making process of the contracting authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.5. Time of excluding the tenderers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.6. Self-cleaning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.6.1. Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.6.2. Collaborations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.6.3. Personnel measures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.7. Period for excluding tenderers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 13 16 20 23 26 29 33 36 38 46 47 50 54 61 65 68 74 78 83 87 94 97 100 103 109 110 111 115

Article 57 contains the grounds for excluding economic operators from participating 1 in the procurement procedure. A similar provision was found in Article 45 of Directive 2004/18/EC, but the provision in the 2014 Public Sector Directive has been updated on several aspects by for example introducing new exclusion grounds (mandatory ones as well as discretionary ones) and a new provision regarding “self-cleaning”. The provision contains both the mandatory grounds for exclusion from participation 2 in a procurement procedure as well as the discretionary grounds for exclusion. The list of mandatory grounds has been expanded and now also lists exclusion grounds such as terror and child labour and other forms of trafficking in human beings. Furthermore, an economic operator shall also be excluded from participation in a procurement procedure where the contracting authority is aware that the economic operator is in breach of its obligations relating to the payment of taxes or social security contributions. In the 2004-Directive, this was not a mandatory exclusion ground, but only a discretionary ground. A few exceptions as to when the economic operator must be excluded exist, e.g., for overriding reasons relating to the public interest such as public health or protection of the environment as well as in cases where exclusion would not be proportionate (principle of proportionality; see below at section 57.3). As a new feature of the directive it is mentioned in the Article that the obligation to 3 exclude an economic operator also applies where the person convicted by final judgment is a member of the administrative, management or supervisory body of that economic

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operator or has powers of representation, decision or control therein. This was probably also the case under the previous rules, although this was not explicitly stated. 4 The provision also contains a new option for economic operators, who are in one of the situations where the economic operator must be excluded. The economic operator may provide evidence to the effect that measures taken by the economic operator are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion. If such evidence is considered as sufficient, the economic operator concerned shall not be excluded from the procurement procedure. This measure is a new element provided for in the 2014 Public Sector Directive and is called self-cleaning. 5 Some Member States have extended the list of exclusions grounds to other grounds than those listed in the Directive such as for example anti mafia exclusions grounds in Italy or offences relating to labour law in several Member States.8 The structure of the Article is as follows: The mandatory exclusion grounds are found in Article 57(1) and (2). Exceptions to the mandatory exclusion of the economic operator are found in paragraph 3. The discretionary exclusion grounds are found in 57(4). The timing with regard to exclusion is found in paragraph 5, and finally the rules for self-cleaning are found in Article 57(6) and (7).

57.1. Mandatory exclusion grounds Article 57(1) contains the mandatory exclusion grounds. Mandatory exclusions grounds at EU level were first introduced in the 2004 Directive. Trepte states that the reason for introducing mandatory grounds were “… a response to the growing concern over the effects of organized crime and terrorism, on public procurement both as a means of subverting the normal competitive process and as a mechanism for laundering money.”9 Mandatory exclusions grounds protects the integretity of the procurement procedure as well as the following public contract by ensuring that the tenderers (and ultimately the undertaking whom the contracting autorhity enters into a contract with), are reliable, and has not commited any serious crimes. 7 According to Article 57 (1), contracting authorities shall exclude an economic operator from participation in a procurement procedure where they have established, by verifying in accordance with Articles 59, 60 and 61, or are otherwise aware that that economic operator has been the subject of a conviction by final judgment for one of the reasons listed in Article 57. The reference to Articles 59, 60, and 61 means that the contracting authority must verify in accordance with these Articles whether the situation of the economic operator is covered by one of the grounds for exclusion. As a starting point, this means that at the time of submission of requests to participate or of tenders, contracting authorities shall accept the European Single Procurement Document (ESPD), consisting of an updated self-declaration as preliminary evidence in replacement of certificates issued by public authorities or third parties confirming that the relevant economic operator is not in one of the situations referred to in Article 57 in which economic operators shall or may be 6

8 For further on Member States practises on this point see Martin Burgi, Martin Trybus and Steen Treumer (eds), Qualification, selection and exclusion in EU procurement, European law series, DJØF Publishing 2016, particular the comparative chapter pp. 250 et seqq. 9 Trepte, p. 338; see also Sope, Williams, ‘Coordinating public procurement to support EU objectives – a first step? The case of exclusions for serious criminal offences, chapter 12’, in Arrowsmith, Sue and Kunzlik, Peter (eds.), Social and Environmental Policies in EC Procurement Law New Directives and New Directions. Recital 43 of the 2004 Directive stated: “The award of public contracts to economic operators who have participated in a criminal organisation or who have been found guilty of corruption or of fraud to the detriment of the financial interests of the European Communities or of money laundering should be avoided.”

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excluded. Before awarding the contract, the contracting authority shall require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60.10 The contracting authority may invite economic operators to supplement or clarify the certificates received pursuant to Article 60. 11 Article 57 refers to Article 61 for verification, which deals with e-CERTIS. e-CERTIS contain information concerning certificates and other forms of documentary evidence, which Member States must keep up to date. Besides the situations where the contracting authority verifies in accordance with Ar- 8 ticle 59-61, the contracting authority can also exclude an operator in cases where the contracting authority becomes aware that an economic operator is in a situation covered by one of the exclusion grounds listed in Article 57. Rumours are not sufficient to establish that the economic operator is in a situation covered by the grounds for exclusion and the Directive is silent as to when one can argue that the contracting authority “becomes aware”. It should also be borne in mind that the economic operator in order to be excluded must have been the subject of a final conviction (see below at section 57.1.2.). Nonetheless, in all cases where the contracting authority “becomes aware”, the contracting authority must give the economic operator the possibility to prove that it is not in a situation covered by any of the grounds listed in Article 57(1). According to Article 60 the contracting authority can, but is not obliged to ask for 9 documentation that the situation of an economic operator is covered by one of the grounds for exclusion. Thus, in theory the contracting authority can enter into an agreement with an economic operator whose situation is covered by one of the grounds for exclusion without being aware of it, since the contracting authority did not ask for documentation. 10 The grounds listed in Article 57 for exclusion are: (a) participation in a criminal organisation, as defined in Article 2 of Council Framework Decision 2008/841/JHA(1); (b) corruption, as defined in Article 3 of the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union (2) and Article 2(1) of Council Framework Decision 2003/568/JHA(3) as well as corruption as defined in the national law of the contracting authority or the economic operator; (c) fraud within the meaning of Article 1 of the Convention on the protection of the European Communities’ financial interests(4); (d) terrorist offences or offences linked to terrorist activities, as defined in Articles 1 and 3 of Council Framework Decision 2002/475/JHA(5) respectively, or inciting or aiding or abetting or attempting to commit an offence, as referred to in Article 4 of that Framework Decision; (e) money laundering or terrorist financing, as defined in Article 1 of Directive 2005/60/EC of the European Parliament and of the Council(6); 10 Article 59 also states: “and, where appropriate, Article 62” However, Article 62 regarding Quality assurance standards and environmental management standards, is not relevant for the mandatory exclusion grounds. 11 See Article 59(4). (1) Council Framework Decision 2008/841/JHA of 24 October 2008 on the fight against organised crime (OJ L 300, 11.11.2008, p. 42). Article 2 deals with Offences relating to participation in a criminal organization. (2) OJ C 195, 25.6.1997, p. 1. (3) Council Framework Decision 2003/568/JHA of 22 July 2003 on combating corruption in the private sector (OJ L 192, 31.7.2003, p. 54). (4) OJ C 316, 27.11.1995, p. 48. (5) Council Framework Decision of 13 June 2002 on combating terrorism (OJ L 164, 22.6.2002, p. 3). (6) Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (OJ L 309, 25.11.2005, p. 15).

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(f) child labour and other forms of trafficking in human beings as defined in Article 2 of Directive 2011/36/EU of the European Parliament and of the Council(7).

The grounds are further elaborated on below in Section 57.1.1-57.1.6. All exclusion grounds listed in the Article are serious offences and public contracts should not be awarded to economic operators that have participated in such violations.12 The list of mandatory grounds for exclusion has, compared to the 2004 Directive, been updated and adapted to new developments in the EU’s political orientations, in particular with regard to the fight against corruption and terrorism.13 11 Contracting authorities shall at any time during the procedure exclude an economic operator where it turns out that the economic operator is, in view of acts committed or omitted in one of the situations referred to in paragraphs 1 and 2 either before or during the procedure, see below at section 57.5. The 2014 Directive contains a new provision in Article 73 regarding termination of contracts. Thus, according to this provision Member States shall ensure that contracting authorities have the possibility, at least under the following circumstances and under the conditions determined by the applicable national law, to terminate a public contract during its term, where: “(b) the contractor has, at the time of contract award, been in one of the situations referred to in Article 57(1) and should therefore have been excluded from the procurement procedure.” From this can be seen that it will be situations, which occurred before the time of award of the contract, which is decisive for the assessment whether one of the exclusion grounds should lead to the exclusion of a tenderer. 12 As regards the mandatory exclusion grounds in Article 57(1), the contracting authority may require proof that such grounds do not exist. As means of proof can be required the production of an extract from the relevant register, such as judicial records or, failing that, of an equivalent document issued by a competent judicial or administrative authority in the Member State or country of origin or the country where the economic operator is established showing that those requirements have been met.14 57.1.1. Participation in a criminal organisation According to Article 57(1)(a) contracting authorities shall exclude an economic operator from participation in a procurement procedure where they have established that the tenderer has been the subject of a conviction by final judgment as a reason of “participation in a criminal organisation, as defined in Article 2 of Council Framework Decision 2008/841/JHA.“ A similar provision was found in the 2004 Directive, Article 45 (1 a). 14 The primary objective of the intervention by the EU with regard to organised crime, is to provide EU citizens with a high level of safety within an area of freedom, security and justice by strengthening cooperation between Member States, and plugging legal loopholes that are exploited by crime syndicates.15 13

(7) Directive 2011/36/EU of the European Parliament and of the Council of 5 April 2011 on preventing and combating trafficking in human beings and protecting its victims, and replacing Council Framework Decision 2002/629/JHA (OJ L 101, 15.4.2011, p. 1). 12 See also Recital 100 which states: “Public contracts should not be awarded to economic operators that have participated in a criminal organisation or have been found guilty of corruption, fraud to the detriment of the Union’s financial interests, terrorist offences, money laundering or terrorist financing.” 13 See Sope, Williams, ‘Coordinating public procurement to support EU objectives – a first step? The case of exclusions for serious criminal offences’ (chap. 12), in Arrowsmith, Sue and Kunzlik, Peter (eds), Social and Environmental Policies in EC Procurement Law New Directives and New Directions, for further on the EU’s policy on these offences and the use of procurement legislation to combat serious criminal offences. 14 Article 60(2). See the commentary to that Article.

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Council Framework Decision 2008/841/JHA establishes the definitions of offences for 15 participating in a criminal organisation. Moreover, it provides for corresponding penalties to be imposed on the offenders, be they natural or legal persons, committing or being responsible for the commission of the acts. The aim of the Framework Decision is to harmonise Member States’ definitions of crimes related to a criminal organization. Participation in a criminal organisation is defined in Article 2, which covers the following offences: a) conduct by any person who, with intent and with knowledge of either the aim and general activity of the criminal organisation or its intention to commit the offences in question, actively takes part in the organisation’s criminal activities, including the provision of information or material means, the recruitment of new members and all forms of financing of its activities, knowing that such participate on will contribute to the achievement of the organisation’s criminal activities b) conduct by any person consisting in an agreement with one or more persons that an activity should be pursued, which if carried out, would amount to the commission of offences referred to in Article 1, even if that person does not take part in the actual execution of the activity. The Member States must also hold any legal person accountable for the above offences that have been committed on its behalf by a person who has a central role in the legal person in question, even if that person has acted in an individual capacity. An offence committed, as a result of lack of supervision, by a person under the authority of the former may also be held against the legal person. The legal persons held accountable for offences must be punished by effective, proportionate and dissuasive penalties. These should include both criminal and non-criminal fines. The penalties may also include the following: – – – – –

ending the right to public aid; temporarily or permanently prohibiting commercial activities; placing under judicial supervision; judicial winding-up; temporarily or permanently closing the establishments used for the offences. 16

And as a result of Article 57(1) of the 2014 Public Sector Directive also exclusion from procurement procedures. In Denmark, the Danish legislator has stated in the preparatory work to the Danish Procurement Act, that also certain cartels can be considered as a criminal organization covered by the provision, hence making breaches of competition rules in some cases to be considered as a mandatory ground for exclusion.17 57.1.2. Corruption According to Article 57(1)(b) contracting authorities shall exclude an economic oper- 16 ator from participation in a procurement procedure where they have established that the tenderer has been the subject of a conviction by final judgment as a reason of “(b) cor15 See Sope, Williams, ‘Coordinating public procurement to support EU objectives – a first step? The case of exclusions for serious criminal offences’ (chap. 12), in Arrowsmith, Sue and Kunzlik, Peter (eds), Social and Environmental Policies in EC Procurement Law New Directives and New Directions. 16 See the Commission’s summary of the decision, http://europa.eu/legislation_summaries/justice_freedom_security/fight_against_organised_crime/jl0011_en.htm (last visited November 2017). 17 For further on this aspect see Carina Risvig Hamer, Grundlæggende Udbudsret, Djøf Forlag 2016, chap. 14.

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ruption, as defined in Article 3 of the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union and Article 2(1) of Council Framework Decision 2003/568/JHA as well as corruption as defined in the national law of the contracting authority or the economic operator”. A similar provision was found in Article 45 (1 b). However, compared to the 2004/18/EC Directive the new provision also includes, besides the relevant EU legal acts, convictions for corruption offences under national law. This ensures that economic operators are excluded in other Member States as a consequence of a conviction for corruption under the national criminal law of the economic operator’s Member State. When talking about corruption in different countries the concept of corruption varies. Transparency International for example defines corruption as ”the abuse of entrusted power for private gain”.18 Many conventions, such as the OECD and the UN conventions, do not define corruption at all, but merely state examples as to what can be considered offences. The 2014 Directive Article 57 has its own definition as to what corruption is, but even Member States within the EU have different approaches to what is considered to be corruption. In some countries corruption will also cover breaches of competition rules and in other Member States the notion of corruption is narrower. 19 Common for all jurisdictions is that corruption distorts the democratic systems and should be prevented. Open, transparent public procurement systems can help reduce corruption, but even in the world’s least corruptive country, Denmark does corruption to some extent exist.20 17 Fighting corruption and fraud within the European institutions is a top priority for the EU and besides EU rules on the matter OECD has also adopted conventions in this area.21 According to Sope Williams EU policy against corruption can be said to have three objectives. First, the policy is aimed at protecting Community finances. Secondly, and similar to the main rationale for EU action against organised crime, EU measures against corruption are also intended to secure for EU citizens an area of ‘freedom, security and justice’ devoid of activity such as corruption and, thirdly, EU anti-corruption measures are intended to facilitate the liberalisation of the internal market. 22 18 The Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union, is designed to fight corruption involving European officials or national officials of Member States of the European Union. Each Member State must take the necessary measures to ensure that conduct constituting an act of passive corruption or active corruption by officials is a punishable criminal offence. Member States must ensure that conduct constituting an act of passive or active corruption, as well as participating in and instigating these acts, is punishable by criminal penalties. According to Article 3 of the convention corruption is See e.g. http://www.transparency.org/what-is-corruption/#define. For a comparative view on corruption in the EU Member States, see the recent report: “Preventing and Combatting Crime in Public Procurement – Final Report”, which can be found at http:// www.warningoncrime.eu/final-report/.(last visited November 2017). 20 According to Transparency Internationals Corruption Perceptions Index, Denmark ranked number 1 in 2014, 2015 and 2016. See on the matter of corruption in the worlds least corrupt country Hanne Marie Motzfeldt and Carina Risvig Hamer, Does corruption in Public Procurement also exist in the world’s least corrupt country (Denmark), Paper for the International Public Procurement Conference IPPC 7, August 2016, Bali. 21 See OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, which can be found at http://www.oecd.org/daf/anti-bribery/oecdantibriberyconvention.htm (last visited April 2017). 22 Sope, Williams, ‘Coordinating public procurement to support EU objectives – a first step? The case of exclusions for serious criminal offences, chapter 12’, in Arrowsmith, Sue and Kunzlik, Peter (eds.), Social and Environmental Policies in EC Procurement Law New Directives and New Directions. 18

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defined as “For the purposes of this Convention, the deliberate action of whosoever promises or gives, directly or through an intermediary, an advantage of any kind whatsoever to an official for himself or for a third party for him to act or refrain from acting in accordance with his duty or in the exercise of his functions in breach of his official duties shall constitute active corruption.” Also corruption within the meaning of Council Framework Decision 2003/568/JHA 19 of 22 July 2003 on combating corruption in the private sector is covered. Article 2 lists regarding active and passive corruption the following conduct (a) promising, offering or giving, directly or through an intermediary, to a person who in any capacity directs or works for a private-sector entity an undue advantage of any kind, for that person or for a third party, in order that that person should perform or refrain from performing any act, in breach of that person's duties; (b) directly or through an intermediary, requesting or receiving an undue advantage of any kind, or accepting the promise of such an advantage, for oneself or for a third party, while in any capacity directing or working for a private-sector entity, in order to perform or refrain from performing any act, in breach of one's duties. Such offences may lead to exclusion from procurement procedures. 57.1.3. EU Fraud According to Article 57(1)(c) contracting authorities shall exclude an economic oper- 20 ator from participation in a procurement procedure where they have established that the tenderer has been the subject of a conviction by final judgment as a reason of “fraud within the meaning of Article 1 of the Convention on the protection of the European Communities’ financial interests”. A similar provision was found in the 2004 Directive Article 45(1)(c). The EU’s policy against fraud has as its primary aim the protection of the Communi- 21 ties’ financial interests.23 Under the convention, fraud affecting both expenditure and revenue must be punish- 22 able by effective, proportionate and dissuasive criminal penalties in every Member State. According to Article 1 of the convention fraud “consist of: (a) in respect of expenditure, any intentional act or omission relating to:– the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the misappropriation or wrongful retention of funds from the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities, – non-disclosure of information in violation of a specific obligation, with the same effect,– the misapplication of such funds for purposes other than those for which they were originally granted; (b) in respect of revenue, any intentional act or omission relating to: – the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the illegal diminution of the resources of the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities,– non-disclosure of information in violation of a specific obligation, with the same effect,– misapplication of a legally obtained benefit, with the same effect.

23 Sope, Williams, ‘Coordinating public procurement to support EU objectives – a first step? The case of exclusions for serious criminal offences’ (chap. 12), in Arrowsmith, Sue and Kunzlik, Peter (eds), Social and Environmental Policies in EC Procurement Law New Directives and New Directions.

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If a tenderer has committed fraud the tenderer must be excluded from participating in procurement procedures. 57.1.4. Terrorism offences According to Article 57(1)(d) contracting authorities shall exclude an economic operator from participation in a procurement procedure where they have established that the tenderer has been the subject of a conviction by final judgment as a reason of “terrorist offences or offences linked to terrorist activities, as defined in Articles 1 and 3 of Council Framework Decision 2002/475/JHA respectively, or inciting or aiding or abetting or attempting to commit an offence, as referred to in Article 4 of that Framework Decision.” A similar provision was not found in the 2004 Directive. 24 The new provision on terrorist offences and offences linked to terrorist activities follows the corresponding provision in the Defence Directive 2009/81/EC. 25 Council Framework Decision 2002/475/JHA harmonises the definition of terrorist offences in all EU countries by introducing a specific and common definition. Article 2 relates to Offences relating to a terrorist group,24 and the following intentional acts are punishable: (a) directing a terrorist group; (b) participating in the activities of a terrorist group, including by supplying information or material resources, or by funding its activities in any way, with knowledge of the fact that such participation will contribute to the criminal activities of the terrorist group. Article 3 relates to Offences linked to terrorist activities. Terrorist-linked offences include the following acts:(a) aggravated theft with a view to committing one of the acts listed in Article 1(1); (b) extortion with a view to the perpetration of one of the acts listed in Article 1(1); (c) drawing up false administrative documents with a view to committing one of the acts listed in Article 1(1)(a) to (h) and Article 2(2)(b). If a tenderer has committed a terrorist offence the tenderer must be excluded from participating in procurement procedures. 23

57.1.5. Money laundering According to Article 57(1)(e) contracting authorities shall exclude an economic operator from participation in a procurement procedure where they have established that the tenderer has been the subject of a conviction by final judgment as a reason of “money laundering or terrorist financing, as defined in Article 1 of Directive 2005/60/EC of the European Parliament and of the Council” A similar provision was found in Article 45 (1) (d). 27 According to Sope Williams, EU policy against money laundering has multiple rationales. First, it is clear that organised crime and corruption will only thrive if the proceeds of such crime may be utilised without alerting the authorities to its source, Thus, EU policy on money laundering is designed to complement its policy against organised crime and corruption and make it more difficult for crime syndicates, terrorist groups and white-collar criminals to flourish. Secondly, the policy aims at combating the crossborder nature of money laundering.25 26

24 A terrorist groups is defined as “… a structured group of more than two persons, established over a period of time and acting in concert to commit terrorist offences. "Structured group" shall mean a group that is not randomly formed for the immediate commission of an offence and that does not need to have formally defined roles for its members, continuity of its membership or a developed structure.” 25 Sope, Williams, ‘Coordinating public procurement to support EU objectives – a first step? The case of exclusions for serious criminal offences’ (chap. 12), in Arrowsmith, Sue and Kunzlik, Peter (eds), Social and Environmental Policies in EC Procurement Law New Directives and New Directions.

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According to Article 1 of Directive 2005/60/EC money laundering is:

28

(a) the conversion or transfer of property, knowing that such property is derived from criminal activity or from an act of participation in such activity, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such activity to evade the legal consequences of his action; (b) the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property was derived from criminal activity or from an act of participation in such activity; (c) the acquisition, possession or use of property, knowing, at the time of receipt, that such property was derived from criminal activity or from an act of participation in such activity; (d) participation in, association to commit, attempts to commit and aiding, abetting, facilitating and counselling the commission of any of the actions mentioned in the foregoing points. If a tenderer has committed such crime, it shall be excluded from participating in procurement procedures. 57.1.6. Child labour and trafficking in human beings Article 57 (f) lists “… child labour and other forms of trafficking in human beings as defined in Article 2 of Directive 2011/36/EU of the European Parliament and of the Council ()” A similar provision was not found in the 2004 Directive. Child labour is covered by ILO Convention 182 on Worst Forms of Child Labour. Trafficking in human beings, is according to Article 2 of Directive 2011/36/EU “The recruitment, transportation, transfer, harbouring or reception of persons, including the exchange or transfer of control over those persons, by means of the threat or use of force or other forms of coercion, of abduction, of fraud, of deception, of the abuse of power or of a position of vulnerability or of the giving or receiving of payments or benefits to achieve the consent of a person having control over another person, for the purpose of exploitation” The above mentioned breaches should also lead to the exclusion of a tenderer from procurement procedures.

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57.1.7. Natural persons Article 57(1) states “The obligation to exclude an economic operator shall also apply 33 where the person convicted by final judgment is a member of the administrative, management or supervisory body of that economic operator or has powers of representation, decision or control therein.” Under the 2004/18/EC Directive it was assumed that exclusion under the 2004 Directive would also apply to an economic operator in cases where a CEO or similar, who had the power to represent the economic operator, is in one of the grounds for exclusion.26 However, the state of law after the Directive was not entirely clear.27 This has been clarified in the 2014 Directive, hence it is not only when the economic operator in question has been convicted for one of the grounds listed in Article See e.g. Fabricius, p. 395. See Steinicke, Michael, ‘Qualification and Shortlisting’ (chap. 5) in Trybus, Caranta and Edelstam (eds), EU Law and Public Contracts, who states “… it is not quite clear whether an economic operator might be excluded based on actions/issues of employees at executive level.” Poulsen, p. 430 states “Contracting authorities are presumably also obliged to exclude an economic operator if a member of its management has been found guilty of such offences.” 26

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57(1), which can lead to an exclusion, but also in cases where the convicted party is one of the members of the administrative, management or supervisory body of that economic operator. 34 Excluding an economic operator should only take place where the person in question is “a member of the administrative, management or supervisory body of that economic operator or has powers of representation, decision or control therein.” Thus, it will not be in every case that the economic operator will be responsible for something its employees have done. Article 57 does not cover situations where other types of employees have been convicted, and it is therefore not entirely clear to what extent an economic operator can become responsible for employees who have been convicted.28 35 The person in question must have been convicted by a final judgment (see below section 57.1.2) for one of the situations listed in Article 57(1). If such a convicted person changes job the new economic operator would be in a position where it would be excluded from participating in a procurement procedure. This has the advantage that a convicted person cannot just start up a new undertaking and participate in procurement procedures if he has been convicted for one the convictions listed in Article 57. 57.1.8. Final judgment The economic operator must have been convicted by a final judgment for one of the reasons listed in Article 57(1). This means that if proceedings are pending against a tenderer the contracting authority may not exclude the tenderer before a final judgment has been delivered. This will also be the case if the tenderer can appeal the case. In such a situation the contracting authority may not exclude the tenderer before the time limit for appeal has expired.29 It is not clear from the Directive whether the final conviction must be judgments within EU or whether it comprises judgments delivered by courts from outside the EU.30 37 In some cases where a final conviction has not been delivered, it will be possible (but is not mandatory) for the contracting authority to exclude an economic operator as a consequence of grave professional misconduct. The contracting authorities must bear the burden of proof in case of such an assessment. According to Recital 101 “Bearing in mind that the contracting authority will be responsible for the consequences of its possible erroneous decision, contracting authorities should also remain free to consider that there has been grave professional misconduct, where, before a final and binding decision on the presence of mandatory exclusion grounds has been rendered, they can demonstrate by any appropriate means that the economic operator has violated its obligations, including obligations relating to the payment of taxes or social security contributions, unless otherwise provided by national law.” For further on grave professional misconduct, see below at section 57.4. 36

28 Priess, elaborates that “German procurement law – to give an example – provides that the economic operator must be excluded if there was a failure of supervision by a person having powers of representation, decision or control.” 29 See also Poulsen, p. 429, and Priess who states “Therefore deferred prosecution agreements, dismissals on other considerations, summary penalties, or penalty orders will not trigger mandatory exclusions. Having regard to the clear wording, one must still conclude that only res judicata judgements sensu strictu give rise to a mandatory exclusion.”. 30 See Priess, who elaborates that this is also the situation today and that Member States have different practises with regard to the matter. Regarding different practises in the Member States see Martin Burgi, Martin Trybus and Steen Treumer (eds.), Qualification, selection and exclusion in EU procurement, European law series, DJØF Publishing 2016.

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57.2. Breach of obligations relating to the payment of taxes or social security contributions According to Article 57(2) an economic operator shall be excluded from participation in a procurement procedure where the contracting authority is aware that the economic operator is in breach of its obligations relating to the payment of taxes or social security contributions and where this has been established by a judicial or administrative decision having final and binding effect in accordance with the legal provisions of the country in which it is established or with those of the Member State of the contracting authority. The failure to pay taxes and social security contributions figures in Public Sector Directive 2004/18/EC among the non-mandatory grounds for exclusion in Article 45(2)(e) and (f), but was inserted as a mandatory ground “In view of the importance of such payments for European public finances and social systems, in particular in times of economic and fiscal crisis, the proposal provides a mandatory ground for exclusion subject to the condition of the existence of a (judicial or administrative) decision having force of res judicata.”31 The fact that the exclusion ground is now mandatory shows the importance of payment of taxes.32 An undertaking can have failed to pay taxes and social security contributions in the Member State of the undertaking as well as in the Member State of the contracting authority. The Public Sector Directive covers both situations. As for the situations in Article 57(1) the economic operator must have been the subject of a final conviction (see above at Section 57.1.2). However, Article 57(2) also refers to administrative decision having final and binding effect. The latter was not a part of the Commission’s proposal.33 Contrary to the exclusions grounds listed in Article 57(1), Article 57(2) is only applicable when the undertaking has failed to pay taxes and social security contributions and not if any of its employees or board members have done so. Where the contracting authority is aware that the economic operator is in breach of its obligations relating to the payment of taxes or social security contributions, and such has been established by a binding decision, the contracting authority is required to exclude the economic operator. Furthermore, contracting authorities may exclude or may be required by Member States to exclude an economic operator where the contracting authority can demonstrate that the economic operator is in breach of its obligations relating to the payment of taxes or social security contributions. Thus, Member States can make it mandatory to exclude an economic operator in breach of its obligations relating to the payment of taxes or social security contributions. If it chooses to do so, the contracting authority is required to exclude the economic operator, where such a breach can be demonstrated “by any appropriate means.” In the latter situation the breach will not have been established by a judicial or administrative decision having final and binding effect. Proof that the economic operator has paid taxes may be required in accordance with Article 60(5), which states that information that can be deduced from registration on official lists or certification shall not be questioned without justification.34 With regard to Cluster 3, Reducing documentation requirements, Council document no. 9185/12, p. 5. Priess elaborates that the ground for exclusion is likely to become more important as some countries such as, e.g., the United Kingdom and Hungary already seem to use it to fight tax avoidance schemes. For further on the UK Disclosure of Tax Avoidance Scheme, see Luke Buther, ‘Exclusion, Qualification and Selection in the UK under the Public Contract Regulation 2015’, in Martin Burgi, Martin Trybus and Steen Treumer (eds), Qualification, selection and exclusion in EU procurement, European law series, DJØF Publishing 2016, p.214 et seqq. 33 See the Commission’s proposal, Article 55(2). 31

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the payment of social security contributions and taxes, an additional certificate may be required of any registered economic operator whenever a contract is to be awarded. See the commentary to Article 60(5) for further. 44 Even though failure to pay taxes or social security contributions now figures as a mandatory ground for exclusion, according to Article 57(2) contracting authorities may not exclude the economic operator when the economic operator has fulfilled its obligations by paying or entering into a binding arrangement with a view to paying the taxes or social security contributions due, including, where applicable, any interest accrued or fines. In the case La Cascina35 the Court of Justice dealt with the question whether the exclusion on grounds of non-payment of taxes was justified even if payment was made at a later time, a tax amnesty had been received or an arrangement was entered into with the competent authorities. The Court states that “It is, therefore, for national rules to determine the date by which or the period within which the persons concerned must have made the payments corresponding to their obligations (…), That period may be, inter alia, the final date for lodging the request to participate in the contract, the date on which the invitation to tender was sent, the final date on which the candidates’ tenders are to be lodged, the date on which tenders are considered by the contracting authority or even immediately prior to the award of the contract.”36 The period must according to the principles of equal treatment and transparency be determined with absolute certainty and made public in order that the persons concerned may know exactly the procedural requirements are. Thus, the Court states that the Directive’s rule did not “… preclude a national law or administrative practice according to which a service provider, who has not fulfilled obligations relating to social security contributions and taxes by having paid in full when the period prescribed for submitting the request to participate in the contract expires, may subsequently regularise his position pursuant to a tax amnesty or leniency measures adopted by the State or pursuant to an administrative arrangement of payment in instalments or debt relief, or by bringing administrative or legal proceedings, provided that, within the period prescribed by national law or administrative practice, he provides evidence that he has benefited from such measures or arrangement or that he has brought such proceedings within that period.”37 45 In situations where only minor amounts of taxes or social security contributions are unpaid contracting authorities must refrain from excluding tenderers. This follows from the principle of proportionality. The same will be the case if the economic operator was informed of the exact amount due at such a time that it did not have the possibility of taking the necessary measures before expiration of the deadline for requesting participation or, in open procedures, the deadline for submitting its tender (see below at section 57.3.2).

57.3. Derogations from excluding an economic operator 46

Article 57(3) contains two exceptions as to when it will be mandatory for contracting authorities to exclude an economic operator on the grounds listed in Article 57(1) and 34 See also Article 64(5), which states “With regard to the payment of social security contributions and taxes, an additional certificate may be required of any registered economic operator whenever a contract is to be awarded.” 35 Joined Cases C-226/04 and C-228/04 – La Cascina Soc. coop. arl, Zilch Srl v. Ministero della Difesa and others [2004] ECR I-1347. 36 Joined Cases C-226/04 and C-228/04 – La Cascina Soc. coop. arl, Zilch Srl v. Ministero della Difesa and others [2004] ECR I-1347, paragraph 31-32. 37 Joined Cases C-226/04 and C-228/04 – La Cascina Soc. coop. arl, Zilch Srl v. Ministero della Difesa and others [2004] ECR I-1347, paragraph 40.

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2). The first is a derogation relating to overriding reasons relating to the public interest (see below section 57.3.1). The other derogation concerns cases where exclusion would be clearly disproportionate (the proportionality principle). Article 57(6) and (7) lists a further ground: self-cleaning (see below at sections 57.6 and 57.7). 57.3.1. Overriding reasons relating to the public interest Member States may provide for derogation from the mandatory exclusion grounds 47 provided for in Article 57(1) and (2), on an exceptional basis, for overriding reasons relating to the public interest such as public health or protection of the environment. In the 2004 Public Sector Directive the similar provision in Article 45(2) stated “for overriding requirements in the general interest.”38 Thus, general interest has been changed to public interest.39 General interest seems to be narrower than public interest in the sense that it might be easier to justify an exception due to public interest than it would be due to general interest, but it is not quite clear from the preparatory works of the 2014 Public Sector Directive whether the change of wording should also imply a change in the interpretation of the derogation. Most likely the change of wording will have no impact. Article 57(3) states as examples for the use of this derogation public interest such as 48 health and protection of the environment. Further examples have been added in the recitals. Thus, Recital 100 states “… Member States should, however, be able to provide for a derogation from those mandatory exclusions in exceptional situations where overriding requirements in the general interest make a contract award indispensable. This might, for example, be the case where urgently needed vaccines or emergency equipment can only be purchased from an economic operator to whom one of the mandatory grounds for exclusion otherwise applies.” The examples referred to in the provision as well as in the recitals are new, but shows that overriding reasons should be interpreted narrowly.40 The exemption should be interpreted in the light of the TFEU,41 which also provides 49 derogations from the rules on free movement in cases such as public order or health. Such a derogation can, for example, be found in Article 36 TFEU, which allows for restrictions on the free movement rules in certain situations such as if the measure is: “justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property.”42 However, where the TFEU always applies, the derogation in Article 57(3) is only applicable where Member States have implemented the possibility.

38 The Danish wording of Article 45 was as follows: “bydende hensyn til almenvellet”, whereas in the 2014 Directive Article 57(3) the expression in Danish language is as follows: “hensyn til væsentlige samfundsinteresser”. 39 The Commission’s proposal did not contain this possibility to derogate from the exclusion grounds for overriding requirements in the general interest. It is not quite clear from the Commission’s proposal why the option was not included. It is possible that the reason was due to simplification as the option was already a result of the TFEU. The Council proposal suggested reinserting the provision with the same wording as in Article 45 (see Council document of November 30, 2012 document no. 16725/1/12), the wording was later on during negotiations with the Parliament changed to the current wording. 40 See e.g. Fabricius, p. 395, who argues that for certain Member States it can be difficult to imagine cases that could justify entering into a contract with an economic operator who is in a situation covered by one of the mandatory exclusion grounds. 41 Steinicke, Michael, ‘Qualification and Shortlisting’ (chap. 5), in Trybus, Caranta and Edelstam (eds), EU Law and Public Contracts, states: “It is likely, though, that “general interest” will be in line with the exception found in the TFEU and the case law on free movement.” Hans-Joachim Priess, ‘The rules on exclusion and self-cleaning under the 2014 Public Procurement Directive’, in: PPLR 2014, 3, 112-123.

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57.3.2. Where exclusion would be disproportionate Member States may also provide for derogation from the mandatory exclusion where exclusion would be clearly disproportionate. Thus, the principle of proportionality has been explicitly mentioned in relation to the mandatory exclusion grounds. The principle of proportionality is also seen in Article 18(1), which states that “Contracting authorities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner.” [Emphasis added]. 51 Article 57(3) further states that exclusion would be clearly disproportionate in particular where only minor amounts of taxes or social security contributions are unpaid or where the economic operator was informed of the exact amount due following its breach of its obligations relating to the payment of taxes or social security contributions at such time that it did not have the possibility of taking measures as provided for in the third subparagraph of paragraph 2 before expiration of the deadline for requesting participation or, in open procedures, the deadline for submitting its tender. In C-358/12, Consorzio Stabile Libor Lavori Publicci, national (Italian) legislation entailed the exclusion of companies due to missing payments to social security schemes, if the difference between the amount owed and the amount paid is both more than EUR 100 or more than 5% of the amount due. The Court held that such a fixed threshold both helped to ensure equal treatment and transparency, and that it created legal certainty. 52 As the mandatory grounds for exclusion constitute serious offences it is difficult to see that the principle of proportionality could lead to an exception in cases where an exception cannot be justified due to overriding reasons relating to the public interest. 53 In case the contracting authority wishes to exclude an economic operator based on one of the mandatory exclusion grounds, the contracting authority must, prior to the exclusion, inform the economic operator that he is covered by a ground for exclusion, and give the candidate or tenderer the opportunity to comment. 50

57.4. Discretionary grounds for exclusion Article 57(4) contains a list of grounds for exclusion, which contracting authorities can use, but are not required to do so. A similar provision on such discretionary grounds for exclusion was found in Directive 2004/18/EC Article 45(2), but the grounds have been updated and new ones have been inserted. 55 Discretionary grounds are voluntary for contracting authorities to use. The ECJ has ruled as follows: “… since the Member States may choose not to apply those grounds of exclusion at all and opt for the widest possible participation in procedures for the award of public contracts or to incorporate them into national law with varying degrees of rigor according to legal, economic or social considerations prevailing at national level., In that context the Member States have the power to make the criteria laid down in Article 29 of the Directive less onerous or more flexible”.43 It is possible for Member States to require contracting authorities to exclude in one of the following situations listed in 57(4 a). Thus, Member States can render one or more of the grounds listed in the Article mandatory in the sense that contracting authorities in that Member State would be obliged to exclude an economic operator for one of the reasons listed in Article 57(4). This could for exam54

42 Article 36 TFEU. See also Article 45 (3) TFEU. For further see, for example, Barnard, Cathrine, ‘Derogations, Justifications and the Four Freedoms: Is State Interest Really Protected?’, in Barnard, Cathrine and Odudu, Okeoghene (eds), The Outer Limits of European Union Law (Hart, Oxford 2009); Barnard, Cathrine, ‘The Substantive Law of the EU’ [2010], mainly chap. 6 and 13. 43 Joined Cases C-226/04 and C-228/04 – La Cascina Soc. coop. arl, Zilch Srl v. Ministero della Difesa and others [2004] ECR I-1347, paragraph 23.

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ple be the case where a Member State for political reasons wishes to exclude economic operators due to violation of obligations in the fields of environmental, social and labour law. If the contracting authority wishes to use one of the grounds for exclusion this should 56 for reasons of transparency be stated in the contract notice This can also be seen in Annex V, Part C Information to be included in contract notices, para 11, regarding conditions for participation, where it is stated that this includes: “c) a list and brief description of criteria regarding the personal situation of economic operators that may lead to their exclusion and of selection criteria; minimum level(s) of standards possibly required; indication of required information (self-declarations, documentation). Thus, contracting authorities should describe beforehand, which situations would lead to exclusion of a tenderer and what types of documentation they require as a proof that the tenderers are not in a situation, which will entail exclusion. These elements must be stated already in the European Single Procurement Document (ESPD).44 Where the contracting authority in the contract notice states that it requires documentation for the fact that the economic operator is not within one of the discretionary exclusion grounds, this should also be taken to imply that the contracting authority intends to use exclusion of tenderers. In such a situation the contracting authority must exclude the tenderers who are covered by one of the grounds for exclusion. A contracting authority may exclude an economic operator during the procedure if 57 the contracting authority becomes aware that a discretionary exclusion ground covers the tenderer. This could even be the case if the contracting authority has not stated in the contract notice that tenderers should provide documentation for the fact that they are not covered by a discretionary exclusion ground. Article 57(5) second paragraph states: “At any time during the procedure, contracting authorities may […] exclude an economic operator where it turns out that the economic operator is, in view of acts committed or omitted either before or during the procedure, in one of the situations referred to in paragraph 4.” This means that if, for example, a tenderer goes bankrupt during the procedure, the contracting authority will be permitted to exclude the tenderer. The Court of Justice has several times stated that Article 45(2) of the 2004 Public Sec- 58 tor Directive (and the previous Article 29 in the Service Directive, which is the equivalent to Directive 2004/18/EC Article 45(2)) addresses the only limits to the power of the Member States in the sense that they cannot provide for grounds for exclusion other than those mentioned therein. Thus, the list of discretionary grounds are exhaustive. 45 Among more recent cases, Forposta stated: “… in accordance with settled case-law of the Court, Article 45(2) of Directive 2004/18 exhaustively lists the grounds capable of justifying the exclusion of a contractor from participation in a contract for reasons, based on objective factors, that relate to his professional qualities and therefore precludes Member States from adding to the list contained in that provision other grounds for exclusion based on criteria relating to professional qualities.”46 However, the list is only exhaustive in relation to grounds for tenderers professional qualities, but does not exclude that Member States can introduce other grounds for ex44 Commission Implementing Regulation (EU) 2016/7 of 5 January 2016 establishing the standard form for the European Single Procurement Document. See the commentary on 59 for further on the ESPD. 45 See for example Joined cases C-226/04 and C-228/04, La Cascina Soc. coop. arl and Zilch Srl v. Ministero della Difesa and Others (C-226/04) and Consorzio G. f. M. v. Ministero della Difesa and La Cascina Soc. coop. arl (C-228/04) [2006], ECR I-1347, paragraph 2, Case C-538/07, Assitur ECR [2009] I-4219, paragraph 20, C-213/07, Michaniki AE v. Ethniko Symvoulio Radiotileorasis and Ypourgos Epikrateias [2008] ECR I-9999, paragraph 43, Case C‑74/09 Bâtiments et Ponts Construction and WISAG Produktionsservice [2010] ECR I‑7271, paragraph 43. 46 See Case C-465/11, Forposta SA, December 2012, paragraph 38.

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clusion to ensure the principles of transparency and equal treatment is ensured. 47 Thus, even though the list is, in principle, exhaustive a few exceptions have been accepted by the ECJ. In Fabricom,48 it was permitted, according to the principle of equal treatment, to exclude an undertaking for reasons of conflict of interest due to prior involvement of the tenderer. The topic of conflict of prior involvement of candidates or tenderers is now covered by Article 41 of the Directive and inserted as a discretionary ground in Article 57(4 f) (see below). In Michaniki49 the Court also stated that Member States are not precluded from “… providing for further exclusionary measures designed to ensure observance of the principles of equal treatment of tenderers and of transparency, provided that such measures do not go beyond what is necessary to achieve that objective.”50 Thus, beside the grounds for exclusion stated in Article 57, there will also be situations where a contracting authority must exclude an economic operator based on the principles laid down in the Treaties. In relation to contracts, which are not covered by the Public Sector Directive, the only grounds for exclusion of the economic operator are also those set in Article 57 and the principles of the Treaty and, it is submitted, that contracting authorities are free to apply these grounds for exclusion as long as they do not violate principles laid down in the Treaties. This was also the case in the recent case Generali.51 The case concerned insurance services below the thresholds and the contracting authority had stated in the contract notice that tenderers would be excluded based on prior violations of competition rules. Since the contract fell below the threshold the question depended on whether such a ground for exclusion was contrary to the rules on the free movement of services. The Court of Justice found that it was possible to use the exclusion ground and stated para. 36 that “If such a cause for exclusion is possible under Directive 2004/18, it must a fortiori be regarded as justified in relation to public contracts which fall short of the threshold defined in Article 7 of that directive and which are consequently not subject to the strict special procedures laid down in that directive.” Thus, as long as the contracting authority states the ground for exclusion it wishes to use beforehand, it is possible to use the grounds in Article 57 for exclusion for contracts outside the Directive. 52 59 The contracting authority is bound by the principle of equal treatment. This means that the choice of the contracting authority as to exclusion is limited in the sense that the contracting authority cannot only exclude one economic operator with reference to an exclusion ground in Article 57(4), but must exclude all economic operators covered by the exclusion ground as long as the violation is the same. 60 However, the principle of proportionality should be observed. Recital 101 states in that regard that: “In applying facultative grounds for exclusion, contracting authorities should pay particular attention to the principle of proportionality. Minor irregularities should only in exceptional circumstances lead to the exclusion of an economic operator. 47 See also Steen Treumer, ‘Exclusion, qualification and Selection of Candidates and Tenderers in EU Public Procurement’ in Martin Burgi, Martin Trybus and Steen Treumer (eds), Qualification, selection and exclusion in EU procurement, European law series, DFJØ Publishing 2016, p. 33 et seqq. 48 Joined cases C-21/03 and C-34/03, Fabricom SA v. Belgian State [2005] ECR 2005 I-1559. 49 Michaniki AE v. Ethniko Symvoulio Radiotileorasis and Ypourgos Epikrateias [2008] ECR I-9999,. 50 Michaniki AE v. Ethniko Symvoulio Radiotileorasis and Ypourgos Epikrateias [2008] ECR I-9999, paragraph 24. 51 Case C-470/13, Generali-Providencia. 52 See also Case C-95/10, Strong Segurança SA v. Município de Sintra, Securitas- Serviços e Tecnologia de Segurança [2011] March 17, 2011, (not yet reported), paragraph 46, which stated that, the Directive does not preclude Member States: ‘and, possibly, contracting authorities from providing for such application in, respectively, their legislation and the documents relating to the contract. For further on this topic, see Hansen, Carina Risvig, ‘Contracts not covered, or not fully covered, by the Public Sector Directive’.

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However repeated cases of minor irregularities can give rise to doubts about the reliability of an economic operator which might justify its exclusion.” This means that contracting authorities may differentiate between violations in the sense that for example a violation which leads to a minor fine in some circumstances would not be sufficient to exclude the economic operator. 53 An assessment of the principle of proportionality could lead to the fact that though two economic operators are in breach of the same exclusion ground only one would be excluded as the other had only committed minor irregularities. 57.4.1 a. Violation of obligations in the fields of environmental, social and labour law Contracting authorities may exclude economic operators in case the contracting au- 61 thority can demonstrate by any appropriate means a violation of applicable obligations referred to in Article 18(2). A similar provision was not found in Directive 2004/18/EC. The provision is almost identical to the provision in Article 56(1) which states: “Contracting authorities may decide not to award a contract to the tenderer submitting the most economically advantageous tender where they have established that the tender does not comply with the applicable obligations referred to in Article 18(2).” The difference between the two provisions seems to lie in the fact that in Article 56(1), the contracting authority must “establish” a violation whereas according to Article 57(4 a) the contracting authority must “demonstrate by any appropriate means” a violation. The Commission had proposed the following wording “Contracting authorities shall 62 reject the tender, where they have established that the tender is abnormally low because it does not comply with obligations established by Union legislation in the field of social and labour law or environmental law or by the international social and environmental law provisions listed in Annex XI.” The adapted wording does not contain a reference to the fact that the tender must be abnormally low due to the violation of applicable obligations referred to in Article 18(2). Though a tender could often be said to be abnormally low if the tenderer is in breach of labour law and social considerations, it is not necessary for the exclusion of the tenderer. In any case the contracting authority may exclude economic operators if the contracting authority can demonstrate by any appropriate means a violation of applicable obligations referred to in Article 18(2).54 Article 18(2) ensures that economic operators fulfil ”applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex XI.” It shows the importance of respecting EU and international obligations in these fields and prevents rewarding of competitive advantages obtained by non-respect of legal obligations.55 Annex XI contains an exhaustive list of international conventions in the field of environmental, social and labour law. See for further on the list the commentary to Article 56(1). 63 Violations of social obligations include rules on accessibility for disabled persons. 56 53 Steinicke and Groesmeyer, p. 1138 argue that under the 2004 Directive Article 45 did not contain the possibility to differentiate between the seriousness of a given violation. 54 The Directive also contains a provision for abnormally low tenders, cf. Article 69 for further comments on abnormally low tenders. For a thorough analysis see also Ølykke, Grith, “Abnormally low Tenders – with an emphasis on public tenderers”. 55 See Cluster 2, The Use of Strategic Procurement, Council document no. 5369/12, January 2012, p. 28. 56 Recital 101, which states: “Contracting authorities should further be given the possibility to exclude economic operators which have proven unreliable, for instance because of violations of environmental or social obligations, including rules on accessibility for disabled persons or other forms of grave professional misconduct, such as violations of competition rules or of intellectual property rights.”

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One may raise the question as to what extent the contracting authority can be said to “demonstrate by any appropriate means”. Similar wording is used for several of the discretionary exclusion grounds. The contracting authority must bear the burden of proof and if the contracting authority wishes to exclude an economic operator based on this provision it is presumably required that the contracting authority gives the economic operator the possibility of justifying that the contracting authority’s assessment is not correct. 57.4.2 b. Bankrupt or is the subject of insolvency

Contracting authorities may exclude an economic operator “Where the economic operator is bankrupt or is the subject of insolvency or winding-up proceedings, where its assets are being administered by a liquidator or by the court, where it is in an arrangement with creditors, where its business activities are suspended or it is in any analogous situation arising from a similar procedure under national laws and regulations.” A similar provision was found in the 2004 Public Sector Directive in Article 45(2 a and b).57 The terminology has been adapted to Council Regulation No 1346/2000 on insolvency proceedings. 66 As a novelty the Directive now states in Article 57(4) second paragraph that “(…) Member States may require or may provide for the possibility that the contracting authority does not exclude an economic operator which is in one of the situations referred to in that point, where the contracting authority has established that the economic operator in question will be able to perform the contract, taking into account the applicable national rules and measures on the continuation of business in the case of the situations referred to in point (b).”58 Priess argues with regard to this addition that “This is a positive addition since it takes into account that certain measures in insolvency or similar proceedings enable a company to re-enter normal business dealings. Further, this exception also strengthens competition in procurement proceedings.”59 67 If an economic operator goes bankrupt during the procurement procedure such an operator must also be excluded from the participation. Article 57(5) second paragraph states “At any time during the procedure, contracting authorities may exclude (…) an economic operator where it turns out that the economic operator is, in view of acts committed or omitted either before or during the procedure, in one of the situations referred to in paragraph 4.” This means that if a tenderer for example goes bankrupt during the procedure the contracting authority should have the possibility to exclude the tenderer. It can be questioned what will take place if the economic operator is a consortia and one member of the consortia goes bankrupt during the procedure. This was the situation in a recent case before the Danish Complaints Board for Public procurement,60 where the Board found that since one of the members of a consortium no longer participated in the consortia due to insolvency, the other member was not in a position where it could have been awarded the contract. The Danish Complaints Board for Public Procurement asked 65

57 The corresponding Article in Directive 2004/18/EC Article 45(2) stated:“(a) is bankrupt or is being wound up, where his affairs are being administered by the court, where he has entered into an arrangement with creditors, where he has suspended business activities or is in any analogous situation arising from a similar procedure under national laws and regulations; and (b) is the subject of proceedings for a declaration of bankruptcy, for an order for compulsory winding up or administration by the court or of an arrangement with creditors or of any other similar proceedings under national laws and regulations”. 58 The reference was suggested by the Parliament, cf. amendment 171, and the justification was that “The common situation where an economic operator has entered into an arrangement with creditors must not be considered as a ground for exclusion by itself.” 59 See Hans-Joachim Priess, ‘The rules on exclusion and self-cleaning under the 2014 Public Procurement Directive’, in: PPLR 2014, 3, 112-123. 60 See decision of January 28, 2014, MT Højgaard A/S and Züblin A/S v. Banedanmark.

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the Court of Justice for a preliminary ruling on the matter, see C-396/14, MT Højgaard & Züblin 61 The case concerned a negotiated procedure under the Utilities Directive concerning the execution of a project in connection with the construction of a new railway line between Copenhagen and Ringsted. Five operators applied for prequalification, and the contracting authority, Banedanmark prequalified all five. Among the prequalified was an association composed of E. Pihl & Søn A/S and Aarsleff who had applied for prequalification as a consortium. On August 26, 2013 a liquidation order was issued on Pihl. Subsequently, the Contracting authority in the case allowed Aarsleff to continue to participate in the tender process alone, despite Pihl's bankruptcy. Aarsleff took over more than 50 employees from Pihl, including key figures in relation to the execution of the project subject to the tender. Thereafter Aarsleff submitted bids in its own name and won the contract. Appeal against this decision was filed with the Complaints Board for Public Procurement, which asked the Court of Justice for a preliminary ruling on the matter. The Court (Grand Chamber) found that (cf. paragraph 26) the question of whether a contracting entity may allow such an alteration must be examined with regard to the general principles of EU law, in particular the principle of equal treatment and the duty of transparency that flows from it, and the objectives of that law in relation to public procurement. According to the Court of Justice the continued participation of one economic operator must take place in conditions, which do not infringe the principle of equal treatment of the tenderers as a whole and that it was not contrary to the principles as such provided that (cf. paragraph 44) “it is established, first, that that economic operator by itself meets the requirements laid down by the contracting entity and, second, that the continuation of its participation in that procedure does not mean that the other tenderers are placed at a competitive disadvantage.” Thus, if Aarsleff, alone would have been prequalified it was allowed for the contracting authority to accept bids from Aarsleff alone. It is for the Danish Complaints Board to determine whether this was the case. For more on this case, see the commentary to Article 18. 57.4.3 c. Grave professional misconduct Contracting authorities may exclude an economic operator “Where the contracting 68 authority can demonstrate by appropriate means that the economic operator is guilty of grave professional misconduct, which renders its integrity questionable.” The provision corresponds to Article 45(2 d) of Directive 2004/18/EC.62 Grave professional misconduct can render the integrity of an economic operator 69 questionable and thus render the economic operator unsuitable to receive the award of a public contract irrespective of whether the economic operator would otherwise have the technical and economical capacity to perform the contract.63 As examples of what can be characterized as grave professional misconduct the 70 recitals mention that if the economic operator in a prior contract, for example, has demanded that a supplier comply with certain collective agreements (which are compatible with EU law) suppliers in breach of these can make a serious mistake. Recital 39 states: “… It should also be possible to include clauses ensuring compliance with collective agreements in compliance with Union law in public contracts. Non-compliance with the relevant See C-396/14, MT Højgaard & Züblin. Which states: “(d) has been guilty of grave professional misconduct proven by any means which the contracting authorities can demonstrate”. Article 45(2 a) of Directive 2004/18/EC which provides an additional ground for exclusion in case of a conviction for an offence concerning the professional conduct has not been taken over by the 2014 Directive since it largely overlaps with point (c). See cluster 3, p. 6. 63 Recital 101. 61

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obligations could be considered to be grave misconduct on the part of the economic operator concerned, liable to exclusion of that economic operator from the procedure for the award of a public contract.” Also breaches of competition rules or intellectual property right can be considered as grave professional misconduct.64 This does not necessarily need to have been demonstrated by a Court, administrative decisions may also be covered by the concept of grave professional misconduct. Regarding situations where neither a final judgment nor adminsitrative decision exist, see below at Section 57.4.4. 71 The Court of Justice found in Forposta SA,65 that the concept of professional misconduct “… covers all wrongful conduct which has an impact on the professional credibility of the operator at issue and not only the violations of ethical standards in the strict sense of the profession to which that operator belongs, which are established by the disciplinary body of that profession or by a judgment which has the force of res judicata.” And furthermore that the concept “… must be understood as normally referring to conduct by the economic operator at issue which denotes a wrongful intent or negligence of a certain gravity on its part. Accordingly, any incorrect, imprecise or defective performance of a contract or a part thereof could potentially demonstrate the limited professional competence of the economic operator at issue, but does not automatically amount to grave misconduct.” 66 Thus, it is essential that the conduct had impact on the professional credibility of the operator. Minor violations of ethical standards are not sufficient. The conduct must be of a certain gravity. Also the Danish Supreme Court has recently ruled on the matter. In the case I/S Vestforbrændingen v. DSV Transport of June 4th, 2013 the question arose whether the contracting authority was justified in excluding DSV with reference to Article 45(2)d). DSV had in a prior contract with the contracting authority terminated a contract which an arbitration court had found to be unjustified. The Danish supreme court found (as well as the Danish Complaints Board for Public Procurement and the appeal Court) that the termination of the contract was not to be considered as grave professional misconduct. The Supreme Court emphasised that there was a genuine dispute regarding the interpretation of the contract and that DSV continued to carry out its transport assignments after the termination of the contract. The supreme Court refered to the above-mentioned Forposta case, where the Court had found that grave professional misconduct covers all wrongful conduct which has an impact on the professional credibility of the operator at issue and that failure of an economic operator to abide by its contractual obligations can, in principle, be considered as professional misconduct.67 It is the contracting authority’s responsibility to assess whether there is grave professional misconduct on the part of a tenderer. Thus, a contracting authority will also be responsible for the consequences of its possibly erroneous decisions.68 Since it is the responsibility of the contracting authory responsibility to make a correct assessment “… contracting authorities should also remain free to consider that there has been grave professional misconduct, where, before a final and binding decision on the presence of mandatory exclusion grounds has been rendered, they can demonstrate by any appropriate means that the economic operator has violated its obligations, including obligations relating to the payment of taxes or social security contributions, unless otherwise provided by national law.” 69 See Recital 101. See also Case C-465/11, Forposta SA, December 2012. 66 See also Case C-465/11, Forposta SA, December 2012, paragraph 27 and 30. 67 See also Case C-465/11, Forposta SA, December 2012. 68 Recital 101. 69 Recital 101. 64

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It is essential that the grave misconduct has rendered the integrity of the undertaking 72 questionable. Thus, it will not be all types of grave mistakes, which are covered. The contracting authority must bear the burden of proof when it comes to demonstrating grave professional misconduct on the part of the tenderer.70 In order to find whether ‘grave misconduct’ has taken place, a specific and individual assessment of the conduct of the economic operator concerned must, in principle, be carried out. A judgment which has the force of res judicata is not required in order to prove pro- 73 fessional misconduct within the meaning of point (d) of that subparagraph.71 57.4.4 d. Agreements aimed at distorting competition Contracting authorities may exclude an economic operator “where the contracting authority has sufficiently plausible indications to conclude that the economic operator has entered into agreements with other economic operators aimed at distorting competition.” A similar provision was not found in the 2004 Public Sector Directive. Competition rules prohibit certain agreements between economic operators aimed at distorting competition. In procurement situations agreements can in particular restrict competition by coordinating tenders (also called bid-rigging).72 In the Commission’s proposal a provision on illicit conduct was proposed.73 Thus, it was proposed that candidates should have been required at the beginning of the procurement procedure to provide an honour clause that they had not undertaken and would not undertake to: “(a) unduly influence the decision-making process of the contracting authority or obtain confidential information that may confer upon them undue advantages in the procurement procedure; (b) enter into agreements with other candidates and tenderers aimed at distorting competition; (c) deliberately provide misleading information that may have a material influence on decisions concerning exclusion, selection or award.” [Emphasis added]. Article 68 of the proposal specifically presribed that contracting authorities should not award the contract to the tenderer submitting the best tender where “(…) (b) the declaration provided by the tenderer pursuant to Article 22 is false.” The two provisions are now covered by Article 57(4 a) in the sense that contracting authorities may exclude an economic operator “where the contracting authority has sufficiently plausible indications to conclude that the economic operator has entered into agreements with other economic operators aimed at distorting competition.” The contracting authority must have “sufficiently plausible indications” that an agreement aimed at distorting competition exists. This will be a difficult test to undertake. Clearly, if the economic operator has been the subject of a conviction this will constitute sufficient indication, but such a situation is already covered by the provision of Article 57(4 a) regarding grave professional miscoduct. The provision in Article 57 (4 d) covers other situations than those where the economic operator has been convicted. It will be a difficult task for the contracting authority to demonstrate sufficiently plausible indica70 See also Recital 101, which states: “… Bearing in mind that the contracting authority will be responsible for the consequences of its possibly erroneous decision.” 71 Case C-465/11, Forposta SA, paragraph 28. 72 See for example Sánchez Graells, Albert, ‘Prevention and Deterrence of Bid Rigging: A Look from the New EU Directive on Public Procurement (April 1, 2014)’, in G Racca & C Yukins (eds), Integrity and Efficiency in Sustainable Public Contracts (Bruylant, Brussels 2014). Available at SSRN: http://ssrn.com/ abstract=2053414 or http://dx.doi.org/10.2139/ssrn.2053414; Ølykke, Grith, ‘How does the Court of Justice of the European Union pursue competition concerns in a public procurement context?’, in Public Procurement Law Review, 2011. 73 See the Commission’s proposal, Article 22.

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tions other than a conviction, but it could be the case, where the contracting authority recieves identical tenders or during the procedure notices other indications as to the existense of such an agreement. It will, ultimately, be for the contracting authority to bear the burden of proof, which will be a difficult task and thus, it is likely that the provision in Article 57 (4 d) will not be of any practical relevance. It is not only vialolations which take place in the concrete tender, but also vialotations which took place at an earlier stage for example in a prior tenderprocedure. 57.4.5 e. Conflict of interest Contracting authorities may also exclude an economic operator “(e) where a conflict of interest within the meaning of Article 24 cannot be effectively remedied by other less intrusive measures.” A similar provision cannot be found in the 2004/18/EC Directive and was neither a part of the Commission’s proposal. Also Article 24 regarding conflict of interest is new and places an obligation on Member States to ensure that contracting authorities take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators. According to Article 24(2) the concept of conflict of interest in relation to Article 24 covers at least any situation where staff members of the contracting authority or of a procurement service provider acting on behalf of the contracting authority who are involved in the conduct of the procurement procedure or may influence the outcome of that procedure have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure. Even though these provisions are new, the fact that an economic operator can be excluded based on conflict of interest existed also prior to the 2014 Public Sector Directive in view of the general principles of equal treatment. See Article 24 for further on conflict of interest. 79 The Financial Regulation also contains a similar provision in Article 94 where it is stated “Contracts may not be awarded to candidates or tenderers who, during the procurement procedure: (a) are subject to a conflict of interest”. 80 It is for the contracting authority to prove that there is a conflict of interest. 74 81 Exclusion of a tenderer may be the last remedy for the contracting authority to apply and only where so doing is indispensable in order to comply with the principle of equal treatment.75 The provision hence states that it is possible to remedy a conflict of interest by other less intrusive meassures. The Directive is silent as to what such measures could be. In the Commission’s proposal, it was stated in Article 21 that “In the event of a conflict of interests, the contracting authority shall take appropriate measures. Those measures may include the exclusion of the staff member in question from involvement in the affected procurement procedure or the re-assignment of the staff member’s duties and responsibilities. Where a conflict of interests cannot be effectively remedied by other means, the candidate or tenderer concerned shall be excluded from the procedure.” Thus, as can be seen it was the Commission’s intention that a conflict of interest could be remedied by for example the exclusion of the staff member in question. 78

74 C-538/13, eVigilo Ltd. See also T-195/05, Deloitte Business Advisory N.vV [2007] ECR II-871 paragraph 35, which states: “§It is for the Commission to show concrete proof that a particular tenderer has a conflict of interest, and if such a risk could justify the exclusion of a tenderer – which is not the case here – the Commission ought to state that clearly in the invitation to tender, so that tenderers so forewarned can take that risk into account when forming their teams.” 75 See also Joined cases C-21/03 and C-34/03, Fabricom SA v. Belgian State [2005] ECR 2005 I-1559.

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In case there is a conflict of interest, which is not possible to remedy, the contracting 82 authority has no other possibility than to exclude the tenderer. 57.4.6 f. Prior involvement in preparation of the procedure A contacting authority may also exclude an economic operator “(f) where a distortion of competition from the prior involvement of the economic operators in the preparation of the procurement procedure, as referred to in Article 41, cannot be remedied by other, less intrusive measures.” Where a candidate or tenderer or an undertaking related to a candidate or tenderer has advised the contracting authority, or has otherwise been involved in the preparation of the procurement procedure, the contracting authority shall take appropriate measures to ensure that competition is not distorted by the participation of that candidate or tenderer. Article 41 contains examples as to what kind of remedy may be relied on in order to avoid that an undertaking, which has been involved somehow in the preparation of the procurement procedure, should be excluded. It is, e.g., stated that such measures include the communication to the other candidates and tenderers of relevant information exchanged in the context of or resulting from the involvement of the candidate or tenderer in the preparation of the procurement procedure and the fixing of adequate time limits for the receipt of tenders. The candidate or tenderer concerned shall only be excluded from the procedure where there are no other means to ensure compliance with the duty to observe the principle of equal treatment. In case it is not possible to remedy an advantage, the contracting authority has no other possibility than to exclude the tenderer. The fact that an economic operator can be excluded based on prior involvement existed also prior the 2014 Public Sector Directive and was a result of case law from the Court of Justice. In Fabricom,76 the Court of Justice found that according to the principle of equal treatment it was possible to exclude an undertaking that had an advantage in the competition.. Cluster 3 states the following: “It proposes a balance between, on the one hand, the principle of equal treatment – in casu, ensuring that some participants are not unfairly advantaged through their prior involvement – and, on the other hand, the principle of proportionality. It applies the same approach that the Court of Justice took in its judgment of 3.3.2005 in Joined Cases C-21/03 and C-34/03 (“Fabricom”), i.e. that in cases concerning prior technical advice exclusion must be the last resort to be applied only where so doing is indispensable to meet the principle of equal treatment. In some cases, communication of the relevant information referred to in the second subparagraph may be sufficient in itself, for example where the prior involvement in the preparation of a largescale works contract is limited to the performance of a geo-technical analysis of the building site. Here, rendering the analysis available to all the other participants can be sufficient to ensure that the principle of equal treatment is observed and competition not distorted. In other cases, further measures may be needed and in yet others it may turn out not to be possible to ensure equal treatment otherwise than through the exclusion of the economic operator concerned.” Before any exclusion of an undertaking, the undertaking must be given the possibility to demonstrate that its prior involvement did not distort competition. For further on prior involvement in preparation of the procedure, see the commentary on Article 41.

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A contracting authority may also exclude an economic operator “where the economic operator has shown significant or persistent deficiencies in the performance of a substantive requirement under a prior public contract, a prior contract with a contracting entity or a prior concession contract which led to early termination of that prior contract, damages or other comparable sanctions.”A similar provision was not found in the 2004/18/EC Directive. According to Recital 101 the introduction of such a provision is due to the fact that “contracting authorities should also be able to exclude candidates or tenderers whose performance in earlier public contracts has shown major deficiencies with regard to substantive requirements, for instance failure to deliver or perform, significant shortcomings of the product or service delivered, making it unusable for the intended purpose, or misbehaviour that casts serious doubts as to the reliability of the economic operator.” This discretionary exclusion ground is based on economic operators’prior flawed fulfilment of a contract. It is necessary that the economic operator in a prior contract has shown significant or persistent deficiencies in the performance of a substantive requirement. Thus, not all types of bad performance – or bad experience – with an economic operator may result in the exclusion of the economic operator. It is also a requirement that the prior contract led to early termination of the prior contract, damages or other comparable sanctions. Thus, bad experience as such is not sufficient. It is also relevant to note that not only the contracting authority’s own prior contracts may result in the use of this provision; also prior contracts (and prior concession contracts) of other contracting authorities can result in the exclusion of the economic operator. In the Commission’s proposal it was only bad experience of the contracting authority itself with could result in the exclusion of the tenderer. Also bad experience in a contract below the thresholds will be covered by the provision as well as contracts falling under, e.g., the Defence and Security Directive, the Concessions Directive and the Utilities Directive. The exclusion ground is limited to cases of qualified bad performance (“significant or persistent deficiencies”) with regard to fulfilling a substantive requirement. Contracting authorities must, in particular, ensure that the breaches of contractual obligations are sufficiently serious to make them comparable to the other grounds for exclusion listed in Article 57.77 It is the contracting authority that has the burden of proof that a tenderer is subject to this exclusion ground. Contracting authorities may for example demonstrate this by a final judgment or order from an administrative board. If the contracting authority has decided to apply this exclusion ground and stated so in the contract notice, the contracting authority is also required to exclude an undertaking covered by the exclusion ground. An interesting question is how this exclusion ground can be used in framework agreements with multiple contracting authorities and where reopening of the competition takes place. In such cases there might be one contracting authority that has had bad experience with an economic operator but where others does not wish to exclude an economic operator. In principle, all contracting authorities are also required to exclude an undertaking covered by the exclusion ground in such cases. However, the rules of self-cleaning becomes relevant in these case in the sense that the undertaking must be given the possibility to clarify to the contracting authorities that mistakes will not happen in the future. As bad performance should not be subject to remedial action for an indefinite period, national law should provide for a maximum duration for such exclusions.78 77

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A concern which can be raised regarding this new provision is that it may, to some 93 extent, be used against tenderers involved in the performance of current contracts when the contracting authority may demand some changes to a specific contract or compromises and indicates that, in case the tenderer refuses, it intends to terminate the contract.79 Terminating a contract can be severe for tenderers as they risk being excluded from many other public contracts. 57.4.8 h. Serious misrepresentation in supplying information A contracting authority may also exclude an economic operator “where the economic 94 operator has been guilty of serious misrepresentation in supplying the information required for the verification of the absence of grounds for exclusion or the fulfilment of the selection criteria, has withheld such information or is not able to submit the supporting documents required pursuant to Article 59”. This exclusion ground concerns the concrete procurement procedure and not prior procurement procedures. Contracting authorities may only require the ESPD as preliminary evidence that the 95 relevant economic operator is not in one of the situations referred to in Article 57 in which economic operators shall or may be excluded. Before awarding the contract, the contracting authority shall require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60 and, where appropriate, Article 62. The contracting authority may invite economic operators to supplement or clarify the certificates received pursuant to Articles 60 and 62. 80 If it turns out that the winning tenderer cannot deliver the required documentation 96 the contracting authority may exclude the operator. 57.4.9 i. Unduly influence the decision-making process of the contracting authority A contracting authority may also exclude an economic operator “(i) where the econo- 97 mic operator has undertaken to unduly influence the decision-making process of the contracting authority, to obtain confidential information that may confer upon it undue advantages in the procurement procedure or to negligently provide misleading information that may have a material influence on decisions concerning exclusion, selection or award.” In the Commission’s proposal a provision on illicit conduct was proposed.81 Thus, it 98 was proposed that candidates should have been required at the beginning of the procurement procedure to provide an honour clause that they had not undertaken and would not undertake to: “(a) unduly influence the decision-making process of the contracting authority or obtain confidential information that may confer upon them undue advantages in the procurement procedure; (b) enter into agreements with other candidates and tenderers aimed at distorting competition; (c) deliberately provide misleading information that may have a material influence on decisions concerning exclusion, selection or award.” [Emphasis added]. Article 68 of the proposal also presribed that contracting authorities should not award the contract to the tenderer submitting the best tender where “(…) (b) the declaration provided by the tenderer pursuant to Article 22 is false.” The two provisions are now covered by Article 57(4 i) in the sense that contracting authorities may exclude an economic operator “where the economic operator has undertaken to unduly influence the decision-making process of the contracting authority, to obtain Recital 101. Article 72 contains a provision regarding modification of contracts during their term and when such can be done in accordance with the procurement rules. 80 See Article 59(4). 81 See the Commission’s proposal, Article 22. 78

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confidential information that may confer upon it undue advantages in the procurement procedure or to negligently provide misleading information that may have a material influence on decisions concerning exclusion, selection or award.” 99 In case the undertaking has succeeded in unduly influencing the decision-making process of the contracting authority or obtaining confidential information, the contracting authority is required to exclude the undertaking as such influence will constitute an advantage for the undertaking and hence a breach of the principle of equal treatment.

57.5. Time of excluding the tenderers Contracting authorities shall at any time during the procedure exclude an economic operator where it turns out that the economic operator is, in view of acts committed or omitted either before or during the procedure, in one of the situations referred to in paragraphs 1 and 2 (mandatory exclusion grounds) 101 At any time during the procedure, contracting authorities may exclude or may be required by Member States to exclude an economic operator where it turns out that the economic operator is, in view of acts committed or omitted either before or during the procedure, in one of the situations referred to in paragraph 4. This means that a contracting authority may be required by a Member State to exclude economic operators. 102 The 2014 Public Sector Directive contains a new provision in Article 73 regarding termination of contracts. Thus, according to this provision Member States shall ensure that contracting authorities have the possibility, at least under the following circumstances and under the conditions determined by the applicable national law, to terminate a public contract during its term, where: “(b) the contractor has, at the time of contract award, been in one of the situations referred to in Article 57(1) and should therefore have been excluded from the procurement procedure.” From this can be seen that it will be the time of award of the contract, which is decisive for the assessment whether one of the exclusion grounds exist. See the commentary on Article 73. 100

57.6. Self-cleaning The provision in Article 57(6) relates to so-called self-cleaning. Self-cleaning is a possibility for the economic operator to remedy past violations it has committed. In this sense it is a clean slate and gives the economic operator an opportunity to start over again, once it has cleaned up prior violations, hence the name self-cleaning. According to this provision any economic operator that is in one of the situations referred to in Article 57(1) constituting mandatory exclusion grounds and Article 57(4) constituting discretionary exclusion grounds may provide evidence to the effect that measures taken by the economic operator are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion. If such evidence is considered to be sufficient, the economic operator concerned shall not be excluded from the procurement procedure. Thus, candidates or tenderers who are about to be excluded on the basis of one of the grounds for exclusion have the right to submit to the contracting authority evidence demonstrating that they have taken appropriate measures to remedy the consequences of past misconduct and to effectively prevent future occurrences. This is called self-cleaning. 104 The provision on self-cleaning is a new invention in the 2014 Public Sector Directive and is inspired by legislation and case-law from various Member States, in particular Germany and Austria. It was already indicated in the Defence and Security Directive, that the Commission should examine the possibility for such a provision. Article 73 of the Defence and Security Directive states that the Commission shall investigate “… the 103

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feasibility of harmonising the conditions for the reinstatement of candidates or tenderers with prior convictions excluding them from participation in public procurements, and shall, if appropriate, bring forward a legislative proposal to that effect”. The topic of self-cleaning was also mentioned in the Commission’s Green Paper, where it was stated “An important issue on which the current EU public procurement Directives remain silent is what are referred to as the "self-cleaning" measures, i.e. measures taken by the interested economic operator to remedy a negative situation affecting his/her eligibility. Their effectiveness depends on their acceptance by Member States.”82 Even though self-cleaning has not previously been a part of the Public Procurement 105 Directives, based on the principle of proportionality and the rules on free movement self-cleaning can be considered to have been a possibility prior to the 2014 Public Sector Directive.83 Thus, self-cleaning was not excluded by the 2004 Directive, which can also be seen from the Green Paper where it is stated that “Article 45 allows Member States to take into account self-cleaning measures as far as such measures show that the concerns about professional honesty, solvency and reliability of the candidate or tenderer have been eliminated. However, there are no uniform rules on ‘self- cleaning’, even though measures taken by the economic operator to remedy the situation of exclusion are taken into account anyway by the contracting authorities in some Member States.”84 The aim of self-cleaning is that tenderers should not be excluded based on a ground 106 that, first of all, no longer exists and, secondly, with regard to which the tenderer has done everything it has been able to in order to avoid that such offences should occur in the future. Self-cleaning can be seen as a sort of proportionalitytest, which is also in line with the Green Paper, which states “The issue of ‘self-cleaning measures’ stems from the need to strike a balance between the implementation of the grounds for exclusion and respect for proportionality and equality of treatment. The consideration of self-cleaning measures may help contracting authorities in carrying out an objective and fuller assessment of the individual situation of the candidate or tenderer in order to decide its exclusion from a procurement procedure.”85 Such considerations can also be seen from Recital 102 which states that “Allowance should, however, be made for the possibility that economic operators can adopt compliance measures aimed at remedying the consequences of any criminal offences or misconduct and at effectively preventing further occurrences of the misbehaviour”. In order for the economic operator to be allowed to participate in the procurement 107 procedure anyway, the economic operator shall (cumulative list); 1) Prove that it has paid or undertaken to pay compensation in respect of any damage caused by the criminal offence or misconduct, (see section 57.6.1) 2) prove that it has clarified the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities and (see section 57.6.2) 3) have taken concrete technical, organisational and personnel measures that are appropriate to prevent further criminal offences or misconduct (see section 57.6.3) Where such measures offer sufficient guarantees, the economic operator in question should no longer be excluded on those grounds alone. Economic operators should have Green Paper, p. 53. E.g. Hans-Joachim Priess, ‘The rules on exclusion and self-cleaning under the 2014 Public Procurement Directive’, in: PPLR 2014, 3, 112-123; Steinicke, Michael, ‘Qualification and Shortlisting’ (chap. 5), in Trybus, Caranta and Edelstam (eds), EU Law and Public Contracts, argue to the contrary that it seems doubtful to base the self-cleaning possibility on the general interest exemption in Article 45 and that the legal background for self-cleaning does not appear very convincing. 84 Green Paper, p. 53. 85 Green Paper, p. 53. 82

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the possibility to request that compliance measures taken with a view to possible admission to the procurement procedure be examined.86 108 It is for the contracting authority to decide if the economic operator has demonstrated sufficiently that a particular ground for exclusion no longer exists. However, Member States can provide national legislation regarding self-cleaning, which sets the rules as to who should carry out the relevant assessments and to what extent measures can be said to be sufficient (see also Recital 102). The measures taken by the economic operators shall be evaluated taking into account the gravity and particular circumstances of the criminal offence or misconduct. Where the measures are considered to be insufficient, the economic operator shall receive a statement of the reasons for that decision. The fact that the tenderers may require a statement of the reasons for the decision that the measures taken are insufficient seems to rest on the presumption that the tenderer has initially asked the contracting authority to evaluate the measures taken. It will not be the responsibility of the contracting authority to ask tenderers whether they have taken any measures. The decision of contracting authority to exclude the tenderer constitutes a decision within the Remedies Directive, 87 and can therefore be the subject of review.88 57.6.1. Compensation 109

The economic operator must show that it has paid or undertaken to pay compensation in respect of any damage caused by the criminal offence or misconduct. Thus, if the economic operator has paid its taxes, compensations or paid damages the economic operator in question should no longer be excluded. It is not a requirement that the undertaking actively finds the companies or individuals who have suffered a loss, and offer compensation. The courts, arbitration or appeal bodies will handle imposition of compensation. An undertaking may also undertake to provide compensation or damages, which for example could be a form of settlement to avoid a lawsuit. 57.6.2. Collaborations

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The economic operator must have clarified the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities. Thus, if the economic operator has participated in investigations by helping the authorities solve a given violation, the economic operator in question should no longer be excluded. A question, which arises in this regard, is the risk of potential self-incrimination. Thus, the undertaking should not be required to reveal elements that will result in criminal prosecution. The information the undertaking provides should however, be sufficient to ensure the future credibility of the undertakings. Against an argument that self-incrimination in these cases may occur it must be remembered that it is voluntary to participate in public tenders, and if an undertaking wants to participate it must comply. 57.6.3. Personnel measures

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The economic operator must have taken measures relating to concrete technical, organisational and personnel measures that are appropriate to prevent further criminal ofRecital 102. The Remedies Directive Article 2(1)(b) lists various types of decisions, which must be open for review such as “the removal of discriminatory technical, economic or financial specifications in the invitation to tender, the contract documents or in any other document relating to the contract award procedure”. The list is not exhaustive. 88 See also Priess. 86

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fences or misconduct. This is perhaps the most important requirement as this will show that the economic operator does not intend to commit futher criminal offences. Those measures might consist, in particular, of personnel and organisational mea- 112 sures such as the severance of all links with persons or organisations involved in the misbehaviour, appropriate staff reorganisation measures, the implementation of reporting and control systems, the creation of an internal audit structure to monitor compliance and the adoption of internal liability and compensation rules.89 Staff-reorganisation could for instance be “… the dismissal of all officers, directors and employees involved in the misconduct, redeployment and/or disciplinary measures regarding persons having participated to a lesser degree or simply tolerated the misconduct.”90 Appropriate compliance measures to prevent future misconduct could also be establishing binding company guidelines, staff training and information, separation of administrative and operative departments, installation of a compliance officer as well as double-checking of important decisions.91 The principle of proportionality must also be observed in these cases. Thus, depending on an employee's involvement in the infringement arrangement it may include immediate dismissal to dismissal with notice, or could simply be to move one employee to another department. It does not mean necessarily that all employees involved, must be dismissed. Relevant employment law must of course also be observed. Article 57(6) also states that an economic operator which has been excluded by final 113 judgment from participating in procurement or concession award procedures shall not be entitled to make use of the possibility of self-cleaning provided for by Article 57(6) during the period of exclusion resulting from the judgment in the Member States where the judgment is effective. The underlying reason is that, in some Member States, economic operators can, when convicted, be excluded from procurement procedures as a result of a judgment. If an economic operator could self-clean, it would circumvent such a judgment. Consequently, in such cases self-cleaning should not be possible. As the wording of Article 57(6) states it is for the economic operator to provide evi- 114 dence to the effect that measures taken by the economic operator are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion. It is for the contracting authority to decide if such evidence is considered as sufficient, so that the economic operator concerned shall not be excluded from the procurement procedure. However, as can be seen from Recital 102 “… it should be left to Member States to determine the exact procedural and substantive conditions applicable in such cases. They should, in particular, be free to decide whether to allow the individual contracting authorities to carry out the relevant assessments or to entrust other authorities on a central or decentralised level with that task.” Thus, Member States can provide national legislation regarding self-cleaning, which sets the rules as to who should carry out the relevant assessments and to what extent measures can be said to be sufficient.

57.7. Period for excluding tenderers By law, regulation or administrative provision and having regard to Union law, Mem- 115 ber States shall specify the implementing conditions for this Article 57. They shall, in particular, determine the maximum period of exclusion if no measures, as specified in

Recital 102. Cluster 3: Reducing documentation requirements, Council document no. 9185/12, p. 9. 91 Cluster 3: Reducing documentation requirements, Council document no. 9185/12, p. 9. 89

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Article 57(6) regarding self-cleaning, are taken by the economic operator to demonstrate its reliability. 116 It is for Member Stated to decide how long such an exclusion period may be, but the period should be of a maximum of 5 years from the date of the conviction by final judgment for the mandatory exclusion grounds and 3 years for the date of the relevant event in relation to the discretionary grounds for exclusion.

Article 58 Selection criteria 1. Selection criteria may relate to: (a) suitability to pursue the professional activity; (b) economic and financial standing; (c) technical and professional ability. Contracting authorities may only impose criteria referred to in paragraphs 2, 3 and 4 on economic operators as requirements for participation. They shall limit any requirements to those that are appropriate to ensure that a candidate or tenderer has the legal and financial capacities and the technical and professional abilities to perform the contract to be awarded. All requirements shall be related and proportionate to the subject-matter of the contract. 2. With regard to suitability to pursue the professional activity, contracting authorities may require economic operators to be enrolled in one of the professional or trade registers kept in their Member State of establishment, as described in Annex XI, or to comply with any other request set out in that Annex. In procurement procedures for services, in so far as economic operators have to possess a particular authorisation or to be members of a particular organisation in order to be able to perform in their country of origin the service concerned, the contracting authority may require them to prove that they hold such authorisation or membership. 3. With regard to economic and financial standing, contracting authorities may impose requirements ensuring that economic operators possess the necessary economic and financial capacity to perform the contract. For that purpose, contracting authorities may require, in particular, that economic operators have a certain minimum yearly turnover, including a certain minimum turnover in the area covered by the contract. In addition, contracting authorities may require that economic operators provide information on their annual accounts showing the ratios, for instance, between assets and liabilities. They may also require an appropriate level of professional risk indemnity insurance. The minimum yearly turnover that economic operators are required to have shall not exceed two times the estimated contract value, except in duly justified cases such as relating to the special risks attached to the nature of the works, services or supplies. The contracting authority shall indicate the main reasons for such a requirement in the procurement documents or the individual report referred to in Article 84. The ratio, for instance, between assets and liabilities may be taken into consideration where the contracting authority specifies the methods and criteria for such consideration in the procurement documents. Such methods and criteria shall be transparent, objective and non-discriminatory. Where a contract is divided into lots this Article shall apply in relation to each individual lot. However, the contracting authority may set the minimum yearly 646

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turnover that economic operators are required to have by reference to groups of lots in the event that the successful tenderer is awarded several lots to be executed at the same time. Where contracts based on a framework agreement are to be awarded following a reopening of competition, the maximum yearly turnover requirement referred to in the second subparagraph of this paragraph shall be calculated on the basis of the expected maximum size of specific contracts that will be performed at the same time, or, where it is not known, on the basis of the estimated value of the framework agreement. In the case of dynamic purchasing systems, the maximum yearly turnover requirement referred to in the second subparagraph shall be calculated on the basis of the expected maximum size of specific contracts to be awarded under that system. 4. With regard to technical and professional ability, contracting authorities may impose requirements ensuring that economic operators possess the necessary human and technical resources and experience to perform the contract to an appropriate quality standard. Contracting authorities may require, in particular, that economic operators have a sufficient level of experience demonstrated by suitable references from contracts performed in the past. A contracting authority may assume that an economic operator does not possess the required professional abilities where the contracting authority has established that the economic operator has conflicting interests which may negatively affect the performance of the contract. In procurement procedures for supplies requiring siting or installation work, services or works, the professional ability of economic operators to provide the service or to execute the installation or the work may be evaluated with regard to their skills, efficiency, experience and reliability. 5. Contracting authorities shall indicate the required conditions of participation which may be expressed as minimum levels of ability, together with the appropriate means of proof, in the contract notice or in the invitation to confirm interest. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, chap. 12; Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, chap. 7; Fabricius, Jesper, Offentlige indkøb i praksis, chap. 9; Steinicke, Michael, ‘Qualification and Shortlisting’ (chap. 5), in Trybus, Caranta and Edelstam (eds), EU Law and Public Contracts; Steinicke and Groesmeyer, EU’s Udbudsdirektiver, p. 1159-1209; Martin Burgi, Martin Trybus and Steen Treumer (eds), Qualification, selection and exclusion in EU procurement, European law series, DFJØ Publishing 2016. 58.1. Selection criteria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58.1.1. The principle of proportionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58.2. Professional or trade registers and other forms of association . . . . . . . . . . . . . 58.3. Economic and financial standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58.3.1. The minimum yearly turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58.4. Technical and professional ability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58.5. Stated in contract notice or invitation to confirm interest . . . . . . . . . . . . . . . . .

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Article 58 contains the selection criteria and corresponds to Articles 46–48 of the 1 2004 Public Sector Directive. Selection criteria are used when selecting candidates and tenderers and to ensure that the tenderer is capable of performing the contract. The Court of Justice has stated regarding selection criteria that these “(…) are designed solely to define the rules governing objective assessment of the standing of tenderers, particularly as regards financial, economic and technical matters.”1

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It is voluntary for contracting authorities to use selection criteria, but if the contracting authority wishes to use such criteria, only those criteria listed in Article 58 can be applied. Thus, Article 58 contains voluntary selection criteria that are linked to the suitability of tenderers to pursue the professional activity, their economic and financial standing, and their technical and professional ability. If the contracting authority does not set any requirements with regard to selection criteria, the contracting authority must accept all the participation of all types of tenderers in the procurement procedure and their possibility of ultimately being awarded the contract in question. It should be borne in mind that a contracting authority cannot state requirements that restrict the EU Treaty provisions on free movement. Such requirements could be the requirement of having an office at a specific location before the submission of tenders 2 or imposing other requirements that non-domestic undertakings will find it more difficult to fulfil.3 When selecting candidates, the contracting authority can require that the economic operator possesses a certain authorization or similar qualifications. Nevertheless, when setting such a requirement, the free movement rules must be ensured. For example, requiring that a non-domestic operator must be a member of a domestic association in the country of the contracting authority is not permitted.4 Regarding the economic and financial standing of tenderers contracting authorities may impose requirements ensuring that economic operators possess the necessary economic and financial capacity to perform the contract. In relation to the financial standing of tenderers, as a new element, the 2014 Public Sector Directive contains a maximum requirement as to the turnover of tenderers. Thus, the Directive now requires that the minimum yearly turnover that economic operators are required to have shall not exceed two times the estimated contract value. Regarding the technical standing contracting authorities may impose requirements ensuring that economic operators possess the necessary human and technical resources and experience to perform the contract to an appropriate quality standard. Regarding the suitability of tenderers to pursue the professional activity, this relates to the personal competences of tenderers and whether a given tenderer is authorized to perform a given activity. Thus, contracting authorities may require economic operators to be enrolled in one of the professional or trade registers in the Member State of the operator, or that the tenderer possesses a particular authorization or is a member of a particular organisation of the Member State of the operator. In respect of Article 63, where an economic operator may rely on the capacities of other entities regarding the selection criteria, such economic operators may rely on any appropriate means to prove to the contracting authority that they will have the necessary resources at their disposal. See with regard to this the commentary on Article 63. Also groups of undertakings may participate in procurement procedures, including where they have come together in the form of a temporary association. In such cases the contracting authority may set conditions, which are not imposed on individual participants such as, e.g., joint representation for the purpose of the procurement procedure. See the commentary to Article 19 for further on groups of economic operators. 5 Case C-176/98, Holst Italia [1999] ECR I-8607, paragraph 25. Case C-234/03, Contse and Others [2005] ECR I-9315, paragraph 43. 3 See for example Commission Interpretative Communication on the Community law applicable to contract awards not or not fully subject to the provisions of the Public Procurement Directives (2006/ C179/2), which states: “Contracting entities should not impose conditions causing direct or indirect discrimination against potential tenderers in other Member States, such as the requirement that undertakings interested in the contract must be established in the same Member State or region as the contracting entity.” 4 See Case C-76/81, SA Transporoute et travaux v. Minister of Public Works [1982] ECR 417, paragraphs 14-15. 1

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When setting criteria, the principle of proportionality, which requires that criteria 8 must be proportionate to the subject of the contract, must be observed (see below at section 58.1.1.).

58.1. Selection criteria Article 58(1) contains the selection criteria, which contracting authorities can use. It 9 is voluntary for contracting authorities to use selection criteria, but if such are used it is only those criteria listed in Article 58(2),(3), and (4) which can be used. This is now explicitly stated in Article 58(1), which states: “Contracting authorities may only impose criteria referred to in paragraphs 2, 3 and 4 on economic operators as requirements for participation.” As mentioned above selection criteria are used to ensure that the tenderer is capable 10 of performing the contract, but perhaps moreover to ensure that a contract is not awarded to a tenderer that is not capable of performing the contract. There will often be more than one tenderer capable of performing a given contract, and selection criteria are not used to choose among them in relation to the award of the contract – such selection takes place as described in Article 67. Selection criteria are limited to the performance of tenderers in general, where the award phase focuses on the specific contract. Selection criteria may relate to: (a) suitability to pursue the professional activity; (b) economic and financial standing; (c) technical and professional ability. Contracting authorities shall limit any requirements to those that are appropriate to ensure that a candidate or tenderer has the legal and financial capacities and the technical and professional abilities to perform the contract to be awarded. Selection criteria may not be used to discriminate tenderers neither in general nor 11 based on nationality. In Serrantoni,6 the Court of Justice found that the national Italian legislation that automatically excluded members of a permanent consortium from participating in a tender procedure was not valid since it constituted “… discrimination against that form of consortium, and does not therefore comply with the principle of equal treatment.”7 Thus, when a contracting authority sets selection criteria, these cannot discriminate against undertakings that have organised themselves in a certain way. Contracting authorities should be careful when setting selection criteria and make sure these do not discriminate among tenderers. When the contracting authority chooses to apply selection criteria these must be stat- 12 ed in the contract notice or in the invitation to confirm interest (as well as in the European Single Procurement Document ESPD). Article 58(5) states “Contracting authorities shall indicate the required conditions of participation which may be expressed as minimum 5 Recital 15, which states “It should also be clarified that contracting authorities should be able to set out explicitly how groups of economic operators are to meet the requirements concerning economic and financial standing as set out in this Directive, or the criteria relating to technical and professional ability, which are required of economic operators participating on their own. The performance of contracts by groups of economic operators may necessitate setting conditions which are not imposed on individual participants. Such conditions, which should be justified by objective reasons and be proportionate, could for instance include requiring the appointment of a joint representation or a lead partner for the purposes of the procurement procedure or requiring information on their constitution.” 6 Case C-376/08, Serrantoni Srl and Consorzio stabile edili Scrl v. Comune di Milano [2009] ECR I-12169. 7 Case C-376/08, Serrantoni Srl and Consorzio stabile edili Scrl v. Comune di Milano [2009] ECR I-12169, paragraph 37.

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levels of ability, together with the appropriate means of proof, in the contract notice or in the invitation to confirm interest.”8 Thus, contracting authorities should describe beforehand, which types of selection criteria they intend to use and what types of documentation they require as proof that the tenderers fulfil the criteria. 58.1.1. The principle of proportionality According to Article 58(1) “All requirements shall be related and proportionate to the subject-matter of the contract.” Thus, the principle of proportionality is now explicitly mentioned in Article 58. The principle has also been inserted in Article 18(1) where it is stated that ”Contracting authorities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner.” The principle was inserted in the Directive to emphasise the importance of this objective. 9 Administrative burden in procurement procedures can be considerably reduced by making sure that any procedural and substantial requirements are proportionate to the subject-matter of the contract. Thus, requirements for participating should be seen in the light of the contract. 14 The principle of proportionality implies that the conditions for participation in procurement procedures must be limited to what is strictly necessary to ensure that a candidate or tenderer is able to perform the contract fully and satisfactorily. 10 It is essential that contracting authorities observe the principle of proportionality in order to ensure that the access to public contracts are not limited, but also to avoid excessive administrative burdens and unjustified risks of exclusion for participants. 15 The principle is expressed different places in the Public Sector Directive. Regarding selection criteria it is also seen in Article 58(3) regarding the maximum turnover a contracting authority can require from tenderers.11 For further on the principle of proportionality see the commentary to Article 18. 13

58.2. Professional or trade registers and other forms of association With regard to suitability to pursue the professional activity, contracting authorities may require economic operators to be enrolled in one of the professional or trade registers kept in their Member State of establishment, as described in Annex XI, or to comply with any other request set out in that Annex. 17 Annex XI deals with registers, and contains a list of relevant professional and trade registers and corresponding declarations and certificates of each Member State. Not all Member States keep such a register.12 18 In procurement procedures for services, in so far as economic operators have to possess a particular authorisation or to be members of a particular organisation in order to 16

8 Also from Annex V, Part C to the Directive “Information to be included in contract notices”, para. 11 regarding conditions for participation, states: “c) a list and brief description of criteria regarding the personal situation of economic operators that may lead to their exclusion and of selection criteria; minimum level(s) of standards possibly required; indication of required information (self-declarations, documentation.” 9 Cluster 8, Sound Procedures, Council document nr. 11266/12 of June 14, 2012. 10 Cluster 3, Reducing documentation requirements, Council document nr. 9185/12, p. 10, states “Reactions to the Green Paper consultations have shown that a considerable number of stakeholders complain about excessive requirements in that respect.” 11 See in that regard also Recital 83, which states: “Overly demanding requirements concerning economic and financial capacity frequently constitute an unjustified obstacle to the involvement of SMEs in public procurement. Any such requirements should be related and proportionate to the subject-matter of the contract.” 12 It is for example stated that for the UK, the economic operator may be requested to provide a certificate from the Registrar of Companies stating that he is certified as incorporated or registered or, where he is not so certified, a certificate stating that the person concerned has declared on oath that he is engaged in the profession in a specific place under a given business name.

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be able to perform in their country of origin the service concerned, the contracting authority may require them to prove that they hold such authorisation or membership. When selecting candidates, the contracting authority can require that the economic 19 operator has a certain authorisation or similar qualifications. Nevertheless, when setting such a requirement, the free movement rules must be ensured. For example, requiring that a non-domestic operator must be a member of a domestic association is not permitted.13

58.3. Economic and financial standing Article 58(3) relates to the economic and financial standing of economic operators and ensures that contracting authorities may impose requirements ensuring that economic operators possess the necessary economic and financial capacity to perform the contract. The provision corresponds to Article 48 of the 2004/18/EC but have been streamlined and clarified in the 2014 Public Sector Directive. This is meant to ensure that the provision clarify practically relevant situations not addressed in Directive 2004/18/EC.14 The requirements with regard to proof of the economic and financial standing of tenderers are now found in Article 60. It is up to the contracting authorities to choose whether it wishes to set criteria relating to the economic and financial standing of tenderers and at what level. According to Arrowsmith a measure relates to economic or financial standing when it seeks to ensure that the undertaking has adequate financial resources to remain in business during the contract period, to complete the contract, and to meet any legal liability to the authority arising from performance.15 Requiring a certain economic and financial standing has become even more important in times of financial crisis. According to Article 58(3), for the purpose of ensuring that the economic operator possesses the necessary financial and economic capacity, contracting authorities may require, in particular, that economic operators have a certain minimum yearly turnover, including a certain minimum turnover in the area covered by the contract, see below section 58.3.1. In addition, contracting authorities may require that economic operators provide information on their annual accounts showing the ratios, for instance, between assets and liabilities. They may also require an appropriate level of professional risk indemnity insurance. The reference in Article 58(3) to “require, in particular …” shows that the situations referred to in the provision are only meant as examples.16 Thus, the contracting authority may require other forms for issues as documentation relating to the economic and financial standing of the tenderer. However, a contracting authority may only require information relating to the financial standing of tenderers, which is relevant for the purpose of a given contract. As to information on annual accounts showing the ratio, for instance, between assets and liabilities may be taken into consideration where the contracting authority specifies the methods and criteria for such consideration in the procurement documents. Such methods and criteria shall be transparent, objective and non-discriminatory.

13 See Case C-76/81, SA Transporoute et travaux v. Minister of Public Works [1982] ECR 417, paragraphs 14-15. 14 See Reducing documentation requirements, Council document nr. 9185/12. 15 Arrowsmith, The Law of Public and Utilities Procurement, p. 716. 16 This was also the interpretation under the 2004/18/EC Directive and the previous Directives, see e.g. Case, C-27-29/86, SA Contructions et Entreprises industrielles and others v. Societé Co-operative “Association Intercommunales pour les Autoroutes des Ardennes”[1987] ECR 3347.

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In Hochtief Construction,17 the contracting authority had required a uniform document, drawn up in accordance with the accounting rules, and fixed a minimum level in so far as it required that the balance sheet had not been negative for more than one of the last three completed financial years. The question was whether such a requirement was permitted, as there may be differences as regards that topic between the legislations of the various Member States. Thus, the national court asked the Court of Justice whether such a requirement was permitted in the light of Member States’ different legislation on the matter. The Court found that Article 47(1)(b) allows for requiring a minimum level of economic and financial standing by reference to one or more particular aspects of the balance sheet. It stated: “… as regards proof of the economic and financial standing of candidates or tenderers, a reference may legitimately be required by a contracting authority even if, objectively, not every candidate or tenderer is able to produce it, if only, in the case of Article 47(1)(b), because of a difference in legislation. Therefore, such a requirement cannot, in itself, be considered to constitute discrimination.”18 The Court added that such could take place “… provided that those aspects are such as to provide information on such standing of an economic operator and that that level is adapted to the size of the contract concerned in that it constitutes objectively a positive indication of the existence of a sufficient economic and financial basis for the performance of that contract, without, however, going beyond what is reasonably necessary for that purpose. The requirement of a minimum level of economic and financial standing cannot, in principle, be disregarded solely because that level relates to an aspect of the balance sheet regarding which there may be differences between the legislations of the different Member States.”19 24 According to Article 60(3) Proof of the economic operator’s economic and financial standing may, as a general rule, be provided by one or more of the references listed in Annex XII Part I. Thus, proof of the economic operator’s economic and financial standing may, as a general rule, be furnished by one or more of the following references: (a) appropriate statements from banks or, where appropriate, evidence of relevant professional risk indemnity insurance; (b) the presentation of financial statements or extracts from the financial statements, where publication of financial statements is required under the law of the country in which the economic operator is established; (c) a statement of the undertaking’s overall turnover and, where appropriate, of turnover in the area covered by the contract for a maximum of the last three financial years available, depending on the date on which the undertaking was set up or the economic operator started trading, as far as the information on these turnovers is available. Article 60(3) also states that “Where, for any valid reason, the economic operator is unable to provide the references requested by the contracting authority, it may prove its economic and financial standing by any other document which the contracting authority considers appropriate.” For further on the documentation requirements see the commentary to Article 60(3). 58.3.1. The minimum yearly turnover 25

According to Article 58(3), second paragraph, the minimum yearly turnover that economic operators are required to have shall not exceed two times the estimated conCase C-218/11, Hochtief Construction AG. Case C-218/11, Hochtief Construction AG, paragraph 30. 19 Case C-218/11, Hochtief Construction AG, paragraph 32. 17

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tract value, except in duly justified cases such as relating to the special risks attached to the nature of the works, services or supplies. Specifying a maximum on the minimum yearly turnover is a new element in the 2014 Public Sector Directive. The Commission had proposed that the maximum should be tree times the yearly turnover, but the final Directive requires two. The reason for setting a requirement for a maximum yearly turnover is that turnover requirements are frequently an obstacle to access by SMEs.20 Contracting authorities have a tendency to demand high turnover requirements in order to be guaranteed that an undertaking may be in fact be in a financial position to deliver. However, such could be disproportionate and the 2014 Directive therefore now requires a maximum turnover of two times the estimated value of the contract. Where a contract is divided into lots the maximum turnover, which can be required, should be seen in light of each individual lot.21 However, the contracting authority may set the minimum yearly turnover that economic operators are required to have by reference to groups of lots in the event that the successful tenderer is awarded several lots to be executed at the same time. Where contracts based on a framework agreement are to be awarded following a reopening of competition, the maximum yearly turnover requirement shall be calculated on the basis of the expected maximum size of specific contracts that will be performed at the same time, or, where it is not known, on the basis of the estimated value of the framework agreement. In the case of dynamic purchasing systems, the maximum yearly turnover shall be calculated on the basis of the expected maximum size of specific contracts to be awarded under that system. The minimum yearly turnover that economic operators may exceed two times the estimated contract value, in duly justified cases. The Public Sector Directive specifies that such “duly justified cases” can relate to the special risks attached to the nature of the works, services or supplies. Recital 83 furthermore states that “Such circumstances might relate to the high risks attached to the performance of the contract or the fact that its timely and correct performance is critical, for instance because it constitutes a necessary preliminary for the performance of other contracts.” This means that there might be exceptional cases where the contracting authority has a legitimate need of a particularly high security of supply and the supplier cannot be easily replaced (e.g. sensitive IT structures, basic public services). Higher turnover requirements may, however, be justified in order to better secure the contracting authority against a default of the supplier. Thus, situations where the replacement of the economic operator is particular difficult or raises other concerns such as security matters could justify a higher turnover to ensure that the tenderer that is awarded the contract is safe and sound. When the contracting authority requires a higher turnover, the principle of proportionality should be borne in mind. Recital 85 states “Where higher minimum turnover requirements are to be applied, contracting authorities should remain free to set the level as long as it is related and proportionate to the subject-matter of the contract”. The contracting authority shall indicate the main reasons for demanding a higher requirement for the turnover of tenderers in the procurement documents or the individual 20 See Commission proposal, Recital 31. See also the 2014 Directive Recital 83 which states: “Overly demanding requirements concerning economic and financial capacity frequently constitute an unjustified obstacle to the involvement of SMEs in public procurement. Any such requirements should be related and proportionate to the subject-matter of the contract.” 21 Article 46 concerns rules on division of contracts into lots. See this article for further commentary on dividing contracts into lots.

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report referred to in Article 84. As the reason can be stated after the award of the contract it is difficult to see that if it turned out that it was not a “duly justified case”, this could be enforced in courts. Thus, if it should have any value, potential tenderers should be able to have this information stated in the contract notice or the contracting authority should state reasons when asked. 33 As documentation for the turnover, the contracting authority may require a statement of the overall turnover of the tenderer and, where appropriate, of turnover in the area covered by the contract for a maximum of the last three financial years available. See for further the commentary to Article 60.3.

58.4. Technical and professional ability 34

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Article 58(4) contains rules on requirements as to the technical and professional ability of tenderers. The Article corresponds to Article 48 of the 2004 Public Sector Directive, though the requirements for documentation for technical and professional ability are now found in Article 60. The list in Article 48 regarding documentation is exhaustive, 22 whereas the list in Article 60 (annex XII) regarding proof of of the technical and professional ability of tenderers is not exhaustive.23 Setting requirements as to technical and professional ability ensures that tenderers will be able to perform the contract and, thus, are qualified in the sense that they have the right equipment, staff and skills. However, as with regard to financial and economic standing contracting authorities are not required to set any requirements as to the technical and professional ability of tenderers. With regard to technical and professional ability, contracting authorities may impose requirements ensuring that economic operators possess the necessary human and technical resources and experience to perform the contract to an appropriate quality standard. It is for the contracting authority to establish what level of experience they find sufficient for the performance of the contract. Contracting authorities may require, in particular, that economic operators have a sufficient level of experience demonstrated by suitable references from contracts performed in the past. See on this the commentary to Article 60. A contracting authority may assume that an economic operator does not possess the required professional abilities where the contracting authority has established that the economic operator has conflicting interests, which may negatively affect the performance of the contract.24 Thus, lack of professional ability may result from a conflict of interests affecting contract performance. For example in the case of a contract for the testing and auditing of research and development work, if the company having executed the work in question were to do the auditing such a circumstance would amount to a clear conflict of interests affecting the correct performing of the audit contract. 25 In procurement procedures for supplies requiring siting or installation work, services or works, the professional ability of economic operators to provide the service or to exe-

See for example, Arrowsmith, The Law of Public and Utilities Procurement, p. 730. See also Steinicke, Michael, ‘Qualification and Shortlisting’ (chap. 5), in Trybus, Caranta and Edelstam (eds), EU Law and Public Contracts, where it is stated that “The current rules on technical abilities include an exhaustive list of possible issues to be documented (by either the contracting authority or the economic operator). This has been changed and now there are no exhaustive list but only a number of examples of which kind of documentation and issues the contracting authority can require.” 24 Conflict of interest is regulated in Article 24, and has been inserted as a discretionary exclusion ground in Article 57(4). 25 Cluster 3. 22

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cute the installation or the work may be evaluated with regard to their skills, efficiency, experience and reliability. According to Article 60(4) evidence of the technical abilities of economic operators 39 may be provided by one or more of the means listed in Annex XII Part II, in accordance with the nature, quantity or importance, and use of the works, supplies or services. See for further regarding the proof of the technical abilities of tenderers the commentary to Article 60.

58.5. Stated in contract notice or invitation to confirm interest Contracting authorities shall indicate the required conditions of participation which 40 may be expressed as minimum levels of ability, together with the appropriate means of proof, in the contract notice or in the invitation to confirm interest.26 Annex V, Part C Information to be included in contract notices, para 11 regarding 41 conditions for participation states that such information shall include “c) a list and brief description of criteria regarding the personal situation of economic operators that may lead to their exclusion and of selection criteria; minimum level(s) of standards possibly required; indication of required information (self-declarations, documentation).” Thus, contracting authorities should describe beforehand, which types of selection criteria they intend to use and what types of documentation they require as proof that tenderers fulfil the criteria.

Article 59 European Single Procurement Document 1. At the time of submission of requests to participate or of tenders, contracting authorities shall accept the European Single Procurement Document (ESPD), consisting of an updated self-declaration as preliminary evidence in replacement of certificates issued by public authorities or third parties confirming that the relevant economic operator fulfils the following conditions: (a) it is not in one of the situations referred to in Article 57 in which economic operators shall or may be excluded; (b) it meets the relevant selection criteria that have been set out pursuant to Article 58; (c) where applicable, it fulfils the objective rules and criteria that have been set out pursuant to Article 65. Where the economic operator relies on the capacities of other entities pursuant to Article 63, the ESPD shall also contain the information referred to in the first subparagraph of this paragraph in respect of such entities. The ESPD shall consist of a formal statement by the economic operator that the relevant ground for exclusion does not apply and/or that the relevant selection criterion is fulfilled and shall provide the relevant information as required by the contracting authority. The ESPD shall further identify the public authority or third party responsible for establishing the supporting documents and contain a formal statement to the effect that the economic operator will be able, upon request and without delay, to provide those supporting documents. Where the contracting authority can obtain the supporting documents directly by accessing a database pursuant to paragraph 5, the EPSD shall also contain the in26

See the commentary to Article 50 regarding notices.

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formation required for this purpose, such as the internet address of the database, any identification data and, where applicable, the necessary declaration of consent. Economic operators may reuse an ESPD which has already been used in a previous procurement procedure, provided that they confirm that the information contained therein continues to be correct. The ESPD shall be drawn up on the basis of a standard form. The Commission shall establish that standard form, by means of implementing acts. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 89(3). The ESPD shall be provided exclusively in electronic form. Notwithstanding Article 92, the Commission shall review the practical application of the ESPD taking into account the technical development of databases in the Member States and report thereon to the European Parliament and the Council by 18 April 2017. Where appropriate, the Commission shall make proposals for solutions optimising the cross-border access to such databases and the use of certificates and attestations in the internal market. A contracting authority may ask tenderers and candidates at any moment during the procedure to submit all or part of the supporting documents where this is necessary to ensure the proper conduct of the procedure. Before awarding the contract, the contracting authority shall, except in respect of contracts based on framework agreements where such contracts are concluded in accordance with Article 33(3) or point (a) of Article 33(4), require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60 and, where appropriate, Article 62. The contracting authority may invite economic operators to supplement or clarify the certificates received pursuant to Articles 60 and 62. Notwithstanding paragraph 4, economic operators shall not be required to submit supporting documents or other documentary evidence where and in so far as the contracting authority has the possibility of obtaining the certificates or the relevant information directly by accessing a national database in any Member State that is available free of charge, such as a national procurement register, a virtual company dossier, an electronic document storage system or a prequalification system. Notwithstanding paragraph 4, economic operators shall not be required to submit supporting documents where the contracting authority having awarded the contract or concluded the framework agreement already possesses these documents. For the purpose of the first subparagraph, Member States shall ensure that databases which contain relevant information on economic operators and which may be consulted by their contracting authorities may also be consulted, under the same conditions, by contracting authorities of other Member States. Member States shall make available and up-to-date in e-Certis a complete list of databases containing relevant information on economic operators which can be consulted by contracting authorities from other Member States. Upon request, Member States shall communicate to other Member States any information related to the databases referred to in this Article.

Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 1304 et seq.; Martin Burgi, Martin Trybus and Steen Treumer (eds), Qualification, selection and exclusion in EU procurement, European law series, DJØF Publishing 2016; Gabriella M. Racca, ‘Electronic Qualitative Selection of Economic

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Operators: the challenge of the European Single Procurement Document (ESPD)’, in Martin Burgi, Martin Trybus and Steen Treumer (eds.), Qualification, selection and exclusion in EU procurement, European law series, DJØF Publishing 2016; Carina Risvig Hamer, Grundlæggende Udbudsret, DJØF Publishing 2016, chap. 14.

The Public Sector Directive contains, as a new element, a standard form (ESPD), 1 which tenderers must use when bidding for a contract.1 The ESPD is used a preliminary evidence that the relevant grounds for exclusion do not apply and that the relevant selection criteria are fulfilled. The ESPD is a standard form (a self-declaration), which is established with Commission Implementing Regulation (EU) 2016/7 of 5 January 2016, establishing the standard form for the European Single Procurement Document (henceforth the ESPD Regulation).2 Annex I to the ESPD Regulation consists of instructions to the ESPD where Annex II contains the standard form itself. The ESPD consists of a formal statement by the economic operator that the relevant grounds for exclusion do not apply, that the relevant selection criteria are fulfilled and that it will provide the relevant information as required by the contracting authority. Thus, as a starting point at the time of submission of requests to participate or of tenders, contracting authorities shall (exclusively) accept the European Single Procurement Document (ESPD) as preliminary evidence for the fulfilment of exclusion and selection criteria and only the winning tenderer shall be required to provide documentation, only few exceptions exist. A similar provision is not found in the 2004/18/EC Directive. The Commission had, instead of the ESPD, proposed a self-declaration as prelimi- 2 nary evidence. Such a self-declaration should be submitted instead of certificates and other official documents as means of proof that the tenderers are not subject to one of the grounds for exclusion and that they fulfil the selection criteria and, where applicable, meet the objective rules and criteria used to reduce the number of participants (Article 65). It was proposed that candidates or tenderers who made use of this option should be prepared to submit the actual official documents “upon request and without delay”. The Commission had also, in its proposal, included a provision on a European procurement passport.3 The Procurement passport was intended to be a standardised document (needing no translation) facilitating proof of elements such as the basic identification data of the economic operator that are typically provided in a certificate of registration, and that the operator is not subject to mandatory grounds for exclusion or insolvency proceedings. It was proposed that such a passport was issued by the competent national authority of the Member State of establishment of the economic operator, and that it would have a minimum validity of 6 months. During the negotiations of the Public Sector Directive the self-declaration and the provision on the European Procurement Passport was, based on the Parliaments initia1 It has been argued that tenderers are not obliged to use the ESPD due to the wording in Article 59(1) “… contracting authorities shall accept”, hence creating an obligation for the contracting authority to accept the ESPD, but not the tenderers to submit it, see e.g. Gabriella M. Racca, ‘Electronic Qualitative Selection of Economic Operators: the challenge of the European Single Procurement Document (ESPD)’, in Martin Burgi, Martin Trybus and Steen Treumer (eds), Qualification, selection and exclusion in EU procurement, European law series, DJØF Publishing 2016. However, if the ESPD should have any value at all tenderers should all use the ESPD and most Member States also seem to have implemented the ESPD as mandatory. 2 The ESPD can be found at th website: https://ec.europa.eu/tools/espd/filter?lang=en (last visited November 2017). See also the Commission’s website: http://ec.europa.eu/growth/single-market/publicprocurement/e-procurement/espd/, where furher information and guidance are available. The Commission is updating both websites frequently. 3 Article 59 of the Commission’s proposal.

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tive, changed to the European Single Procurement Document (ESPD), which is a more formal statement by the economic operator that the relevant grounds for exclusion do not apply and/or that the relevant selection criteria are fulfilled. According to the press release from the European Parliament when the Directives were adopted, the ESPD is seen as one of the major innovations in the 2014 Directive and the Parliament stated that “The bidding procedure for companies will be simpler, with a standard "European Single Procurement Document" based on self-declarations. Only the winning bidder will have to provide original documentation. This should reduce the administrative burden on companies by over 80%, the Commission estimates.”4 From the ESPD Regulation (see Recital 1) it can be seen that the main purpose of the ESPD is to reduce the need for tenderers to produce a substantial number of certificates or other documents related to exclusion and selection criteria. It is also the intention that the ESPD should facilitate an increased cross-border participation in public procurement procedures, see recital 4. However, despite the intention of a simpler procedure, so far the ESPD is not working according to its intentions. The ESPD shall ultimately be provided exclusively in electronic form, but until 2018 it is possible for Member States to postpone the use of the eESPD (Article 59(2)) until 18 April 2018, see Article 90 (1).

59.1. Information to be included in the European Single Procurement Document (ESPD) 3

The European Single Procurement Document consists of an updated self-declaration as preliminary evidence in replacement of certificates issued by public authorities or third parties confirming that the relevant economic operator fulfils the following conditions: (a) it is not in one of the situations referred to in Article 57 in which economic operators shall or may be excluded; (b) it meets the relevant selection criteria that have been set out pursuant to Article 58; (c) where applicable, it fulfils the objective rules and criteria that have been set out pursuant to Article 65.

Thus, the ESPD will be used as preliminary evidence, replacing other forms of documentation and certificates. The ESPD shall consist of a formal statement by the economic operator that the relevant ground for exclusion does not apply and/or that the relevant selection criterion is fulfilled and shall provide the relevant information as required by the contracting authority. 4 The aim of the ESPD is to help economic operators participate in public procurement by reducing the administrative burdens by not requiring all tenderers to submit documentation, but only the winning tenderer.5 Recital 86 states that “Further simplification 4 See the European Parliament’s Press Release, which can be found at http://www.europarl.europa.eu/ne ws/en/news-room/content/20140110IPR32386/html/New-EU-procurement-rules-to-ensure-better-qualit y-and-value-for-money (last visited November 2017). 5 See also Recital 84, which states: “Many economic operators, and not least SMEs, find that a major obstacle to their participation in public procurement consists in administrative burdens deriving from the need to produce a substantial number of certificates or other documents related to exclusion and selection criteria. Limiting such requirements, for example through use of a European Single Procurement Document (ESPD) (…) could result in considerable simplification for the benefit of both contracting authorities and economic operators.” See also Cluster 3, p. 20 regarding the self-declaration, which the Commission had proposed to insert in the directive where it is stated that it “follows widespread complaints expressed in the Green Paper consultations that candidates and bidders are frequently excluded for failure to submit documents that are already (sometimes even in multiple copies) in the possession of the contracting authority.”

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for both economic operators and contracting authorities could be obtained by means of a standard form for self-declarations, which could reduce problems linked to the precise drafting of formal statements and declarations of consent as well as language issues.” The ESPD shall identify the public authority or third party responsible for establishing the supporting documents and contains a formal statement to the effect that the economic operator will be able, upon request and without delay, to provide those supporting documents. Where the contracting authority can obtain the supporting documents directly by accessing a database pursuant to Article 59(5), the EPSD shall also contain the information required for this purpose, such as the internet address of the database, any identification data and, where applicable, the necessary declaration of consent. Where the economic operator relies on the capacities of other entities pursuant to Article 63, the ESPD shall also contain the information referred to in the first subparagraph of this paragraph in respect of such entities. This means that an economic operator participating on its own but relying on the capacities of one or more other entities must ensure that the contracting authority receives its own ESPD together with a separate ESPD setting out the relevant information for each of the entities it relies on. In case the tenderer is a group of economic operators, including temporary associations, a separate ESPD setting out the information required under Parts II to V must be given for each of the participating economic operators. Where procurements are divided into lots and selection criteria vary from lot to lot, an ESPD should be filled in for each lot (or group of lots with the same selection criteria). Economic operators may reuse an ESPD, which has already been used in a previous procurement procedure, provided that they confirm that the information contained therein continues to be correct. Since contracting authorities require different forms of documentation in its procurement procedures, it would presumably only be relevant to reuse the ESPD for the mandatory exclusion grounds in Article 57. In practice, the possibility for undertakings to reuse the ESPD does not seem to be a real possibility. The use of the ESPD is relevant for most procurement procedures covered by the Public Sector Directive and the Utilities Directive, and can also be used in other types of procurement procedures e.g. under the Concession Directive and procurement below the threshold. For procurement procedures based on the light-regime it is not mandatory to require an ESPD, but Member States can choose to make it mandatory. According to the rules on the ESPD, tenders in open procedures and requests for participation in restricted procedures, competitive procedures with negotiation, competitive dialogues or innovation partnerships must be accompanied by the ESPD. For negotiated procedures without prior publication, provided for under Article 32, the situation is more complex as can be seen from footnote 7 in the Regulation. Here, it is concluded that requesting an ESPD is not always necessary, particularly so in the cases where such would constitute an unnecessary administrative burden:

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59.2. Standard form The ESPD shall be drawn up on the basis of a standard form. The Commission shall 10 establish that standard form by means of implementing acts. Those implementing acts

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shall be adopted in accordance with the examination procedure referred to in Article 89(3). For further on implementing acts see the commentary to Article 89. The standard form has been established with Commission Implementing Regulation (EU) 2016/7 of 5 January 2016, establishing the standard form for the European Single Procurement Document (henceforth the ESPD Regulation). Annex I to the ESPD Regulation consists of instructions regarding the ESPD where Annex II contains the standard form itself. The ESPD shall ultimately be provided exclusively in electronic form and the Commission shall make available all language versions of the ESPD in e-Certis.6 An electronic version of the ESPD, is available at https://ec.europa.eu/growth/tools-databases/espd/ filter?lang=en.

59.3. Review the practical application of the ESPD The Commission shall review the practical application of the ESPD. The Commission shall in that regard report the results to the European Parliament and the Council by 18 April 2017. The deadline for review is relative short compared to the fact that the Directive at that time has only been enforced in Member States for a year and that many Member States at that time had not yet transposed the Directives. 12 When the Commission reviews the application of the ESPD it must take into account the technical development of databases in the Member States and “Where appropriate, the Commission shall make proposals for solutions optimising the cross-border access to such databases and the use of certificates and attestations in the internal market.” Recital 6 to the ESPD Regulation furthermore adds regarding the evaluation of the ESPD that “In so doing, the Commission may also take into consideration possible suggestions to improve its functionality in view of enhancing the possibilities of cross-border participation in public procurement, not least for SMEs, or potential simplifications within the framework set out by Directive 2014/24/EU; it may as well consider possible issues relating to practices of systematic requests of certificates or other forms of documentary evidence of all participants in a given procurement procedure or practices consisting in identifying in a discriminatory manner the economic operators to be requested such documentation.” 11

59.4. Ask tenderers and candidates to submit all or part of the supporting documents A contracting authority may ask tenderers and candidates at any moment during the procedure to submit all or part of the supporting documents where this is necessary to ensure the proper conduct of the procedure. The Public Sector Directive is silent as to when it can be said to be “necessary to ensure a proper conduct of the procedure”. In theory it could be necessary in all procurement procedures to ensure the tenderers are qualified. However, the use of the possibility is presumably more limited. An example for the potential use could be in a negotiated procedure where the contracting authority requires documentation of all the undertakings invited to submit a tender to ensure that the undertakings which will be prequalified are also in fact qualified, and thus that no unnecessary resources are used in the negotiated procedure without ensuring that the undertakings can perform that task. 14 Before awarding the contract, the contracting authority shall require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60 and, where appropriate, Article 62. 13

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The contracting authority may invite economic operators to supplement or clarify the certificates received pursuant to Articles 60 and 62. An exception where documentation is not required is contracts based on framework 15 agreements where such contracts are concluded in accordance with Article 33(3) or point (a) of Article 33(4). In these cases an award of the framework agreement itself has already taken place and documentation for the winning tenderers has already been provided and therefore it should not be necessary to submit further documentation from the same tenderers. For dynamic purchasing systems documentation is established based on the restricted 16 procedure, and the ESPD will in such cases be required when requesting to participate. According to Article 35(7) “Contracting authorities may, at any time during the period of validity of the dynamic purchasing system, require admitted participants to submit a renewed and updated self-declaration as provided for in Article 59(1), within five working days from the date on which that request is transmitted.” In that regard the contracting authority may ask tenderers and candidates at any moment during the procedure to submit all or part of the supporting documents where this is necessary to ensure the proper conduct of the procedure.7 The contracting authority must set an adequate time limit, which ensures that the tenderer/candidate has sufficient time to submit these documents.8 Contracting authorities do not have a duty to ask for supporting documents, but may ask for them. Thus, it is not an obligation. In case the contracting authority becomes aware of a violation e.g. that an exclusion ground in Article 57 covers a supplier, it can be argued that the contracting authority will in fact have a duty to ask for documentation. Article 35(7) states that “Article 59(4) to (6) shall apply throughout the entire period of validity of the dynamic purchasing system.” This means that before awarding the contract, the contracting authority shall require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60 and, where appropriate, Article 62. The contracting authority may invite economic operators to supplement or clarify the certificates received pursuant to Articles 60 and 62. 9 However, economic operators shall not be required to submit supporting documents where the contracting authority having awarded the contract already possesses these documents. Economic operators may be excluded from the procurement procedure or be subject 17 to prosecution under national law in cases of serious misrepresentation in filling in the ESPD or, generally, in supplying the information required for the verification of the absence of grounds for exclusion or the fulfillment of the selection criteria, or where such information is withheld or the economic operators are unable to submit the supporting documents, see the commentary on Article 57 for further on this matter.

59.5. Situations where economic operators shall not be required to submit supporting documents Economic operators shall not be required to submit supporting documents or other 18 documentary evidence where and in so far as the contracting authority has the possibility of obtaining the certificates or the relevant information directly by accessing a nationSee Article 59(4). Recital 65 “It should be recalled that the possibility foreseen in the general provisions on means of proof of this Directive to ask economic operators to submit supporting documents and the obligation to do so of the tenderer to which it has decided to award the contract also apply in the particular context of dynamic purchasing systems.” 9 Article 59(4). 7

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al database in any Member State that is available free of charge, such as a national procurement register, a virtual company dossier, an electronic document storage system or a prequalification system.10 The ESPD shall contain the relevant information, such as the internet address of the database, any identification data and, where applicable, the necessary declaration of consent. 19 Neither shall economic operators be required to submit supporting documents where the contracting authority having awarded the contract or concluded the framework agreement already possesses these documents. It could be argued that that provision gives the economic operator which already has a contract with the contracting authority an advantage. However, as the documents can only be required after the award of the contract, it will not constitute a competitive advantage. 20 Member States shall ensure that databases which contain relevant information on economic operators, and which may be consulted by their contracting authorities may also be consulted, under the same conditions, by contracting authorities of other Member States.

59.6. List of databases containing relevant information on economic operators Member States shall make available and up-to-date in e-Certis a complete list of databases containing relevant information on economic operators, which can be consulted by contracting authorities from other Member States. Upon request, Member States shall communicate to other Member States any information related to the databases referred to in this Article. 22 Article 86 contains a provision for administrative cooperation between Member States where it is stated that “Member States shall provide mutual assistance to each other, and shall put in place measures for effective cooperation with one another, in order to ensure exchange of information on issues referred to in Articles 42, 43, 44, 57, 59, 60, 62, 64 and 69. They shall ensure the confidentiality of the information which they exchange.” 23 Effective administrative cooperation is necessary for the exchange of information needed for conducting award procedures in cross-border situations, in particular with regard to the verification of the grounds for exclusion and the selection criteria, the application of quality and environmental standards and of lists of approved economic operators.11 For further on administrative cooperation between Member States see the commentary on Article 86. 21

Article 60 Means of proof 1. Contracting authorities may require the certificates, statements and other means of proof referred to in paragraphs 2, 3 and 4 of this Article and Annex XII as evidence for the absence of grounds for exclusion as referred to in Article 57 and for the fulfilment of the selection criteria in accordance with Article 58.

10 See also Recital 85, which states: “It should also be provided that contracting authorities should not ask for still up-to-date documents, which they already possess from earlier procurement procedures. However, it should also be ensured that contracting authorities will not be faced with disproportionate archiving and filing burdens in this context. Consequently, implementation of this duty should only be applicable once the use of electronic means of communication is obligatory, as electronic document management will render the task much easier for contracting authorities.” 11 Recital 128.

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2.

3.

4. 5.

Contracting authorities shall not require means of proof other than those referred to in this Article and in Article 62. In respect of Article 63, economic operators may rely on any appropriate means to prove to the contracting authority that they will have the necessary resources at their disposal. Contracting authorities shall accept the following as sufficient evidence that none of the cases specified in Article 57 apply to the economic operator: (a) as regards paragraph 1 of that Article, the production of an extract from the relevant register, such as judicial records or, failing that, of an equivalent document issued by a competent judicial or administrative authority in the Member State or country of origin or the country where the economic operator is established showing that those requirements have been met; (b) as regards paragraph 2 and point (b) of paragraph 4 of that Article, a certificate issued by the competent authority in the Member State or country concerned. Where the Member State or country in question does not issue such documents or certificates, or where these do not cover all the cases specified in paragraphs 1 and 2 and point (b) of paragraph 4 of Article 57, they may be replaced by a declaration on oath or, in Member States or countries where there is no provision for declarations on oath, by a solemn declaration made by the person concerned before a competent judicial or administrative authority, a notary or a competent professional or trade body, in the Member State or country of origin or in the Member State or country where the economic operator is established. A Member State shall, where relevant, provide an official declaration stating that the documents or certificates referred to in this paragraph are not issued or that they do not cover all the cases specified in paragraphs 1 and 2 and point (b) of paragraph 4 of Article 57. Such official declarations shall be made available through the online repository of certificates (e-Certis) referred to in Article 61. Proof of the economic operator’s economic and financial standing may, as a general rule, be provided by one or more of the references listed in Annex XII Part I. Where, for any valid reason, the economic operator is unable to provide the references requested by the contracting authority, it may prove its economic and financial standing by any other document which the contracting authority considers appropriate. Evidence of the economic operators’ technical abilities may be provided by one or more of the means listed in Annex XII Part II, in accordance with the nature, quantity or importance, and use of the works, supplies or services. Upon request, Member States shall make available to other Member States any information relating to the grounds for exclusion listed in Article 57, the suitability to pursue the professional activity, and the financial and technical capacities of tenderers referred to in Article 58, and any information relating to the means of proof referred to in this Article.

Literature: Steinicke and Groesmeyer, EU’s Udbudsdirektiver, p. 1159-1209; Arrowsmith, The Law of Public and Utilities Procurement, chap. 12; Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers KalsmoseHjelmborg, EU Public Procurement Law, chap. 7; Fabricius, Jesper, Offentlige indkøb i praksis, chap. 9; Steinicke, Michael, ‘Qualification and Shortlisting’ (chap. 5), in Trybus, Caranta and Edelstam (eds), EU Law and Public Contracts; Martin Burgi, Martin Trybus and Steen Treumer (eds), Qualification, selection and exclusion in EU procurement, European Law Series, DFJØ Publishing 2016. 60.1. Documentation – Means of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.2. Documentation relating to the grounds for exclusion. . . . . . . . . . . . . . . . . . . . . . 60.2.1. Mandatory exclusion grounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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PART I The Public Sector Directive 2014/24/EU 60.2.2. Discretionary exclusion grounds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.3. Documentation relating to the economic and financial standing of economic operators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.3.1. Statements from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.3.2. Financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.3.3. Statement of the turnover of the undertaking. . . . . . . . . . . . . . . . . . . . . . . . . . . 60.4. Documentation relating to the economic operators’ technical abilities . . . . 60.4.1. List of works, principal deliveries or main services (reference list) . . . . . . 60.4.2. Technicians or technical bodies involved. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.4.3. Description of facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.4.4. Supply chain management and tracking systems. . . . . . . . . . . . . . . . . . . . . . . . 60.4.5. Check of the products or services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.4.6. Educational and professional qualifications of the service provider . . . . . 60.4.7. Environmental management measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.4.8. Average annual manpower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.4.9. Tools, plant or technical equipment available. . . . . . . . . . . . . . . . . . . . . . . . . . . 60.4.10. Subcontracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.4.11. Samples and certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.5. Exchange of information between the Member States . . . . . . . . . . . . . . . . . . . . .

18 21 26 29 33 36 43 46 48 51 53 55 58 59 61 64 66 71

Article 60 (in connection with Annex XII and Annex XII) lists the certificates, statements and other means of proof that economic operators can submit as proof for the different conditions for participation in the procurement procedure (absence of grounds for exclusion and fulfilment of the selection criteria). This is often described as documentation. Article 60 corresponds to, e.g., Article 47(1), 48(1) of the 2004 Public Sector Directive, but has been updated and placed in one article instead of several. 2 The required form of documentation/means of proof must be specified in the contract notice bearing in mind that as preliminary evidence the contracting authority may only require the ESPD as a preliminary documentation that the relevant economic operator is not in one of the situations referred to in Article 57 in which economic operators shall or may be excluded, and that the economic operator meets the relevant selection criteria that have been set out pursuant to Article 58. Before awarding the contract, the contracting authority shall require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60 (and Article 62). 3 Means of proof regarding the exclusion grounds is found in paragraph 2. Means of proof regarding economic and financial standing is found in paragraph 3 and for technical standing in paragraph 4. 1

60.1. Documentation – Means of proof Article 60(1) states that contracting authorities may require the certificates, statements and other means of proof referred to in paragraphs 2, 3 and 4 of this Article and Annex XII as evidence for the absence of grounds for exclusion as referred to in Article 57 and for the fulfilment of the selection criteria in accordance with Article 58. 5 It is explicitly mentioned that contracting authorities shall not require means of proof other than those referred to in this Article and in Article 62, but as the wording on Article 60(1) shows, the contracting authority is not required to ask for any documentation at all. Thus, in case the contracting authority wishes documentation only documentation, which is mentioned in Article 60 may be demanded. 6 In respect of Article 63, where an economic operator may rely on the capacities of other entities regarding the selection criteria, such economic operators may rely on any appropriate means to prove to the contracting authority that they will have the necessary 4

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resources at their disposal. See in this regard the commentary to Article 63. Also groups of undertakings may participate in procurement procedures, including where they have come together in the form of a temporary association. In such cases the contracting authority may set conditions, which are not imposed on individual participants such as, e.g., joint representation for the purpose of the procurement procedure. See for further regarding groups of undertakings, the commentary to Article 19. Even though it is only the winning tenderers who are required to submit the docu- 7 mentation in question, a contracting authority may ask tenderers and candidates at any moment during the procedure to submit all or part of the supporting documents where this is necessary to ensure the proper conduct of the procedure.1 Thus, if the contracting authority suspects that the operator is in a situation that provides a ground for exclusion or does not fulfil the selection criteria, the contracting authority may require the supporting documents for other tenderers than the winning tenderer.

60.2. Documentation relating to the grounds for exclusion Article 60(2) specifies the types of proof, which contracting authorities shall accept as sufficient evidence that none of the cases specified in Article 57 apply to the economic operator (exclusion grounds). Different types of proof can be asked depending on whether documentation relates to the mandatory exclusion grounds or the discretionary exclusion grounds. A Member State shall, where relevant, provide an official declaration stating that the documents or certificates referred to in Article 60(2) are not issued or that they do not cover all the cases specified in 57(1) and (2) and (4 b). Such official declarations shall be made available through the online repository of certificates (e-CERTIS) referred to in Article 61. Economic operators shall not be required to submit supporting documents or other docu mentary evidence where and in so far as the contracting authority has the possibility of obtaining the certificates or the relevant information directly by accessing a national database in any Member State that is available free of charge, such as a national procurement register, a virtual company dossier, an electronic document storage system or a prequalification system. In Article 60(1), it is stated that “Contracting authorities may require the certificates, statements and other means of proof (…)” [Emphasis added]. The wording indicates that contracting authorities are not required to ask for any means of proof. Thus, it is at the contracting authority’s own discretion whether it wishes to receive documentation. It should, in that regard, be recalled that the contracting authority may only require the ESPD as preliminary evidence that the relevant economic operator is not in one of the situations referred to in Article 57 in which economic operators shall or may be excluded. Before awarding the contract, the contracting authority shall require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60 and 62. According to Article 57(5) contracting authorities shall at any time during the procedure exclude an economic operator where it turns out that the economic operator is, in view of acts committed or omitted either before or during the procedure, in one of the situations referred to in paragraphs 1 and 2 (mandatory exclusion grounds). Thus, the contracting authority would presumably have a duty to react in case it becomes aware of the presence of an exclusion ground.

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The Directive is silent as to the age of the documentation regarding the exclusion grounds. According to Article 57(5) it is for Member States to determine the maximum period of exclusion. Such a period shall not exceed five years from the date of the conviction by final judgment regarding the mandatory exclusion grounds in Article 57(1) and three years from the date of the relevant documentation regarding the discretionary exclusion grounds in Article 57(4). Thus, it could be argued that the contracting authority should not ask for documentation older than this. However, it is, to the contrary, more in the interest of the contracting authority that the documentation is as new as possible as that can serve to ensure that recent events did not cause the tenderer to be covered by an exclusion ground.2 When setting a time frame concerning documentation, the contracting authority should bear in mind the time it would take for tenderers to get obtain documentation from the various registers and similar in the Member States. 60.2.1. Mandatory exclusion grounds

As regards the mandatory exclusion grounds in Article 57(1), all exclusion grounds listed in this provision are serious offences and public contracts should not be awarded to economic operators that have participated in such violations. 15 According to Article 57, contracting authorities shall exclude an economic operator from participation in a procurement procedure where they have established by verification in accordance with Articles 59, 60 and 61, or are otherwise aware that that economic operator has been the subject of a conviction by final judgment for one of the reasons listed in Article 57. The reference to Articles 59, 60 and 61 means that the contracting authority must verify in accordance with these Articles whether the economic operator is covered by one of the grounds for exclusion. As a starting point this means that at the time of submission of requests to participate or of tenders, contracting authorities shall accept the European Single Procurement Document (ESPD), consisting of an updated self-declaration as preliminary evidence in replacement of certificates issued by public authorities or third parties confirming that the relevant economic operator is not in one of the situations referred to in Article 57 in which economic operators shall or may be excluded. Before awarding the contract, the contracting authority shall require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60. Thus, Article 60 contains the types of proof, contracting authorities may require. 16 The contracting authority may require as means of proof: 14

– The production of an extract from the relevant register, such as judicial records or, failing that, of an equivalent document issued by a competent judicial or administrative authority in the Member State or country of origin or the country where the economic operator is established showing that those requirements have been met. – a certificate issued by the competent authority in the Member State or country concerned. The latter could be a judicial record that shows an undertaking´s criminal history, which some Member States have established for undertakings as well as other types of docu2 See also Recital 85 which states that “It is important that the decisions of contracting authorities should be based on recent information, in particular as regards exclusion grounds, given that important changes can intervene quite rapidly, for instance in the event of financial difficulties which would render the economic operator unsuitable or, conversely, because an outstanding debt on social contributions would meanwhile have been paid.”

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mentation such as extracts from relevant registers. If such a record does not exist the economic operator may provide an equivalent document. Such an equivalent document must be issued by a competent judicial or administrative authority in the Member State (or country of origin) where the economic operator is established. It is explicitly mentioned that such an equivalent document can also come from “… a country of origin or the country where the economic operator is established showing that those requirements have been met.” This requirement is to ensure that undertakings located outside the EU are also required to submit documentation and what such documentation should consist of. As regards the mandatory exclusion grounds in Article 57(2) relating to missing pay- 17 ment of taxes or social security contributions3 as well as regarding the exclusion ground relating to insolvency and similar in Article 57(4) point b, the contracting authority may require a certificate issued by the competent authority in the Member State or country concerned. Where the Member State or country in question does not issue such documents or certificates, or where these do not cover all the cases specified in Article 57(1) and (2) and (4 b), they may be replaced by a declaration on oath or, in Member States or countries where there is no provision for declarations on oath, by a solemn declaration made by the person concerned before a competent judicial or administrative authority, a notary or a competent professional or trade body, in the Member State or country of origin or in the Member State or country where the economic operator is established. 60.2.2. Discretionary exclusion grounds Regarding the exclusion ground relating to insolvency and similar in Article 57(4) 18 point b,4 the contracting authority may require a certificate issued by the competent authority in the Member State or country concerned. This is the same as for the mandatory exclusion grounds in Article 57(2) relating to missing payment of taxes or social security contributions, see above at section 60.2.1. Thus, where the Member State or country in question does not issue such documents 19 or certificates, or where these do not cover all the cases specified in Article 57(1) and (2) and (4 b) they may, as is the case with regard to the mandatory exclusion grounds, be replaced by a declaration on oath or, in Member States or countries where there is no provision for declarations on oath, by a solemn declaration made by the person concerned before a competent judicial or administrative authority, a notary or a competent professional or trade body, in the Member State or country of origin or in the Member State or country where the economic operator is established. Most of the discretionary grounds in Article 57(4) state: “where the contracting au- 20 thority can demonstrate by appropriate means [that] …” In such cases it will be for the contracting authority to demonstrate that an exclusion ground is present. All the grounds listed are grounds, where an official certificate would not state anything as to 3 According to Article 57(2) an economic operator shall be excluded from participation in a procurement procedure where the contracting authority is aware that the economic operator is in breach of its obligations relating to the payment of taxes or social security contributions and where this has been established by a judicial or administrative decision having final and binding effect in accordance with the legal provisions of the country in which it is established or with those of the Member State of the contracting authority. 4 Contracting authorities may exclude an economic operator “Where the economic operator is bankrupt or is the subject of insolvency or winding-up proceedings, where its assets are being administered by a liquidator or by the court, where it is in an arrangement with creditors, where its business activities are suspended or it is in any analogous situation arising from a similar procedure under national laws and regulations.”

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whether the exclusion ground is present e.g. due to conflict of interest, agreements aimed at distorting competition, serious misrepresentation in supplying the information required for the verification of the absence of grounds for exclusion or the non-fulfilment of the selection criteria and so on. Therefore, Article 60 does not require documentation in these situations, and the contracting authority may seek to find another way of demonstrating whether the operator is in a situation covered by one of the grounds for exclusion.

60.3. Documentation relating to the economic and financial standing of economic operators Article 60(3) corresponds to Article 47(1) of the 2004 Public Sector Directive and relates to documentation relating to the economic and financial standing of economic operators. The list of possible means of proof in Article 47 of Directive 2004/18/EC has been moved to an Annex without substantial change. Besides documentation for financial standing, documentation for the discretionary ground in Article 57(4), litra b that tenderers are not bankrupt or under insolvency procedure etc. may take place in accordance with Article 60(2) see above at section 60.2.2. 22 According to Article 60(3) proof of the economic operator’s economic and financial standing may, as a general rule, be provided by one or more of the references listed in Annex XII Part I. Thus, by one or more of the following references: 21

(a) appropriate statements from banks or, where appropriate, evidence of relevant professional risk indemnity insurance; (b) the presentation of financial statements or extracts from the financial statements, where publication of financial statements is required under the law of the country in which the economic operator is established; (c) a statement of the undertaking’s overall turnover and, where appropriate, of turnover in the area covered by the contract for a maximum of the last three financial years available, depending on the date on which the undertaking was set up or the economic operator started trading, as far as the information on these turnovers is available. Where, for any valid reason, the economic operator is unable to provide the references requested by the contracting authority, it may prove its economic and financial standing by any other document which the contracting authority considers appropriate. Such a valid reason could exist where an economic operator cannot submit the required documents since such are not produced in the Member State where the undertaking is established e.g. financial statements. In such cases the contracting authority must accept other forms of documentation from that undertaking. 24 The required form of documentation must be specified in the contract notice bearing in mind that as preliminary evidence the contracting authority may only require the ESPD as preliminary evidence that the relevant economic operator meets the relevant selection criteria that have been set out pursuant to Article 58. Before awarding the contract, the contracting authority shall, require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60. 25 The economic operator may according to Article 63(1) in cases where appropriate and for a particular contract rely on the capacities of other entities regardless of the legal nature of the links it has with them. This could be particularly relevant regarding financial standing. Where an economic operator relies on the capacities of other entities with regard to criteria relating to economic and financial standing, the contracting authority 23

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may require that the economic operator and those entities be jointly liable for the execution of the contract (see on this the commentary to Article 63). 60.3.1. Statements from banks Annex XII Part I states the requirement proof of the economic operator’s economic 26 and financial standing as follows: “(a) appropriate statements from banks or, where appropriate, evidence of relevant professional risk indemnity insurance”. Similar wording was found in Article 47(1 a) of Directive 2004/18/EC. A statement from a bank would normally show whether the undertaking in credit- 27 worthy. It is not stated in the Annex, what such a bank statement must contain, but only that the statement must be “appropriate”. Statements from banks may involve elements with regard to which a bank would normally be competent and should contain information regarding the assessment of the economic operator´s financial standing. Steinicke and Groesmeyer states that this could for example be guarantees or a solvency statement.5 However, often a bank would not be in a position to give a solvency statement as this depends on many issues and it is more likely that for the sake of certainty it would be preferable to obtain solvency statements from accountants. A statement from a bank can be a guarantee but most often it will merely be a statement stating what is the undertaking´s relationship with the bank, its credit and so on. Where appropriate, the contracting authority may require evidence of relevant pro- 28 fessional risk indemnity insurance (or other types of insurances relevant for the performance of the contract). In some Member States national law will require a risk indemnity insurance covering specific professional work. Documentation of such insurance can take place by sending the insurance policy or by a statement from the insurance company, bearing in mind the principle of proportionality.6 Contracting authorities can require both a statement from a bank as well as the relevant insurance. 60.3.2. Financial statements Annex XII Part I states the required proof of the economic operator’s economic and 29 financial standing the requirement as follows: “(b) the presentation of financial statements or extracts from the financial statements, where publication of financial statements is required under the law of the country in which the economic operator is established”. The same wording was found in Article 47(1 b) of Directive 2004/18/EC. It is a requirement that publication of such financial statements is required in the 30 Member State where the economic operator is established. Thus, contracting authorities may only require such documentation from tenderers where publication is a requirement in the Member State (or country) where the undertaking is established. The reason seems to be that producing such a document can be time-consuming and should therefore only be required where it is also required for other reasons in a Member State. A financial statement shows the undertaking´s profit and losses from the last year. 31 The contracting authority may ask for the statement as such or extracts from the statement.

See e.g. Steinicke and Groesmeyer, EU’s Udbudsdirektiver, p. 1169. In a case before the Danish Complaints Board for Public Procurement, June 6, 2000, Ernst & Young v. Fyns Stiftsøvrighed the Board rules that the contracting authority could not have required the tenderers to submit a copy of their insurance policy, but should only have required a statement from the insurance company. 5

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The Court of Justice has recently stated that the “minimum level of economic and financial standing cannot be established by reference to the balance sheet in general. It follows that the option provided for in the first subparagraph of Article 44(2) of Directive 2004/18 can be implemented, as regards Article 47(1)(b), only by reference to one or more particular aspects of the balance sheet.”7 And that it “… follows that the aspect (…) of the balance sheet chosen by a contracting authority to establish a minimum level of economic and financial standing must be objectively such as to provide information on such standing of an economic operator and that the threshold thus fixed must be adapted to the size of the contract concerned in that it constitutes objectively a positive indication of the existence of a sufficient economic and financial basis for the performance of that contract, without, however, going beyond what is reasonably necessary for that purpose.”8 Thus, the requirement of a minimum level of economic and financial standing cannot, in principle, be disregarded solely because that level relates to an aspect of the balance sheet regarding which there may be differences between the legislations of the different Member States.”9 60.3.3. Statement of the turnover of the undertaking

Annex XII Part I states regarding proof of the economic operator’s economic and financial standing the requirement as follows: “(c) a statement of the undertaking’s overall turnover and, where appropriate, of turnover in the area covered by the contract for a maximum of the last three financial years available, depending on the date on which the undertaking was set up or the economic operator started trading, as far as the information on these turnovers is available.” A similar wording was found in Article 47(1 c) of Directive 2004/18/EC. 34 Such a statement shows the undertaking’s overall turnover. It should be recalled that contracting authorities may not require undertakings to have a turnover which exceeds two times the estimated contract value, except in duly justified cases such as relating to the special risks attached to the nature of the works, services or supplies. 10 The contracting authority is not required to demand a given turnover, but if doing so it must not exceed two times the value of the contract. As proof of an undertakings turnover a statement in accordance with Annex XII para c may be provided. The statement can be issued by the economic operator itself or by the accountant of the economic operators. 35 All documentation requirements must be relevant for the contract in question and the contracting authority. Hence it is stated that the statement of the undertaking’s overall turnover must relate to the area covered by the contract. Furthermore, contracting authorities cannot demand to see statements which are older than the last three financial years. If an undertaking has not existed for three years, the economic operator should be allowed to submit other types of documentation and cannot reject a tenderer claiming that the tenderer does not fulfil this requirement due to the fact that it has not existed for three years.11 33

Case C-218/11, Hochtief Construction AG, October 18, 2012, paragraph 27. Case C-218/11, Hochtief Construction AG, October 18, 2012, paragraph 29. 9 Case C-218/11, Hochtief Construction AG, October 18, 2012, paragraph 32. 10 See Article 58(3). 11 See also Poulsen, p. 446. 7

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60.4. Documentation relating to the economic operators’ technical abilities Article 58(4) contains rules on requirements to tenderers’ technical and professional ability. The Article corresponds to Article 48 of the 2004 Public Sector Directive, though the requirements concerning documentation are now found in Article 60. With regard to technical and professional ability, contracting authorities may impose requirements ensuring that economic operators possess the necessary human and technical resources and experience to perform the contract to an appropriate quality standard. Contracting authorities may require, in particular, that economic operators have a sufficient level of experience demonstrated by suitable references from contracts performed in the past. Evidence of the economic operators’ technical abilities may be provided by one or more of the means listed in Annex XII Part II, in accordance with the nature, quantity or importance, and use of the works, supplies or services. The list in Annex XII is presumably exhaustive in the sense that if the contracting authority requires documentation, it can only require documentation listed in Annex XII. The similar list in Article 48(1) was considered exhaustive.12 The Court has stated regarding Article 48 that as regards technical and professional capacity it establishes a closed system which limits the methods of assessment and verification available to those authorities and, therefore, limits their opportunities to lay down requirements (see as regards procurement directives prior to Directive 2004/18.13 Requirements must be set in accordance with the nature, quantity or importance, and use of the works, supplies or services. The required form of documentation must be specified in the contract notice bearing in mind that as preliminary evidence the contracting authority may only require the ESPD as preliminary evidence that the relevant economic operator meets the relevant selection criteria that have been set out pursuant to Article 58. Before awarding the contract, the contracting authority shall require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60. The economic operator may according to Article 63(1), where appropriate and for a particular contract, rely on the capacities of other entities, regardless of the legal nature of the links which it has with them. See on this the commentary to Article 63. Means of providing evidence of the economic operators’ technical abilities as referred to in Article 58: (a) the following lists: (i) a list of the works carried out over at the most the past five years, accompanied by certificates of satisfactory execution and outcome for the most important works; where necessary in order to ensure an adequate level of competition, contracting authorities may indicate that evidence of relevant works carried out more than five years before will be taken into account;14 (ii) a list of the principal deliveries effected or the main services provided over at the most the past three years, with the sums, dates and recipients, whether public or private, involved. Where necessary in order to ensure an adequate level of competition, contracting authorities may indicate that evidence of relevant sup-

12 See Steinicke and Groesmeyer, EU’s Udbudsdirektiver, p. 1186. Arrowsmith, The Law of Public and Utilities Procurement, p. 730. 13 Case C‑218/11, Hochtief Construction AG, October 18, 2012, paragraph 28, and the case law cited therein (Case 76/81 Transporoute et travaux [1982] ECR 417, paragraphs 8 to 10 and 15).

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plies or services delivered or performed more than three years before will be taken into account; (b) an indication of the technicians or technical bodies involved, whether or not belonging directly to the economic operator’s undertaking, especially those responsible for quality control and, in the case of public works contracts, those upon whom the contractor can call in order to carry out the work; (c) a description of the technical facilities and measures used by the economic operator for ensuring quality and the undertaking’s study and research facilities; (d) an indication of the supply chain management and tracking systems that the economic operator will be able to apply when performing the contract; (e) where the products or services to be supplied are complex or, exceptionally, are required for a special purpose, a check carried out by the contracting authorities or on their behalf by a competent official body of the country in which the supplier or service provider is established, subject to that body’s agreement, on the production capacities of the supplier or the technical capacity of the service provider and, where necessary, on the means of study and research which are available to it and the quality control measures it will operate; (f) the educational and professional qualifications of the service provider or contractor or those of the undertaking’s managerial staff, provided that they are not evaluated as an award criterion; (g) an indication of the environmental management measures that the economic operator will be able to apply when performing the contract; (h) a statement of the average annual manpower of the service provider or contractor and the number of managerial staff for the last three years; (i) a statement of the tools, plant or technical equipment available to the service provider or contractor for carrying out the contract; (j) an indication of the proportion of the contract which the economic operator intends possibly to subcontract; (k) with regard to the products to be supplied: (i) samples, descriptions or photographs, the authenticity of which must be certified where the contracting authority so requests; (ii) certificates drawn up by official quality control institutes or agencies of recognised competence attesting the conformity of products clearly identified by references to technical specifications or standards.15 It is for the contracting authority to decide which information they wish to receive as documentation for tenderers’ technical and professional ability.

14 The statement “where necessary in order to ensure an adequate level of competition, contracting authorities may indicate that evidence of relevant works carried out more than five years before will be taken into account; “ and the similar statement for services and supply, is new in the 2014 Directive. Cluster 3, Reducing documentation requirements, Council document nr. 9185/12 states: “The possibility to take into account experience dating back more than five/three years has been inserted to respond to a concern voiced by contracting authorities and economic operators: especially in times of economic crisis and for large-scale projects, undertakings might not have carried out enough reference projects in the last 5 years but be able to show relevant experience through reference projects dating back longer. The precisions of the exact for[m] and content of the references in former Article 48(2)(a) have been deleted for the pure purpose of simplifying the text.” 15 See Annex XII, Part II: Technical ability.

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60.4.1. List of works, principal deliveries or main services (reference list) With regard to technical and professional ability, contracting authorities may impose 43 requirements ensuring that economic operators possess the necessary human and technical resources and experience to perform the contract to an appropriate quality standard, see above at section 60.4. To ensure that the tenderer is experienced with the type of work to be performed in 44 the contract, contracting authorities may require documentation for works previously performed by the tenderer. This can also include work performed for the contracting authority in question. It is not necessary that the list contain detailed information as to deliveries.16 For works contract such documentation may be required for the past five years and 45 for services and goods only documentation for the past three years may be required. However, for competition reasons situations may exist where such a list may concern work, which have been done a longer time ago if that is relevant. “The possibility to take into account experience dating back more than five/three years has been inserted to respond to a concern voiced by contracting authorities and economic operators: especially in times of economic crisis and for large-scale projects, undertakings might not have carried out enough reference projects in the last 5 years but be able to show relevant experience through reference projects dating back longer.”17 Thus, for particular large-scale projects or other projects, which are not performed often, the contracting authority can admit references dating back longer in order to get a broader competition field in the sense that more undertakings would be able to participate in the competition for the contract. 60.4.2. Technicians or technical bodies involved Contracting authorities may ask as documentation for technical ability: “b) an indica- 46 tion of the technicians or technical bodies involved, whether or not belonging directly to the economic operator’s undertaking, especially those responsible for quality control and, in the case of public works contracts, those upon whom the contractor can call in order to carry out the work”. Technicians or technical bodies involved can belong to the economic operator’s un- 47 dertaking, but may also be independent. Such persons would often be in charge of quality control. Contracting authorities may ask for documentation as to which technicians the economic operator has available. 60.4.3. Description of facilities Contracting authorities may ask as documentation for technical ability: “(c) a descrip- 48 tion of the technical facilities and measures used by the economic operator for ensuring quality and the undertaking’s study and research facilities.” When contracting authorities require this type of documentation it should be borne 49 in mind that tenderers do not need to have relevant equipment, facilities when tendering for the contract. It is sufficient that they have such equipment at their disposal at the time of performing the contract. Tenderers will quite often need to invest in new equip16 See Case C-315/01, Gesellschaft für Abfallentsorgungs-Technik GmbH (GAT) [2003] ECR I-6351, paragraph 65 “However, the fact remains that the submission of a list of the principal deliveries effected in the past three years, stating the sums, dates and recipients, public or private, involved is expressly included among the references or evidence which, under Article 23(1)(a) of Directive 93/36, may be required to establish the suppliers’ technical capacity.” The Court found that such lists could not be used in the award phase to identify the most economically advantageous tender, see paragraph 66. 17 See Cluster 3, Reducing documentation requirements, Council document no. 9185/12.

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ment or facilities in order to perform a given contract, and contracting authorities should therefore observe the principle of proportionality when requiring documentation of the kind in question. 50 Nevertheless, contracting authorities may from the tenderer require a description of the technical facilities, which the economic operator intends to use. 60.4.4. Supply chain management and tracking systems Contracting authorities may ask as documentation for technical ability “(d) an indication of the supply chain management and tracking systems that the economic operator will be able to apply when performing the contract.” 52 This is similar to asking for documentation for subcontractors and ensures that the contracting authority is aware of the supply chain management and tracking systems that the economic operator will be able to apply when performing the contract. For further on the matter see the commentary on subcontractors in Article 71. 51

60.4.5. Check of the products or services Contracting authorities may ask as follows with regard to documentation for technical ability: “(e) where the products or services to be supplied are complex or, exceptionally, are required for a special purpose, a check carried out by the contracting authorities or on their behalf by a competent official body of the country in which the supplier or service provider is established, subject to that body’s agreement, on the production capacities of the supplier or the technical capacity of the service provider and, where necessary, on the means of study and research which are available to it and the quality control measures it will operate”. 54 This type of documentation will be used to ensure that the suppliers’ products or services of a certain standard, quality etc. are adequate. In such cases a check of the product can be done by the contracting authorities themselves or by a competent official body of the country in which the supplier or service provider is established, on behalf of the contracting authority. This is different way of documentation than supplying samples. 53

60.4.6. Educational and professional qualifications of the service provider Contracting authorities may ask as documentation for technical ability: “(f) the educational and professional qualifications of the service provider or contractor or those of the undertaking’s managerial staff, provided that they are not evaluated as an award criterion”. 56 The contracting authority may only require such documentation where tenderers´ experience is not used as an award criterion. The Court of Justice has several times stated that the selection and award phase must be kept separated and takes place by different set of rules. An evaluation of the two phases can take place simultaneously, but “… the two procedures are nevertheless distinct and are governed by different rules.”18 Thus, the selection phase concerns the tenderers’ suitability to perform a given task, whereas the award phase is an evaluation of the tender submitted for the specific contract in question. A highly relevant (and debated) question is whether elements linked to the suitability of a tenderer, such as tenderers’ previous experience with the type of contract in question, is allowed during the award phase.19 The discussion seems to be closed with 55

18 Case C-31/87, Gebroeders Beentjes BV v. the Netherlands [1988] ECR 4635, paragraphs 15 and 16. Case C-532/06, Emm. G. Lianakis AE, Sima Anonymi Techniki Etaireia Meleton kai Epivlepseon and Nikolaos Vlachopoulos v. Dimos Alexandroupolis and Others [2008] ECR I-251, paragraph 26 regarding services. Case C-199/07, Commission v. Greece [2009] ECR I-1669, paragraph 51.

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the insertion of the possibility provided for in Article 67 to use as a criterion to award a contract “(b) organisation, qualification and experience of staff assigned to performing the contract, where the quality of the staff assigned can have a significant impact on the level of performance of the contract”. This means that even though experience of staff relates to whether a given operator is qualified (selection), the experience of the staff can influence the quality of the works or services, and therefore it is relevant to include this in the award phase, which would give tenderers the opportunity to compete for the contract based on who has the best experience (best employees). For further on the matter, see the commentary to Article 67. Thus only in cases where such documentation is not used with regard to the award 57 phase may the contracting authority require documentation for the qualities of the contracting authority’s staff (selection). 60.4.7. Environmental management measures Contracting authorities may ask as documentation for technical ability “(g) an indica- 58 tion of the environmental management measures that the economic operator will be able to apply when performing the contract.“ This should be seen in light of Article 62 regarding quality assurance standard and environmental management standards. See the commentary to Article 62 for further comments. 60.4.8. Average annual manpower Contracting authorities may ask as documentation for technical ability “(h) a state- 59 ment of the average annual manpower of the service provider or contractor and the number of managerial staff for the last three years.” Such a requirement says something about the size of the undertaking and since the 60 contracting authority can require such information for the last three years, it can show whether the undertaking is expanding. 60.4.9. Tools, plant or technical equipment available Contracting authorities may ask as documentation for technical ability “(i) a state- 61 ment of the tools, plant or technical equipment available to the service provider or contractor for carrying out the contract.” When contracting authorities require this type of documentation it should be borne 62 in mind that tenderers do not need to have relevant tools, plant or technical equipment when tendering for the contract. It is sufficient that the equipment is available for the tenderer at the time of the performance. Tenderers will quite often need to invest in new equipment in order to perform a given contract, and contracting authorities should therefore observe the principle of proportionality when requiring the documentation. According to Arrowsmith a broad approach should be taken with regard to the con- 63 cept of availability in order to ensure that the authority is able to take into account everything that could affect the ability to compete. One relevant aspect could, e.g., be that the necessary equipment might not be available due to a looming risk of strike at the work place of the operator.20 19 See, for example, the special issue of Public Procurement Law Review [2009] edited by Steen Treumer, no. 3, pp. 103-164. In that issue case law from Germany, Italy, Belgium, Norway and Denmark is analysed in the context of before and after the Lianakis-judgment, see also above. 20 Cf. Arrowsmith, p. 737.

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60.4.10. Subcontracting Contracting authorities may ask as documentation for technical ability “(j) an indication of the proportion of the contract which the economic operator intends possibly to subcontract.” 65 According to Article 71(2) “In the procurement documents, the contracting authority may ask or may be required by a Member State to ask the tenderer to indicate in its tender any share of the contract it may intend to subcontract to third parties and any proposed subcontractors.” Thus, Member States may require that tenderers indicate any share of the contract they intend to subcontract. According to recital 105 transparency in the subcontracting chain is necessary “… as this gives contracting authorities information on who is present at building sites on which works are being performed for them, or on which undertakings are providing services in or at buildings, infrastructures or areas, such as town halls, municipal schools, sports facilities, ports or motorways, for which the contracting authorities are responsible or over which they have a direct oversight”. Thus, contracting authorities can require information regarding subcontractors. See for further on subcontracting the commentary on Article 71. 64

60.4.11. Samples and certificates 66

Contracting authorities may ask as documentation for technical ability “(k) with regard to the products to be supplied: (i) samples, descriptions or photographs, the authenticity of which must be certified where the contracting authority so requests; (ii) certificates drawn up by official quality control institutes or agencies of recognised competence attesting the conformity of products clearly identified by references to technical specifications or standards.

Regarding the product to be provided, contracting authorities may require submission of samples. Samples give the contracting authority the possibility to establish whether the technical requirements for a given product are ensured, and a sample can also be used as part of the evaluation in order to measure for example the quality of a given product. When the contracting authority requires samples the principle of proportionality should be observed. Thus, if a given product is expensive the tenderers should not be required to submit many products. The contracting authority should therefore consider whether it is necessary to obtain more than one sample in connection with the tenderers or whether its needs can be met by a single sample. The distribution of a large number of samples will not be proportional if the delivery of only a single sample is sufficient. This should be seen in light of the fact that respecting the principle of proportionality will help promoting participation by SME’s that do not have the same capacity as larger undertakings to engage in very costly tender procedures.21 68 In some cases it will be costly to deliver a sample to the contracting authority as a sample may be expensive to transport. Thus, the contracting authority must observe the principle of proportionality in such a case as well and not require samples to be delivered particularly in cases where a description and photographs would be sufficient. In the GAT case, the contracting authority used an award criterion“according to which a tenderer's bid may be favorably assessed only if the product which is the subject of the offer is available for inspection by the contracting authority within a radius of 300 km of the 67

21 See also the Danish Competition and Consumer Authority’s statement “Medicoindustriens klage over krav om vareprøver” from 2007.

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authority.” The Court found that such a criterion was precluded in a procedure to award a public supply contract as a criterion for the award of the contract, but did not state whether it could be required in the selection phase.22 It should be emphasised that the requirement for tenderers to submit samples have to 69 be made to all the tenderers and not only to the tenderer, which has products the authority is not familiar with. If a tenderer does not submit a sample, the contracting authority may reject the tender. However, it is possible that the contracting authority may ask for a sample in accordance with Article 56(3) on missing documents and information. A sample can be objectively said to exist prior to the time of it being asked for and it should be possible to rely on Article 56(3). See in that respect the commentary to Article 56. Contracting authorities may also require certificates, drawn up by official quality 70 control institutes or agencies of recognised competence attesting the conformity of products clearly identified by references to technical specifications or standards.

60.5. Exchange of information between the Member States Upon request, Member States shall make available to other Member States any information relating to the grounds for exclusion listed in Article 57, the suitability to pursue the professional activity, and the financial and technical capacities of tenderers referred to in Article 58, and any information relating to the means of proof referred to in Article 60. It is for Member State to ask other Member States for this information. The information will be used in particular for non-domestic undertakings to become aware of national legislation regarding exclusion grounds as well as national requirements for pursuing a given professional activity e.g. exams, authorisations and similar. Article 86 contains a provision for administrative cooperation between Member States where it is stated that “1. Member States shall provide mutual assistance to each other, and shall put in place measures for effective cooperation with one another, in order to ensure exchange of information on issues referred to in Articles 42, 43, 44, 57, 59, 60, 62, 64 and 69. They shall ensure the confidentiality of the information which they exchange.” Effective administrative cooperation is necessary for the exchange of information needed for conducting award procedures in cross-border situations, in particular with regard to the verification of the grounds for exclusion and the selection criteria, the application of quality and environmental standards and of lists of approved economic operators.23 For further on administrative cooperation between Member States see the commentary to Article 86.

Article 61 Online repository of certificates (e-Certis) 1. With a view to facilitating cross-border tendering, Member States shall ensure that the information concerning certificates and other forms of documentary evidence introduced in e-Certis established by the Commission is constantly kept up-to-date.

22 See Case C-315/01, Gesellschaft für Abfallentsorgungs-Technik GmbH (GAT) [2003] ECR I-6351, paragraph 69 and 74. 23 Recital 128.

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2. Contracting authorities shall have recourse to e-Certis and shall require primarily such types of certificates or forms of documentary evidence that are covered by eCertis. 3. The Commission shall make available all language versions of the ESPD in e-Certis. Literature: Roger Bickerstaff, ‘E-procurement under the new EU procurement Directives’, in: PPLR 2014, 3, 134-147.

The provision on e-CERTIS is for the first time appearing in one of the procurement directives, but e-CERTIS has existed since 2010, though its usage has not been widespread so far.1 2 e-CERTIS is an on-line source of information to help companies and contracting authorities deal with different forms of documentary evidence required when tendering for public contracts. Currently, the Commission provides and manages e-CERTIS, which is updated and verified on a voluntary basis by national authorities. The aim of e-CERTIS is to facilitate the exchange of certificates and other documentary evidence frequently required by contracting authorities.2 3 Experience acquired so far indicates that voluntary updating and verification are insufficient means of ensuring that e-CERTIS can deliver its full potential for simplifying and facilitating documentary exchanges in particular for the benefit of SMEs. Maintenance should therefore be rendered obligatory in a first step. Recourse to e-CERTIS will be made mandatory at a later stage.3 4 The provision in Article 61 on e-CERTIS requires Member State to update information in e-CERTIS on certificates and other forms of documentary, and the provision ensures that contracting authorities have recourse to e-CERTIS. 1

61.1. e-CERTIS – Introduction 5

e-CERTIS is established by the Commission and can be found on the website: http:// ec.europa.eu/markt/ecertis/login.do.e-CERTIS is available in all 23 EU languages. ECERTIS offers:4 – Public employees to check the conformity of certificates sent by an undertaking answering to a call for tender, – tenderers to visualise the documents needed to answer a call for tender, – to view lists of economic operators, – to search and compare the information contained in certificates using different refining criteria, – information to contributors to undertake an easy updating of the information: add and remove information, update existing information,

1 See Roger Bickerstaff, ‘E-procurement under the new EU procurement Directives’, in: PPLR 2014, 3, 134-147. 2 Recital 87. 3 Recital 87. 4 See European Commission, DG MARKT, e-CERTIS, User’s guide, which can be found at http:// ec.europa.eu/markt/ecertis/login.do.

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– an approval of workflow: a centralised responsible unit will undertake reviews and publish the proposed modifications, – the possibility of introducing examples of identified certificates and attestations when available. Thus, e-CERTIS is a reference tool and does not guarantee that the evidential infor- 6 mation resulting from a query will be recognised as valid by a contracting authority. It is merely an information tool, which helps to identify and recognise the certificates and attestations that are most commonly requested in the context of procurement procedures of the different Member States. 7 According to e-CERTIS itself e-CERTIS can be useful particularly for: – First-time bidders, new to procurement procedures (even in the same country as the contracting authority). e-CERTIS offers a handy reference system about the types of documents tenderers usually have to submit and their contents, – cross-border tendering, – contracting authorities – since they need to be sure that the documents they receive, possibly from several countries, meet the requirements in the terms of reference as regards content and the authority of the issuer. e-CERTIS covers the documents, which contracting authorities most frequently ask 8 for, such as documents providing information whether a tenderer is covered by certain exclusion grounds, e.g. that the tender has not been charged with criminal or professional misconduct. It also covers documents relating to the tenderer’s financial capacity and similar. e-CERTIS does not cover all the types of documents contracting authorities may request. 61.1.1. Up to date information in e-CERTIS According to Article 61(1) Member States shall ensure that the information concerning certificates and other forms of documentary evidence introduced in e-CERTIS is constantly kept up-to-date. The updating of information seeks to facilitate cross-border tendering. In order for e-CERTIS to work, it is essential that Member States provide the necessary information in e-CERTIS. Having these types of information in e-CERTIS facilitates cross-border tendering. e-CERTIS is also mentioned in Article 59 where it is stated in paragraph 4 that “Member States shall make available and up-to-date in e-Certis a complete list of databases containing relevant information on economic operators, which can be consulted by contracting authorities from other Member States. Upon request, Member States shall communicate to other Member States any information related to the databases referred to in this Article.” According to Article 60(2) Member States shall, where relevant, provide an official declaration stating that the documents or certificates referred to in Article 60(2) are not issued or that they do not cover all the cases specified in 57(1) and (2) and (4 b). Such official declarations shall be made available through the online repository of certificates (e-CERTIS). It is the Commission’s responsibility to see to it that e-CERTIS functions technically correct.

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61.2. Recourse to e-CERTIS According to Article 61(2) contracting authorities shall have recourse to e-CERTIS and shall require primarily such types of certificates or forms of documentary evidence that are covered by e-CERTIS. Hence the use of e-CERTIS is not obligatory in any way. 14 The Commission had proposed to make the recourse to e-CERTIS obligatory for contracting authorities and that only documents found in e-CERTIS could be asked for.5 The Commission’s idea was two-phased in the sense that, first, Member States should ensure maintenance of e-CERTIS, and this should be rendered obligatory in a first step, and later on recourse to e-CERTIS would be made mandatory. The underlying idea was that e-CERTIS should become mandatory two years after the latest date for implementation of the Directive, which coincides with the date the Commission had also proposed for the general obligation to use electronic means of communication. The Commission’s wish to make e-CERTIS obligatory is also expressed in its Communication “A strategy for e-procurement” from April 2012, wherein it is stated: “In addition, e-CERTIS will become a mandatory clearing house two years after the transposition deadline. It will list the certificates and statements that may be requested for qualification of a bidder in procurement and will set the equivalence criteria across Member States. This will provide greater clarity and legal certainty, especially in terms of cross-border submission, with regards to certificates and statements that may be required by Member States.”6 15 The idea of a system where all the necessary documents to be used in public procurement can be found electronically is interesting and in theory very good. It could help undertakings to know the types of documents asked for not only in their own Member State, but also in other Member States. 13

61.3. The ESPD and e-CERTIS The Commission shall make available all language versions of the European Single Procurement Document (ESPD) in e-CERTIS. 17 At the time of submission of requests to participate or of tenders, contracting authorities shall accept the ESPD, consisting of an updated self-declaration as preliminary evidence in replacement of certificates issued by public authorities or third parties confirming that the relevant economic operator fulfils the conditions listed in Article 58,e.g., that the economic operator is not in one of the situations referred to in Article 57 and meets the relevant selection criteria that have been set out pursuant to Article 58. 18 The ESPD shall be drawn up on the basis of a standard form and this standard form must be available in e-CERTIS in all languages. 19 Article 59(6) states: “Member States shall make available and up-to-date in e-Certis a complete list of databases containing relevant information on economic operators which can be consulted by contracting authorities from other Member States. Upon request, Member States shall communicate to other Member States any information related to the databases referred to in this Article.” 16

5 The Commission’s proposal states: “Recourse to e-Certis shall become obligatory and contracting authorities shall be obliged to require only such of types of certificates or forms of documentary evidence that are available in e-Certis at the latest 2 years after the date provided for in Article 92(1).” 6 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions “A strategy for e-procurement”, April 2012, COM(2012) 179 final, p. 6.

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63.3.1. E-CERTIS and IMI The Internal Market Information System (IMI) is a secure online application that al- 20 lows competent authorities in the EEA to communicate quickly and easily with their counterparts abroad. It is developed jointly by Member States and the Commission and is a system developed to share information between Member States. It is for example possible to use IMI to check the validity of qualifications for professionals wanting to practice in a given Member State, or to verify information about a foreign company or person wanting to provide a service in another Member State. Authorities of the Member States can for example exchange information using pre-translated questions and answers. IMI can be found at http://ec.europa.eu/internal_market/imi-net/index_en.htm Article 86(3) of the Directive states “To test the suitability of using the Internal Market 21 Information System (IMI) established by Regulation (EU) No 1024/2012 for the purpose of exchanging information covered by this Directive, a pilot project shall be launched by 18 April 2015.”7 A pilot project was launched April 20158 to test the suitability of an expansion of IMI to cover the exchange of information under this Directive. Thus, it is possible that IMI at some point in the future will replace e-CERTIS, or at least that synergies could be explored between the IMI application and e-CERTIS.9

Article 62 Quality assurance standards and environmental management standards 1. Contracting authorities shall, where they require the production of certificates drawn up by independent bodies attesting that the economic operator complies with certain quality assurance standards, including on accessibility for disabled persons, refer to quality assurance systems based on the relevant European standards series certified by accredited bodies. They shall recognise equivalent certificates from bodies established in other Member States. They shall also accept other evidence of equivalent quality assurance measures where the economic operator concerned had no possibility of obtaining such certificates within the relevant time limits for reasons that are not attributable to that economic operator provided that the economic operator proves that the proposed quality assurance measures comply with the required quality assurance standards. 2. Where contracting authorities require the production of certificates drawn up by independent bodies attesting that the economic operator complies with certain environmental management systems or standards, they shall refer to the EcoManagement and Audit Scheme (EMAS) of the Union or to other environmental 7 Recital 125 states “The Internal Market Information System (IMI) established by Regulation (EU) No 1024/2012 of the European Parliament and of the Council (1) could provide a useful electronic means to facilitate and enhance administrative cooperation managing the exchange of information on the basis of simple and unified procedures overcoming language barriers.” See also Recital 85 “At the current stage of development, there might still be cases where [contracting authorities should verify such information by accessing relevant database] it is not yet possible because of technical reasons. The Commission should therefore envisage promoting measures that could facilitate easy recourse to up-to-date information electronically, such as strengthening tools offering access to virtual company dossiers, or means of facilitating interoperability between databases or other such flanking measures (…).” 8 See http://ec.europa.eu/growth/tools-databases/newsroom/cf/itemdetail.cfm?item_id=8235&lang=en. For further on IMI see the IMI website: http://ec.europa.eu/internal_market/imi-net/about/index_en.htm. 9 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of Regions: A strategy for e-procurement COM/ 2012/0179 final, p. 6.

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management systems as recognised in accordance with Article 45 of Regulation (EC) No 1221/2009 or other environmental management standards based on the relevant European or international standards by accredited bodies. They shall recognise equivalent certificates from bodies established in other Member States. Where an economic operator had demonstrably no access to such certificates, or no possibility of obtaining them within the relevant time limits for reasons that are not attributable to that economic operator, the contracting authority shall also accept other evidence of environmental management measures, provided that the economic operator proves that these measures are equivalent to those required under the applicable environmental management system or standard. 3. Upon request, Member States shall make available to other Member States, in accordance with Article 86, any information relating to the documents produced as evidence of compliance with quality and environmental standards referred to in paragraphs 1 and 2. Literature: Steinicke and Groesmeyer, EU’s Udbudsdirektiver, p. 1210-1213; Carina Risvig Hamer, Grundlæggende Udbudsret, Djøf forlag 2016, p. 525 et seqq.

Article 62 concerns quality assurance standards and environmental management standards and corresponds to Directive 2004/18/EC Article 49 (which related to quality assurance standards) and Article 50 (which related to environmental management standards). Thus, two Articles have been merged into one under the name “Quality assurance standards and environmental management standards.” 2 The substance of the provision in Article 62 has remained unaltered, except for minor clarifications, but the provision has been slightly updated. 3 According to Article 58, the contracting authority can choose to set selection criteria. When setting selection criteria, all requirements shall be related and proportionate to the subject-matter of the contract and contracting authorities may only set selection criteria, which relate to 1

(a) suitability to pursue the professional activity; (b) economic and financial standing; (c) technical and professional ability. Regarding requirements relating to the tenderer´s technical and professional ability contracting authorities may impose requirements ensuring that economic operators possess the necessary human and technical resources and experience to perform the contract to an appropriate quality standard.1 Such quality standards must be set in accordance with Article 62(1). 4 Together with Article 60, Article 62 relates to the documentation the contracting authority may require from tenderers to ensure that these satisfy the criteria set by the contracting authority. In fact, Article 60 states: “Contracting authorities shall not require means of proof other than those referred to in this Article and in Article 62.” 5 It should be recalled that at the time of submission of requests to participate or of tenders, contracting authorities shall accept the European Single Procurement Document (ESPD), consisting of an updated self-declaration as preliminary evidence in replacement of certificates issued by public authorities or third parties confirming that the relevant economic operator is not in one of the situations referred to in Article 57 and it

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meets the relevant selection criteria that have been set out pursuant to Article 58. Thus, documentation relating to Article 62 should only be required from the winning tenderer.

62.1. Quality assurance standards Article 62(1) corresponds to Article 49 of Directive 2004/18/EC. Quality assurance standards may concern accessibility for disabled persons. This clarification is all the more useful in view of the strengthened provisions in respect of accessibility in the context of technical specifications. Contracting authorities shall recognise equivalent certificates from bodies established in other Member States. They shall also accept other evidence of equivalent quality assurance measures where the economic operator concerned had no possibility of obtaining such certificates within the relevant time limits for reasons that are not attributable to that economic operator provided that the economic operator proves that the proposed quality assurance measures comply with the required quality assurance standards. It is for the economic operator to prove that the proposed quality assurance measures comply with the required quality assurance standards.

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62.2. Environmental management systems or standards Article 62(2) corresponds to Article 50 of the 2004/18/EC Directive, but minor 10 changes have been made. Compared to Article 50 of the 2004/18/EC Directive, the scope of the provision has 11 been amended so as to cover all contracts. Under the 2004/18/EC Directive Article 50 could only be used, according to Article 48(2 f) “… for public works contracts and public services contracts, and only in appropriate cases, an indication of the environmental management measures that the economic operator will be able to apply when performing the contract.” The change ensures that contracting authorities can require the production of certificates drawn up by independent bodies attesting that not just in appropriate cases, but in all procurement procedures the economic operator complies with certain environmental management systems or standards. According to the provision, where contracting authorities require the production of 12 certificates drawn up by independent bodies attesting that the economic operator complies with certain environmental management systems or standards, they shall refer to either: – the Eco-Management and Audit Scheme (EMAS) of the Union, – to other environmental management systems as recognised in accordance with Article 45 of Regulation 1221/2009,2 – or to other environmental management standards based on the relevant European or international standards by accredited bodies. Environmental Management Systems are tools for an organisation to remain aware of 13 the interactions that its products and activities have with the environment and to achieve and continuously improve the desired level of environmental performance. Thus, environmental management schemes, whether or not they are registered under Community instruments (EMAS), can demonstrate that the economic operator has the technical capability to perform the contract.3 On the international scene, the International Stan2 Regulation 1221/2009 of the European Parliament and of the Council of 25 November 2009 on the voluntary participation by organisations in a Community eco-management and audit scheme (EMAS), repealing Regulation (EC) No 761/2001 and Commission Decisions 2001/681/EC and 2006/193/EC, OJ L 342, 22.12.2009, p. 1, which entered into force on 11 January 2010.

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dards Organisation (ISO) creates standards and, as mentioned above, at the European level economic operators may apply the EU Eco-Management and Audit Scheme (EMAS). EMAS is a management instrument developed by the Commission for companies and other organisations in order to evaluate, report, and improve their environmental performance. According to Recital 88 “Contracting authorities should be able to require that environmental management measures or schemes be applied during the performance of a public contract. Environmental management schemes, whether or not they are registered under Union instruments such as Regulation (EC) No 1221/2009 of the European Parliament and of the Council (1), can demonstrate that the economic operator has the technical capability to perform the contract. This includes Ecolabel certificates involving environmental management criteria. Where an economic operator has no access to such environmental management registration schemes or no possibility of obtaining them within the relevant time limits, it should be allowed to submit a description of the environmental management measures implemented, provided that the economic operator concerned demonstrates that those measures ensure the same level of environmental protection as the measures required under the environmental management.” 14 Where an economic operator had demonstrably no access to such certificates, or no possibility of obtaining them within the relevant time limits for reasons that are not attributable to that economic operator, the contracting authority shall also accept other evidence of environmental management measures, provided that the economic operator proves that these measures are equivalent to those required under the applicable environmental management system or standard.4 This means that it is only in cases where “an economic operator had demonstrably no access to such certificates, or no possibility of obtaining them within the relevant time limits for reasons that are not attributable to that economic operator” that the contracting authority is required to accept other evidence of environmental management measures. 15 As for the situations above regarding quality assurance standards, it is for the economic operator to prove that these measures are equivalent to those required under the applicable environmental management system or standard. 16 In the 2004/18/EC Directive ecolabels were mentioned in Article 23 (6), which stipulates that the contracting authority may use detailed specifications or parts thereof as defined by European and (multi)national eco-labels or by any other eco-label in connection with their specification of environmental characteristics in terms of performance

62.3. Exchange of information 17

Member States shall make available to other Member States, upon request and in accordance with Article 86,5 any information relating to the documents produced as evi-

See also Recital 44 of Directive 2004/18/EC. Article 62(2) second paragraph is thus almost with regard to wording identical to Article 43(1) final paragraph, which states: “Where an economic operator had demonstrably no possibility of obtaining the specific label indicated by the contracting authority or an equivalent label within the relevant time limits for reasons that are not attributable to that economic operator, the contracting authority shall accept other appropriate means of proof, which may include a technical dossier from the manufacturer, provided that the economic operator concerned proves that the works, supplies or services to be provided by it fulfil the requirements of the specific label or the specific requirements indicated by the contracting authority.” 5 Article 86 deals with administrative cooperation between Member States and requires that Member States provide mutual assistance to each other, and that the Member States put in place measures for effective cooperation with one another, in order to ensure exchange of information including information relating to Article 62. 3

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dence of compliance with quality and environmental standards referred to in paragraphs 1 and 2. The obligation entails mutual cooperation and information exchange with regard to 18 the certificates, through the Internal Market Information system (referred to in Article 86) in order, to facilitate handling and assessment of evidence in a cross-border context. Already Directive 2004/18/EC provided for mutual assistance and information ex- 19 change in the case of Article 45(1)4th subparagraph (obligatory exclusion grounds).6 It did not, however, specify how the exchange of information should be operated, nor did it provide any tools to do so. Authorities were left "alone" as to where and how to get the information needed, e.g. to verify if documents provided by an economic operator from another Member State were authentic and up-to-date; language issues were not tackled. Effective administrative cooperation is necessary for the exchange of information 20 needed for conducting award procedures in cross-border situations, in particular with regard to the verification of the grounds for exclusion and the selection criteria, the application of quality and environmental standards and of lists of approved economic operators.7 For further on administrative cooperation between Member States see the commentary to Article 86.

Article 63 Reliance on the capacities of other entities 1. With regard to criteria relating to economic and financial standing as set out pursuant to Article 58(3), and to criteria relating to technical and professional ability as set out pursuant to Article 58(4), an economic operator may, where appropriate and for a particular contract, rely on the capacities of other entities, regardless of the legal nature of the links which it has with them. With regard to criteria relating to the educational and professional qualifications as set out in point (f) of Annex XII Part II, or to the relevant professional experience, economic operators may however only rely on the capacities of other entities where the latter will perform the works or services for which these capacities are required. Where an economic operator wants to rely on the capacities of other entities, it shall prove to the contracting authority that it will have at its disposal the resources necessary, for example, by producing a commitment by those entities to that effect. The contracting authority shall, in accordance with Articles 59, 60 and 61, verify whether the entities on whose capacity the economic operator intends to rely fulfil the relevant selection criteria and whether there are grounds for exclusion pursuant to Article 57. The contracting authority shall require that the economic operator replaces an entity which does not meet a relevant selection criterion, or in respect of which there are compulsory grounds for exclusion. The contracting authority may require or may be required by the Member State to require that the economic operator substitutes an entity in respect of which there are non-compulsory grounds for exclusion. Where an economic operator relies on the capacities of other entities with regard to criteria relating to economic and financial standing, the contracting authority may require that the economic operator and those entities be jointly liable for the execution of the contract. 6 “Where the information concerns a candidate or tenderer established in a State other than that of the contracting authority, the contracting authority may seek the cooperation of the competent authorities …”. 7 Recital 128.

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Under the same conditions, a group of economic operators as referred to in Article 19(2) may rely on the capacities of participants in the group or of other entities. 2. In the case of works contracts, service contracts and siting or installation operations in the context of a supply contract, contracting authorities may require that certain critical tasks be performed directly by the tenderer itself or, where the tender is submitted by a group of economic operators as referred to in Article 19(2), by a participant in that group. Literature: Steinicke and Groesmeyer, EU’s Udbudsdirektiver, p. 1172-1175; Arrowsmith, The Law of Public and Utilities Procurement, chap. 12; Steinicke, Michael, ‘Qualification and Shortlisting’ (chap. 5), in Trybus, Caranta and Edelstam (eds), EU Law and Public Contracts; Martin Burgi, Martin Trybus and Steen Treumer (eds), Qualification, selection and exclusion in EU procurement, European law series, DFJØ Publishing 2016.

Article 63 deals with the situation where an economic operator wishes to rely on the capacities of other entities in relation to the selection criteria. Article 63 corresponds to Article 47(2) and (3) in Directive 2004/18/EC and Article 48 (3) and (4). These provisions were inserted in the 2004 Public Sector Directive as a codification of case law from the Court of Justice.1 According to the EU Court of Justice, most recently in case C-324/14 Partner Apelski Dariusz, tenderers have the opportunity to rely on third party capacities and this is a general possibility for a tenderer, provided that the tenderer can justify that he actually has at his disposal the resources of the entity. There may be cases where the contracting authority may require a single undertaking to meet the selection requirements whereby the possibility of relying on other companies' performance is hampered. Thus, the Court of Justice requires that a third party directly or personally participate in the performance of the contract. It is not sufficient that a tenderer simply has the capabilities of an undertaking, but it is crucial that the undertaking also performs the relevant parts of the task. 2 As something new in the 2014 Directive the contracting authority can, where a tenderer relies on the capacities of other entities, require that the economic operator and those entities be jointly liable for the execution of the contract. The clarification aims at “… allowing contracting authorities to effectively protect themselves against a deficiency of the prime contractor (e.g. insolvency) during contract execution, arising from financial unsoundness.”2 What is also new is that Article 63(2) explicitly allows contracting authorities to prohibit subcontracting to a certain extent, but limits this prohibition to the “critical tasks” (see below at section 63.2). 3 Reliance on the capacity of other entities as dealt with in Article 63 is different from subcontracting regulated in Article 71. If a contracting authority uses a subcontractor the contractor will perform a given part of the contract or deliver certain products. There is, as such, no relationship between the contracting authority and the subcontractor. The entity, which the economic operator wishes to rely on in accordance with Article 63 does not necessarily perform anything for the economic operator, but it may be its financial standing the economic operator has wished to rely on.3 4 To sum up, the Article 63 clarifies that an economic operator may, where appropriate and for a particular contract, rely on the capacities of other entities. Where an economic operator wants to rely on the capacities of other entities, it shall prove to the contracting 1

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authority that it will have at its disposal the resources necessary, for example, by producing a commitment by those entities to that effect. Contracting authorities can require joint liability and require that certain critical tasks must be performed by the main contractor.

63.1. Rely on the capacities of other entities When tendering for a public contract, an economic operator can choose to submit a 5 tender itself, in such a case it must fulfil all the selection criteria itself. The economic operator may also submit a tender in a group of undertakings, e.g., in the form of a consortium. In such a case it will be the consortium that must fulfil the selection criteria. However, a tenderer may also submit a tender, where it does not itself fulfil all selection criteria, but where it relies on other undertakings to do so. The latter situation is regulated in Article 63. If a tenderer wishes to rely on other undertakings, this can be done through subcon- 6 tracting or be based on contractual relations by creating for example a consortium. For many SMEs establishing a consortium is essential in order to bid for contracts that, individually, an SME is too small to solve. In a consortium, undertakings can for a procurement procedure join their capacities and properties with regard to technical, professional and economic standing and rely on each other when carrying out the assignment. In such cases, all the members of a consortium do not need to fulfil the requirement for selection as long as the consortium as such does.4 Where groups of economic operators, including temporary associations, participate together in the procurement procedure, a separate ESPD setting out the information required under Parts II to V must be given for each of the participating economic operators. Article 63 does not cover this situation, but exclusively the situation where one undertaking only seeks to rely on the capacity of another undertaking. The situation in which a group of undertakings join with regard to obtaining a procurement contract is regulated in Article 19 whereto further comments can be seen. Under the same conditions, a group of economic operators as referred to in Article 7 19(2) may rely on the capacities of participants in the group or of other entities. The Court of Justice has found that “… a party cannot be eliminated from a procedure for the award of a public service contract solely on the ground that that party proposes, in order to carry out the contract, to use resources which are not its own but belong to one or more other entities.”5 And that it is therefore permissible “… for a service provider which does not itself fulfil the minimum conditions required for participation in the procedure for the award of a public service contract to rely, vis-à-vis the contracting authority, on the standing of third parties upon whose resources it proposes to draw if it is awarded the con-

3 See also See Steinicke, Qualification and Shortlisting, chap. 5, in Trybus, Caranta and Edelstam (eds), EU Law and Public Contracts, who states: “The difference between the use of subcontractors on the one hand and reliance on the resources or equipment of other operators on the other hand is that the former is an expression of one undertaking’s performance for another whereas the latter covers the situation where there is no performance of services from one undertaking to another (the tenderer) but where there a is contractual relationship concerning use of another company’s resources or equipment. See (10) Case C-176/98, Holst Italia ECR [1999] I-8607, paragraph 27. 4 The Court of Justice has found that the contracting authority cannot require that all the members of a consortium fulfil the requirement for selection as long as one of the members fulfils it, see C-399/05, Commission v. Greece [2007] ECR I-101. 5 Case C-176/98, Holst Italia [1999] ECR I-8607, paragraph 26. See also C-389/92 Ballast Nedam Groep v. Belgian State [1994] ECR I-1289 (‘Ballast Nedam Groep I’), paragraph 15.

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tract.”6 Article 63 incorporates these findings and provides the opportunity for economic operators to rely on the capacities of other entities. 8 Where the economic operator relies on the capacities of other entities pursuant to Article 63, the ESPD shall also indicate whether the entity fulfils the exclusion grounds and selection criteria in respect of such entities.7 This is a precondition intending to ensure that the verification of the information regarding such entities can be carried out together with and on the same conditions as the verification in respect of the main economic operator.8 As also established in the ESPD Regulation an economic operator participating on its own but relying on the capacities of one or more other entities must ensure that the contracting authority or contracting entity receives its own ESPD together with a separate ESPD setting out the relevant information for each of the entities it relies on. The contracting authority shall, in accordance with Articles 59, 60 and 61, verify whether the entities on whose capacity the economic operator intends to rely fulfill the relevant selection criteria and whether there are grounds for exclusion pursuant to Article 57.9 9 Where an economic operator wants to rely on the capacities of other entities, it shall prove to the contracting authority that it will have at its disposal the resources necessary, for example, by producing a commitment by those entities to that effect. According to Article 60(1) paragraph 2 “In respect of Article 63, economic operators may rely on any appropriate means to prove to the contracting authority that they will have the necessary resources at their disposal.” It is not quite clear from these provisions, what is needed in order to prove that the economic operator will in fact have the necessary resources at its disposal. The economic operator must be able to document that the entity that the economic operator wishes to rely on has in fact committed itself to do so.10 10 An economic operator can let its capacity rely on more than one other entity. This was also stated by the Court of Justice Swm Construzioni,11 where an Italian Court asked the Court of justice for a preliminary ruling on the question “… whether Articles 47(2) and 48(3) of Directive 2004/18 must be interpreted as precluding a national provision, (…), which prohibits, as a general rule, economic operators participating in a tendering procedure for a public works contract from relying on the capacities of more than one undertaking for the same qualification category”. The Court of Justice found that “… the systematic use of the plural in those provisions indicates that they do not prohibit, in principle, candidates or tenderers from relying on the capacities of more than one third-party entity in order to prove that they meet a minimum capacity level. A fortiori, those provisions do not lay down any general prohibition regarding a candidate or tenderer’s reliance on the capacities of one or more third-party entities in addition to its own capacities in order to fulfil the criteria set by a contracting authority.”12 However, the Court also pointed out that “It is true that there may be works with special requirements necessitating a certain capacity Case C-176/98, Holst Italia [1999] ECR I-8607, paragraph 27. Article 59(1). 8 Recital 84. 9 Article 63 (1) second paragraph. 10 In a case before the Danish Complaints Board for Public Procurement, decision of July 26, 2012, Adams Transport Co ApS v. Udenrigsministeriet (the foreign ministry) a statement from the undertaking was not sufficient since it was stated in this statement that the undertaking could withdraw its support at any time. It was stated “This letter of support will remain effective until termination in writing by Crown Worldwide Holdings Ltd.” Thus, the undertaking did in fact not have the resources available (financial). 11 Case C-94/12, Swm Construzioni 2 SpA, Swm Costruzioni 2 SpA, Mannocchi Luigino DI v Provincia di Fermo [2013] ECR I-646. 12 Case C-94/12, Swm Construzioni 2 SpA, Swm Costruzioni 2 SpA, Mannocchi Luigino DI v Provincia di Fermo [2013] ECR I-646, paragraph 30. 6

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which cannot be obtained by combining the capacities of more than one operator, which, individually, would be inadequate. In such circumstances, the contracting authority would be justified in requiring that the minimum capacity level concerned be achieved by a single economic operator or, where appropriate, by relying on a limited number of economic operators, in accordance with the second subparagraph of Article 44(2) of Directive 2004/18, as long as that requirement is related and proportionate to the subject-matter of the contract at issue.”13 An economic operator may rely on the capacity of another entity for financial stand- 11 ing (section 63.1.1.) technical capacity (section 63.1.2) and professional ability (section 63.1.3). However, a contracting authority can require that critical tasks are performed by the main contractor (section 63.1.4.) Regarding contracts which are not covered by the Public Sector Directive, but where 12 such contracts are of cross-border interest,14 the Court of Justice has in Strong Segurança SA,15 addressed whether Article 47(2) of the Public Sector Directive applied when entering into a B-service contract. In the case, the undertaking Strong Segurança SA had submitted a tender and based its financial standings on a third undertaking. According to Article 47(2) of the 2004 Directive, this action is permissible for contracts falling within the Directive as long as the economic operator can prove ‘that it will have at its disposal the resources necessary, (…).’16 Portugal had not provided for the use of Article 47(2) in its national legislation for B-services (which was not required). Regarding the question whether the provision was applicable for B-services as a consequence of the Directive, the Court stated that “… there is no indication from the wording of the provisions of Directive 2004/18, or from its spirit and general scheme, that the subdivision of the services into two categories is based on a distinction between the “substantive” and “procedural” provisions of that directive” [emphasis added].17 Thus, according to the Court, neither the wording nor the spirit of the Directive required that Article 47(2) apply to B-services. 63.1.1. Rely on capacity for economic and financial standing With regard to criteria relating to economic and financial standing in Article 58(3), 13 and to criteria relating to technical and professional ability in Article 58(4), an economic operator may, where appropriate and for a particular contract, rely on the capacity of another undertaking. The reference to “where appropriate” indicates that it is the undertaking that will judge whether it is in fact appropriate in the particular contract. Proof that the economic operator has the resources available in relation to financial 14 standing may be provided on the basis of a statement of guarantee. There is no requirement in the provision as to a proper surety obligation when an undertaking relies on another entity’s financial standing. A statement that the entity will provide economic sup-

13 Case C-94/12, Swm Construzioni 2 SpA, Swm Costruzioni 2 SpA, Mannocchi Luigino DI v Provincia di Fermo [2013] ECR I-646, paragraph 35. 14 These types of contracts are covered by the fundamental rules in the TFEU when they are of a certain cross-border interest. For an analysis of this topic, see Hansen, Carina Risvig, ‘Contracts not covered, or not fully covered, by the Public Sector Directive’. 15 Case C-95/10, Strong Segurança SA v. Município de Sintra, Securitas-Serviços e Tecnologia de Segurança [2011] March 17, 2011. The case is commented by Smith, Susie, ‘No obligation to apply specific provisions in the Public Sector Directive to contracts for Annex II B services: Strong Seguranca SA v Municipio de Sintra (C-95/10)’ [2011] PPLR no. 4, NA 125-127. 16 Article 47(2) of the 2004 Public Sector Directive. 17 Case C-95/10, Strong Segurança SA v. Município de Sintra, Securitas-Serviços e Tecnologia de Segurança [2011] March 17, 2011, paragraph 31.

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port should be sufficient even where the entity is not required to compensate for a loss in case the undertaking goes bankrupt. 15 It has been assumed that in some cases the relationship between two undertakings is such that it can be said that resources can be considered to be available based on a full ownership of an undertaking.18 In such cases the financial turnover of all undertakings involved may automatically be taken into account. 16 Where an economic operator relies on the capacities of other entities with regard to criteria relating to economic and financial standing, the contracting authority may require that the economic operator and those entities be jointly liable for the execution of the contract. This was inserted in the 2014 Directive and aims at allowing contracting authorities to effectively protect them against a deficiency of the prime contractor (e.g. insolvency) during contract execution, arising from financial unsoundness.19 Even though such an option was not contained in the 2004 Directive, it was the assumption that such joint liability could be required. 63.1.2. Rely on capacity for technical capacity With regard to criteria relating to technical and professional ability as dealt with in Article 58(4), an economic operator may, where appropriate and for a particular contract, rely on the capacity of another undertaking. The reference to “where appropriate” indicates that it is the undertaking that will judge whether it is in fact appropriate in the particular contract. 18 The Court of Justice has stated that “(…) A tenderer claiming to have at its disposal the technical and economic capacities of third parties on which it intends to rely if the contract is awarded to it may be excluded only if it fails to demonstrate that those capacities are in fact available to it.”20 Thus, the burden of demonstrating that the resources are in fact available to it will rest with the undertaking that wishes to rely on another entity. 17

63.1.3. Rely on capacity for educational and professional qualifications With regard to criteria relating to the educational and professional qualifications as set out in point (f) of Annex XII Part II,21 or to the relevant professional experience, economic operators may, however, only rely on the capacities of other entities where the latter will perform the works or services for which these capacities are required. 20 Where an economic operator wants to rely on the capacities of other entities, it shall prove to the contracting authority that it will have at its disposal the resources necessary, for example, by producing a commitment by those entities to that effect. 19

63.1.4. Replacement of an undertaking 21

Article 63(1) second paragraph states that the contracting authority shall require that the economic operator replaces an entity which does not meet a relevant selection criterion, or in respect of which there are compulsory grounds for exclusion. A similar provision was neither found in the 2004 Public Sector Directive nor was it a part of the Com-

See Arrowsmith, The Law of Public and Utilities Procurement, p. 718. Cluster 3, p. 17. 20 Case C-314/01, Siemens ECR [2004] I-2549, paragraph 47. 21 Annex XII, Part II deals with means providing evidence of the economic operators’ technical abilities, as referred to in Article 58 “… (f) the educational and professional qualifications of the service provider or contractor or those of the undertaking’s managerial staff, provided that they are not evaluated as an award criterion.” See on this the Commentary to Article 60. 18

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mission’s proposal for the 2014 Public Sector Directive. It is not quite clear from the provision whether a replacement may take place before or after the signing of the contract. Article 72 of the Public Sector 2014 Directive contains a new provision regarding 22 modifications of a contract. The provision is inserted as a consequence of case law from the Court of Justice. In that regard it should be recalled that in Wall,22 the Court of Justice found that the change of a subcontractor may constitute a substantial amendment and thus requires a new procedure. The Court stated “A change of subcontractor (…), may in exceptional cases constitute such an amendment to one of the essential provisions of a concession contract where the use of one subcontractor rather than another was, in view of the particular characteristics of the services concerned, a decisive factor in concluding the contract, which is in any event for the referring court to ascertain.”23 Thus, changing the economic operator can lead to an amendment that requires a new competition. This will be even more relevant in case the relevant party is an economic operator, which the tenderer has relied upon as the undertakings in these situations will have an even closer link than in the subcontractor situations and the situation may often be that that also the contracting authority believed that the undertaking involved had the relevant resources available. Article 72 now states that the change of a contractor will not be a substantial modification where such a new contractor replaces the one to which the contracting authority had initially awarded the contract as a consequence of either: (i) an unequivocal review clause or option in conformity with point (a); (ii) universal or partial succession into the position of the initial contractor, following corporate restructuring, including takeover, merger, acquisition or insolvency, of another economic operator that fulfils the criteria for qualitative selection initially established provided that this does not entail other substantial modifications to the contract and is not aimed at circumventing the application of this Directive; or (iii) in the event that the contracting authority itself assumes the main contractor’s obligations towards its subcontractors where this possibility is provided for under national legislation pursuant to Article 71; 24 Thus, Article 72 now regulates the change of contractor. The provision will also be relevant in cases where an economic operator wishes to substitute an undertaking it has relied on. For changes in a consortium before the award of contract see C-396/14, MT Højgaard & Züblin, further elaborated on under Article 57. The contracting authority may require or may be required by the Member State to 23 require that the economic operator substitutes an entity in respect of which there are non-compulsory grounds for exclusion.

63.2. Require certain critical tasks be performed directly by the tenderer itself In the case of works contracts, service contracts and siting or installation operations 24 in the context of a supply contract, contracting authorities may require that certain critical tasks be performed directly by the tenderer itself or, where the tender is submitted by a group of economic operators as referred to in Article 19(2), by a participant in that group. Thus, Article 63(2) explicitly allows contracting authorities to prohibit subcon-

22 Case C-91/08, Wall AG v. La ville de Francfort-sur-le-Main and Frankfurter Entsorgungs- und Service (FES) GmbH [2010] ECR I-2815. 23 Case C-91/08, Wall AG v. La ville de Francfort-sur-le-Main and Frankfurter Entsorgungs- und Service (FES) GmbH [2010] ECR I-2815, paragraph 39. 24 See Article 72(1 d).

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tracting to a certain extent, but limits this prohibition to the “critical tasks” to avoid a too strong interference in economic operators’ freedom to organise their business. 25 The Council had suggested that it should be for the Member States to decide whether they wanted to implement this possibility, but this was not included in the final version of the Directive, and thus it is left to the choice of the contracting authorities whether they wish to require that a certain critical task be performed directly by the tenderer itself. The aim of the new wording was to create legal certainty as to allowing critical tasks to be performed directly by the tenderer itself.26 In Siemens the Court of Justice found that the Directive (Service Directive 92/50) did not preclude a prohibition or a restriction on the use of subcontracting for the performance of essential parts of the contract precisely in the case where the contracting authority has not been in a position to verify the technical and economic capacities of the subcontractors when examining the tenders and selecting the lowest tenderer. 27 In the specific case the contracting authority had required that a maximum of 30% of the services could be subcontracted, and that it was provided that the characteristic parts of the contract, namely, project management, system design, development, construction, delivery and management of the central components of the overall system specific to the project development, delivery and management of the life-cycle of the electronic cards in question and development and delivery of the terminals remained with the tenderer or tender consortium. The provision in Article 63(2) does not elaborate on what is considered to be a critical task, but only critical tasks within works contracts, service contracts and siting or installation operations in the context of a supply contract, are covered. It is especially in contracts involving continued cooperation with the economic operator over a certain time (works, services and supplies involving installation) that there can be a legitimate interest in having the chosen contractor itself perform the essential tasks.28

Article 64 Official lists of approved economic operators and certification by bodies established under public or private law 1. Member States may establish or maintain either official lists of approved contractors, suppliers or service providers or provide for a certification by certification bodies complying with European certification standards within the meaning of Annex VII. They shall inform the Commission and the other Member States of the address of the certification body or the body responsible for the official lists, to which applications shall be sent. 2. Member States shall adapt the conditions for registration on the official lists referred to in paragraph 1 and for the issue of certificates by certification bodies to the provisions of this subsection. Cluster 3, Reducing documentation requirements, Council document nr. 9185/12, p. 17. See Cluster 3, Reducing documentation requirements, Council document nr. 9185/12, which states: “Under the current rules, seen in the light of the case-law of the Court (in particular, Case C-176/98, Holst Italia), there is considerable uncertainty on whether contracting authorities are allowed to require performance of a contract by the main contractor ‘in person’ (e.g., prohibit subcontracting).” 27 Case C-314/01, Siemens ECR [2004] I-2549, paragraph 45. 28 Cluster 3, Reducing documentation requirements, Council document no. 9185/12, p. 17. 25 26

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Member States shall also adapt those conditions to Article 63 as regards applications for registration submitted by economic operators belonging to a group and claiming resources made available to them by the other companies in the group. In such cases, those operators shall prove to the authority establishing the official list that they will have those resources at their disposal throughout the period of validity of the certificate attesting to their registration on the official list and that throughout the same period those companies continue to fulfil the qualitative selection requirements encompassed by the official list or certificate on which operators rely for their registration. Economic operators registered on the official lists or having a certificate may, for each contract, submit to the contracting authority a certificate of registration issued by the competent authority or the certificate issued by the competent certification body. Those certificates shall state the references which enabled those economic operators to be registered on the official list or to obtain certification and the classification given in that list. Certified registration on official lists by the competent bodies or a certificate issued by the certification body shall constitute a presumption of suitability with regard to requirements for qualitative selection encompassed by the official list or certificate. Information that can be deduced from registration on official lists or certification shall not be questioned without justification. With regard to the payment of social security contributions and taxes, an additional certificate may be required of any registered economic operator whenever a contract is to be awarded. The contracting authorities of other Member States shall apply paragraph 3 and the first subparagraph of this paragraph only in favour of economic operators established in the Member State holding the official list. The requirements of proof for the criteria for qualitative selection encompassed by the official list or certificate shall comply with Article 60 and, where appropriate, Article 62. For any registration of economic operators of other Member States on an official list or for their certification, no further proof or statements shall be required other than those requested of national economic operators. Economic operators may request at any time their registration on an official list or the issuance of a certificate. They shall be informed within a reasonably short period of time of the decision of the authority drawing up the official list or of the competent certification body. Economic operators from other Member States shall not be obliged to undergo such registration or certification in order to participate in a public contract. The contracting authorities shall recognise equivalent certificates from bodies established in other Member States. They shall also accept other equivalent means of proof. Upon request, Member States shall make available to other Member States any information relating to the documents produced as evidence that the economic operators fulfil the requirements to be registered on the official list of approved economic operators or as evidence that economic operators from another Member State possess an equivalent certification.

Literature: Steinicke and Groesmeyer, EU’s Udbudsdirektiver, p. 1216-1224; Arrowsmith, The Law of Public and Utilities Procurement, 765 et seq.

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Article 64 corresponds to article 52 of Directive 2004/18/EC, but has been restructured with the aim of simplifying its content and to adapt it to the changes of the other provisions of this sub-section. The provision deals with official lists of approved economic operators and certification by bodies established under public or private law. 2 An official list of approved economic operators is a list of undertakings kept by a given Member State and where the Member States set requirements as to how undertakings can be adopted on the list.1 Such lists can replace documentations as to contractors’ economic and financial standing and technical knowledge or ability, registration in an official list of recognized contractors may therefore replace the references in so far as such registration is based upon equivalent information.2 Thus, an official list can be used for documentation that an economic operator fulfills exclusion or selection criteria. Article 64 sets the requirements for such lists. 3 Certification by bodies established under public or private law is a system similar to official lists. However, instead of being on an official list a certificate is issued for the documentation of the qualities of the undertaking. Article 64 establishes the requirements for such certificates. 1

64.1. Official lists of approved economic operators Member States may establish or maintain either official lists of approved contractors, suppliers or service providers or provide for a certification issued by certification bodies complying with European certification standards within the meaning of Annex VII (definition of certain technical specifications).3 The provision corresponds to Directive 2004/18/EC Article 52, paragraphs 1, 7 and 8. As to the substance the provision has not been changed in the 2014 Public Sector Directive. 5 Member States shall inform the Commission and the other Member States of the address of the certification body or the body responsible for the official lists, to which applications shall be sent. Not many Member States use official lists or operate a certificate scheme.4 4

64.2. Adaption of the official lists Member States shall adapt the conditions for registration on the official lists referred to in Article 64(1). The same goes for the issue of certificates issued by certification bodies relating to the provisions of this subsection. Adapting the conditions for registration would for example be relevant when exclusion criteria are changed or similar. 7 Member States shall also adapt those conditions to Article 63 as regards applications for registration submitted by economic operators belonging to a group and claiming re6

1 Public authorities that are authorized to offer the works, products or services covered by the relevant contract notice concerned, but which are not registered on those lists, should still be allowed to participate in the tender, see C-203/14, Consorci Sanitari del Maresme, paragraph 41. 2 See Case C-27/86, CEI-Bellini [1987] ECR p. 3347, paragraph 25. 3 Annex VII: (2) ‘standard’ means a technical specification, adopted by a recognised standardisation body, for repeated or continuous application, with which compliance is not compulsory, and which is one of the following: (a) ‘international standard’ means a standard adopted by an international standardisation organisation and made available to the general public, (b) ‘European standard’ means a standard adopted by a European standardisation organisation and made available to the general public, (c) ‘national standard’ means a standard adopted by a national standardisation organisation and made available to the general public. 4 See for example http://www.portal-vz.cz/en/Informacni-systemy-a-elektronicke-vzdelavani/Information-System-on-Public-Contracts/List-of-Approved-Economic-Operators.

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sources made available to them by the other companies of the group. According to Article 63 an undertaking may rely on the capacity of another entity. In such cases, those operators shall prove to the authority establishing the official list that they will have those resources at their disposal throughout the period of validity of the certificate attesting to their registration on the official list and that throughout the same period those companies continue to fulfil the qualitative selection requirements encompassed by the official list or certificate on which operators rely for their registration.

64.3. Official lists and Certificates as documentation Economic operators registered on the official lists or holding a certificate may, for each contract, submit to the contracting authority a certificate of registration issued by the competent authority or the certificate issued by the competent certification body. Those certificates shall state the references which enabled those economic operators to be registered on the official list or to obtain certification and the classification given in that list. This means that the certificate must state the grounds which the economic operator fulfils and justifying his registration on the list. According to the Court of Justice “Contractors registered on such lists may, for each contract, submit to the authority awarding contracts a certificate of registration issued by the competent authority. That certificate is to state the references which enabled them to be registered in the list and the classification given in the list.”5 Thus, the most essential in order for lists and certificates to be used in public procurement procedures is that the certificates and lists show which requirements the economic operators fulfil when registered on the list. The 2014 Public Sector Directive introduces an obligation for contracting authorities to accept the European Single Procurement Document (ESPD) at the time of submission of requests to participate or of tenders, consisting of an updated self-declaration as preliminary evidence in replacement of certificates issued by public authorities or third parties confirming that the relevant economic operator is not in a situation covered by an exclusion ground and that the economic operator fulfils the selection criteria. Before awarding the contract, the contracting authority shall require the tenderer to which it has decided to award the contract to submit up-to-date supporting documents in accordance with Article 60 and, where appropriate, Article 62. Thus, it could be argued that since the ESPD must be accepted in all cases, the lists and certificates will have even less significance in the future.

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64.4. Presumption of suitability Certified registration on official lists by the competent bodies or a certificate issued 12 by a certification body shall constitute a presumption of suitability with regard to requirements for qualitative selection encompassed by the official list or certificate.

64.5. Information in the lists or certificates Information that can be deduced from registration on official lists or certification 13 shall not be questioned without justification. With regard to the payment of social security contributions and taxes, an additional 14 certificate may be required of any registered economic operator whenever a contract is to be awarded. The need for fully updated documentation in these situations means that

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additional documentation may be required. See for further the commentary to Article 57(2). 15 The contracting authorities of other Member States shall apply Article 64(3) and 64(5) first subparagraph only in favour of economic operators established in the Member State holding the official list. Thus, it will not be necessary for contracting authorities of other Member States to accept documentation in the form of lists or certificates for other undertakings than those established in the country where the lists and certificates are issued.

64.6. Proof for fulfilment of the criteria for qualitative selection The requirements of proof for the criteria for qualitative selection encompassed by the official list or certificate shall comply with Article 60 and, where appropriate, Article 62. See the commentary to those Articles regarding the types of documentation, which can be required for fulfilment of exclusion grounds and selection criteria. 17 For registration of economic operators of other Member States on an official list or for their certification, no proof or statements shall be required other than those requested of national economic operators. Thus, undertakings from one Member State may be accepted on an official list in another Member State, but must not be required to be accepted on the list in order to participate in procurement procedures of that Member State. Economic operators may request at any time their registration on an official list or the issuance of a certificate. They shall be informed within a reasonably short period of time of the decision of the authority drawing up the official list or of the competent certification body. 16

64.7. Undertakings from other Member States 18

Economic operators from other Member States shall not be obliged to undergo such registration or certification in order to participate in a public contract. The contracting authorities shall recognise equivalent certificates from bodies established in other Member States. They shall also accept other equivalent means of proof.

64.8. Information exchange Upon request, Member States shall make available to other Member States any information relating to the documents produced as evidence that the economic operators fulfil the requirements to be registered on the official list of approved economic operators or as evidence that economic operators from another Member State possess an equivalent certification. 20 Article 86 deals with administrative cooperation between Member States and requires that Member States provide mutual assistance to each other, and that the Member States put in place measures for effective cooperation with one another in order to ensure exchange of information including information relating to Article 65. 21 Effective administrative cooperation is necessary for the exchange of information needed for conducting award procedures in cross-border situations, in particular with regard to the verification of the grounds for exclusion and the selection criteria, the application of quality and environmental standards and of lists of approved economic operators. 6 For further on administrative cooperation between Member States see the commentary to Article 86. 19

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Subsection 2 Reduction of numbers of candidates, tenders and solutions Article 65 Reduction of the number of otherwise qualified candidates to be invited to participate 1. In restricted procedures, competitive procedures with negotiation, competitive dialogue procedures and innovation partnerships, contracting authorities may limit the number of candidates meeting the selection criteria that they will invite to tender or to conduct a dialogue, provided the minimum number, in accordance with paragraph 2, of qualified candidates is available. 2. The contracting authorities shall indicate, in the contract notice or in the invitation to confirm interest, the objective and non-discriminatory criteria or rules they intend to apply, the minimum number of candidates they intend to invite and, where appropriate, the maximum number. In the restricted procedure the minimum number of candidates shall be five. In the competitive procedure with negotiation, in the competitive dialogue procedure and in the innovation partnership the minimum number of candidates shall be three. In any event the number of candidates invited shall be sufficient to ensure genuine competition. The contracting authorities shall invite a number of candidates at least equal to the minimum number. However, where the number of candidates meeting the selection criteria and the minimum levels of ability as referred to in Article 58(5) is below the minimum number, the contracting authority may continue the procedure by inviting the candidates with the required capabilities. In the context of the same procedure, the contracting authority shall not include economic operators that did not request to participate, or candidates that do not have the required capabilities. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 681 et seq.; Michael Steinicke, ‘Qualification and shortlisting’, in Trybus, Caranta and Edelstam (eds), EU Public Contract Law, p. 119; Steen Treumer, ‘The Selection of Qualified Firms to be Invited to Tender under the E.C. Procurement Directive’, in PPLR, 1998, p. 147. 65.1. Methods for making quantitative selections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65.1.1. Selection by drawing lots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65.1.2. Selection on the basis of who is expected to submit the best tenders. . . . . 65.1.3. Selection on the basis of grounds for exclusion. . . . . . . . . . . . . . . . . . . . . . . . . . 65.1.4. Relative weightings of the selection criteria, including use of a points system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65.1.5. Selection on the basis of commercial considerations, e.g. the development of cooperative relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65.1.6. Selection on the basis of secondary or non-economic criteria . . . . . . . . . . . 65.1.7. Selection on the basis of rotating between potential tenderers. . . . . . . . . . . 65.1.8. Selection on the basis of attaining the most competitive situation. . . . . . . 65.1.9. Other methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65.2. The number of qualified candidates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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This provision is carried forward, essentially unchanged, from Article 44(3) of Direc- 1 tive 2004/18/EC. There are corresponding provisions in Article 78(2) of the Utilities Directive 2014/25/EU, Article 38(3) of the Defence and Security Directive 2009/81/EC, and Article 37(3) of the Concessions Directive 2014/23/EU.

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Article 65 of the Public Sector Directive allows a further selection to be made (a quantitative selection), in addition to the assessment of the suitability of undertakings (the qualitative selection). This is often referred to as shortlisting. As can be seen from the commentaries on Articles 57 to 64, the aim of the selection process is to ensure that undertakings that apply to take part in a procurement procedure actually have the necessary characteristics and qualifications to carry out the task which the procurement concerns. However, the EU legislator has acknowledged the interest of contracting authorities in being able to make a restriction of the numbers of the undertakings admitted to participate in a procurement contest. There would be a disproportionate administrative burden if a contracting authority had to deal with a very large number of tenders, and undertakings themselves will only have an interest in investing their time and resources in drawing up tenders if there is a more limited field of tenderers. Article 65 refers to restricted procedures, competitive procedures with negotiation, competitive dialogue procedures and innovation partnerships, but not to open procedures. This is because in open procedures all may submit tenders and the assessment of the suitability of tenderers takes place at the same time as the assessment of tenders. If a contracting authority wants to ensure the possibility of restricting the numbers of applicants, it must use restricted procedures or, if the conditions for these are fulfilled, competitive procedures with negotiation or competitive dialogue procedures. 3 Article 65(2) states that contracting authorities may only limit the number of candidates if a minimum number of qualified candidates is available. In reality, there must be a greater number of qualified candidates than the maximum number which the contracting authority has laid down in the contract notice before a restriction of numbers can be made. Thus, a contracting authority cannot implement a restriction if the number of qualified candidates is appropriate in relation to the predetermined maximum number. What is meant by a ‘qualified candidates’ is not explained further. It must be assumed that a qualified candidate is one that meets the selection criteria; see Article 65(1). 2

65.1. Methods for making quantitative selections A restriction on the number of candidates must be based on objective and non-discriminatory criteria. Also, it must be expected that there will be other restrictions connected with quantitative selections, particularly restrictions related to the principles of transparency and equal treatment. Article 65 and the principle of transparency mean that contracting authorities must determine in advance and publish both the number (possibly expressed as a range) of qualified candidates that will be accepted, and information about the criteria on which the quantitative selection will be based. Article 65 expressly states that this information must be given in the contract notice or in the invitation to confirm an interest. 5 It can be argued that, in procurement contests, there is a general principle that undertakings that show themselves best suited should have the possibility of going further in the contest. This clearly applies to the evaluation of tenders but need not necessarily apply at the pre-qualification stage. What matters at the pre-qualification stage is that the contracting authority should ensure that all the undertakings admitted to participate in the contest have the capacity to satisfactorily preform the task required by the contracting authority. In principle this merely means that the undertakings must meet the contracting authority’s criteria by showing that they have the capacities to perform the task. A quantitative selection involves restricting the number of candidates, all of which are qualified to perform the task. While in many cases it will seem proper and reasonable to 4

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make the selection by choosing candidates with the best qualifications, there is no reason to assume that there is such a requirement; see further immediately below. There follows an assessment of the various methods for making quantitative selec- 6 tions while complying with the requirement that these should be based on objective and non-discriminatory criteria. The term objective indicates that the criteria must be impartial. The assessment of whether a criterion is impartial mainly concerns the considerations served by the criterion and whether such considerations will be served by the criterion in question. It will often be quite easy to determine whether a criterion is objective, but there can be situations where this is less clear, especially with regard to whether a criterion serves its intended purpose and whether the purpose might be better served by other means. The term non-discriminatory must be interpreted in accordance with the general principle of discrimination in EU law; see further in section 0.3.2.1. Discrimination will exist where there is different treatment, i.e. where similar situations are treated differently or where different situations are treated in the same way, and where there is no proper basis for such different treatment. However, an assessment of whether criteria are objective and non-discriminatory will not be the same as an assessment of whether a specific criterion would otherwise be applicable to a quantitative selection. Thus, one of the criteria discussed below could, in principle, comply with procurement law and be an acceptable basis for making a quantitative selection while nevertheless not being applicable because the concrete criterion or its application is not objective or is discriminatory in the specific situation. One can question whether one of the criteria is so objective and non-discriminatory that it can normally be applied without further discussion. It must be assumed that relative weightings of the selection criteria can be made in most cases, at least in the sense that the contracting authority assesses each undertaking’s application in relation to each of the selection criteria, and on this basis chooses undertakings that have the best financial and professional/technical capacities; see further on this in section 65.1.4. It could even be argued that there is a presumption of the application of relative weightings to the selection criteria, so that a contracting authority that does not state in the contract notice the criteria that will be used in the quantitative selection may be allowed to use the method of the undertakings’ relative fulfilment of the selection criteria for making a quantitative restriction to a predetermined maximum number of candidates. Apart from the expectations of the candidates with regard to a criterion for quantitative selection that is not stated in the contract notice, this also means that the contracting authority will have the information necessary for applying this criterion, since this information will have been submitted for the qualitative selection. In addition to the selection criteria, Article 65(2), second paragraph, also refers to 7 ‘rules’ as forming the basis for a quantitative selection. The rules referred to must be national rules which mandate the use of specific methods for making quantitative selections. The requirements for objectivity and non-discrimination also apply to the extent that a contracting authority applies such rules as a basis for making the quantitative selection. The criteria that might be applied for making a quantitative selection include selec- 8 tion: – – – –

by some random means, such as drawing lots; on the basis of those parties which may be expected to submit the best tenders; by applying the grounds referred to in Article 57 of the Public Sector Directive; by giving relative weightings to the selection criteria, including the possible use of a points system similar to that used for the award itself; Michael Steinicke

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– on the basis of commercial considerations, such as the desire to develop cooperative relations with one or more undertakings; – by applying secondary or non-financial criteria; – by rotation of potential candidates; – to attain the most competitive situation, for example by selecting both large undertakings and small and medium sized enterprises (SMEs). As will be seen in the following sections 65.1.1 to 65.1.9, some of these criteria must be rejected as possible methods for making quantitative selections, while others might be used following more detailed consideration of their relevance and the extent to which they serve a proper purpose. 9 It must be assumed that, pursuant to Article 56(3) of the Public Sector Directive, contracting authorities can request information for use in making both qualitative and quantitative selections. If the information requested in the contract notice is insufficient for making a quantitative selection, then under Article 56(3) the contracting authority may request further information from the economic operators concerned. 65.1.1. Selection by drawing lots By drawing lots, or similar methods, qualified undertakings are selected on the basis of chance. It can be argued that this is contrary to the spirit of the procurement rules which require a contracting authority’s decisions to be based on proper grounds, and thus not on chance. Thus the element of chance in the drawing of lots is generally not acceptable for assessing submissions; see Case 274/83 Commission v Italy. However, the wording of Article 65 does not directly exclude the drawing of lots or other random methods. The drawing of lots does not breach the requirement for making a quantitative selection by a non-discriminatory method. On the other hand, it is questionable whether it will normally be a proper ground for selection to choose some and reject others at random. The argument for drawing lots or using some other random method can be that there is a heavy administrative burden associated with making a quantitative restriction by any other means, for example if applications have been received from 40 qualified candidates and the contracting authority only wants 5 qualified candidates. However, such considerations are seldom sufficiently weighty since the contracting authority must in any case make a detailed evaluation of the applications with a view to assessing whether candidates are qualified. Also, the administrative burden, for example, of assessing which candidates are qualified by giving relative weightings to the selection criteria, will usually be so slight as not to justify drawing lots.1 11 Drawing of lots can presumably be used in situations where the differences between applicants are so slight as to make it possible for the contracting authority to have relevant and proper grounds for choosing some applicants rather than others. Such a situation could also arise with regard to the content of tenders, but in certain cases it may be possible to foresee this. Thus, it is conceivable that, in relation to references and the qualifications of employees, the contracting authority may have set such high minimum criteria as to make it irrelevant whether a candidate has fulfilled the criteria with ease or with difficulty, and that neither the financial circumstances of the applicants or other (external) circumstances are sufficiently relevant to be able to provide grounds for a quantitative selection. If there is no relevant and proper basis for selecting some appli10

1 Steen Treumer, ‘The Selection of Qualified Firms to be Invited to Tender under the E.C. Procurement Directive’, PPLR, 1998, p. 147.

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cants and rejecting others, it must be legitimate for the contracting authority to make a selection using a method whereby it does not itself choose between the applicants. One can even argue that it is proper for a contracting authority to refrain from making a choice on the basis of marginal differences between applicants or on the basis of factors that are not relevant for the contracting authority, but rather to leave the matter to chance. In such a case the selection will be made on a neutral basis, and this is most in accordance with the there being no specific basis on which to make a true choice between the applicants. If a contracting authority can see in advance that drawing lots will be the most appropriate way of making a quantitative selection, it could state this in the contract notice. Often a contracting authority will have stated some other criterion than drawing lots for making a quantitative selection pursuant to Article 65, but this criterion is not relevant to the choice between two or more applicants. For example, a contracting authority may have stated that it will use the extent of relevant references as the basis for making a quantitative selection and that this criterion could give a clear basis for the contracting authority to make a quantitative selection of four out of the six undertakings that have submitted qualified applications to participate. As for the last of the five applicants that will be invited to submit a tender, it may not be possible to say which of the remaining undertakings has the most relevant references. It is possible that the contracting authority will have been so far-sighted as to state in the contract notice that the selection will be made by drawing lots if the extent of relevant references does not give a basis for selecting between two or more of the applicants. However, where the criteria in the contract notice cannot provide the basis for selecting between two or more applicants, the question is whether it will be possible to select by drawing lots even if this has not been stated in the contract notice. Given that drawing lots is the most neutral way to make a quantitative selection, it should be in accordance with Article 65 to draw lots when the criteria laid down do not give a sufficient basis for making a well-grounded choice between two or more applicants. In any case, a neutral selection method must be preferable to a contracting authority making its selection on the basis of improper grounds, or not based on the criteria laid down or on the basis of some new and unpublished criterion where the choice is made at the discretion of the contracting authority. Recital 93 of the Public Sector Directive states: ‘Given the numerous possibilities of 12 evaluating value for money on the basis of substantive criteria, recourse to drawing of lots as the sole means of awarding the contract should be avoided.’ This statement relates to the award phase and there is no equivalent statement relating to the selection phase. Despite this, in general the drawing of lots in the assessment phase of procurement procedures should not be given too much weight. At the same time it must be assumed that if the drawing of lots can play a role in the decisive assessment of a contest (the award phase), then the drawing of lots can also play a role in quantitative selection. On the basis of the above statement it must be assumed that the drawing of lots can be used, but only in special cases. 65.1.2. Selection on the basis of who is expected to submit the best tenders It can be considered whether the contracting authority’s expectations about what ten- 13 ders may be submitted can be given any weight when making a quantitative selection. It must be assumed that this is not the case in so far as such expectations relate to anything other than an undertaking’s qualifications, as revealed in its application to participate. If the expectation is merely, for example, that applicants with more experience of the type of task concerned may generally be expected to have a better overview and thus Michael Steinicke

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give a more relevant and appropriate tender, this effectively means that the contracting authority is using information about references as the decisive element in the selection. Such a general expectation is thus implicit in the selection method and is referred to as the relative weighting of the selection criteria; see section 65.1.4. If the expectation goes beyond such general assumptions it will be a condition for using expectations about tenders as a selection method that the contracting authority has one or more specific expectations about the content of tenders. It is highly questionable whether such an expectation can ever be justified, whether based on the applications or the contracting authority’s knowledge of the undertakings in question. In the latter case there will clearly be a problem of equal treatment in relation to applicants of which the contracting authority has no prior knowledge, for example from previous contracts, and thus there will be no corresponding basis for expecting anything about the tenders of these undertakings. A contracting authority’s expectations must be based on something other than its own speculations about the content of tenders, without these being in any way binding on the applicants. More or less vague assumptions about one or other of the applicants normally offering, for example, a good discount from its list prices or a comprehensive service, cannot form a basis for the contracting authority’s selection of that undertaking, as such assumptions may be mistaken or not justified by the subsequent tender.2 It seems that this uncertainty can only be overcome if the contracting authority asks applicants to agree to be bound by the criteria on which the contracting authority wishes to base its quantitative selection. In most cases it will probably be difficult to obtain such binding commitments from applicants at a time when the more detailed conditions for tendering are unknown. Moreover, such an approach seems to be a mixture of the qualification phase and the award phase, and this would be contrary to both Article 58(1) of the Public Sector Directive and Case 31/87 Beentjes. 65.1.3. Selection on the basis of grounds for exclusion 14

Applying the grounds for exclusion set out in Article 57 of the Public Sector Directive will often be the first part of the prequalification process, so that undertakings covered by one of the grounds set out in Article 57 will already be excluded when the quantitative selection is initiated. It is possible that the grounds for exclusion in Article 57 can play a role in quantitative selection. It must be assumed that the Article 57 grounds can be applied quantitative selection if, prior to the quantitative selection, the contracting authority makes an assessment of whether one or more of the grounds in Article 57 are relevant to the applicants. Exclusion on the basis of Article 57(4) is not an obligation laid on a contracting authority, but a right. In connection with quantitative selection, Article 57 can apply so that, after qualitative pre-selection, a contracting authority can make a quantitative selection on the basis of Article 57(4). Thus, if a contracting authority narrows down the number of applicants it wishes to pre-qualify, the authority can refrain from applying the grounds for exclusion in Article 57. This means that the appropriateness of using Article 57 for making a quantitative selection is reduced as the contracting authority cannot be sure of arriving 2 To the extent that the decisions of a contracting authority are based on the services which the undertakings may offer, it must be assumed to be a requirement that such undertakings must be bound to offer the services; see the principle in Case C-448/01 EVN, para. 71, to the effect that sub-criteria should be supported by a requirement enabling effective verification of the information in tenders. Even though the case referred to concerned the tendering phase, it must be assumed that the same applies to quantitative selection, and that the decisions of a contracting authority can only be based on future circumstances if it is ensured that these circumstances are realisable.

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at the exact number of applicants it wants, as stated in the contract notice or procurement materials. If a contracting authority excludes an undertaking, on the ground that it can demonstrate by appropriate means that the economic operator is guilty of grave professional misconduct which renders its integrity questionable (Article 57(4)(c)), the authority will be bound to exclude all economic operators that are in a corresponding situation. Thus a contracting authority may find itself with no applicants because a situation referred to in Article 57 applies to them all. 65.1.4. Relative weightings of the selection criteria, including use of a points system It is generally assumed that the method by which a contracting authority assesses the 15 extent to which applicants fulfil the selection criteria must be the best means for making a quantitative selection. This is presumably because this ensures a result that will be thought most ‘fair’ if the chosen undertakings are those best qualified in the area. Such a result is also most in keeping with the basic assumption of a contest and the obligation of contracting authorities to decide on the basis of the best expected outcome which general underlies the Procurement Directive, and thus appears to be the most acceptable solution also for the excluded applicants. The decision of the Court of Justice of the European Union (CJEU) in Case C-360/89 Commission v Italy expresses that this is the most correct approach.3 The case concerned a provision in Italian Law No 80/87 on special provisions for accelerating the completion of public works. Article 3(3) of this Law provided that, where more than 15 undertakings were interested, the contracting authority or agency had to invite at least 15 undertakings to tender and that, in selecting the undertakings to be invited to tender, preference was to be given to temporary associations and consortia made up of undertakings which carried on their main activities in the region in which the works were to be carried out. The CJEU ruled that this provision infringed the first paragraph of Article 22 of Directive 71/305 (the then Public Sector Directive) in so far as the selection criterion related to matters of fact which could not form part of the information on the basis of which the authorities awarding contracts were to select the candidates they would invite to tender.4 As stated in section 65.1, there is probably a presumption that the method of giving 16 relative weightings to the selection criteria will usually be sufficiently objective and nondiscriminatory as to be generally applicable, without a detailed justification. As stated by the CJEU in Case C-448/01 EVN, in connection with the application of the award criteria, an award may not be based on circumstances that lie beyond what is relevant to the specific task. The CJEU correctly ruled that it was not in accordance with the rules for a contracting authority to apply a criterion under which points are awarded for supplies which the tenderer could provide beyond the level which the contract requires. If this principle were to be applied to quantitative selection it would mean that it is not possible to give relative weightings to the selection criteria. If it is assumed that the contracting authority determines the standards which applicants must meet for qualitative selection, then raising this level or giving relative weightings to these requirements would, by definition, mean that undertakings chosen by quantitative selection would be chosen on the basis of fulfilling criteria that go beyond the level sufficient for fulfilling the task. The same situation would then exist as for the award criteria that were not accepted by the CJEU in the EVN case. The same approach can be applicable under Article 3 Steen Treumer, ‘The Selection of Qualified Firms to be Invited to Tender under the E.C. Procurement Directive’, PPLR, 1998, p. 147. 4 Case C-360/89 Commission v Italy, para. 21.

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58(1) of the Public Sector Directive, which provides that all requirements must be related to and proportionate to the subject-matter of the contract. Sue Arrowsmith in similar terms: “For example, it would violate equal treatment to select between economic operators on the basis of their turnover, when all of them have a turnover that exceeds what is reasonably required to undertake that contract.”5 It is not material whether the contracting authority has made a prior statement about the standards which undertakings must live up to or whether a contracting authority has merely requested the submission of certain documentation without laying down a specific standard. This might suggest that methods other than applying relative weightings to the section criteria, for example those in Article 58, should be used when making a quantitative selection, for example pursuant to Article 57. However, it must be assumed that the framework for making quantitative selections should not be understood in this way, but that there are several factors that mean it is not appropriate to apply the case law from the EVN case to the selection situation. For example, in the selection situation there is considerable uncertainty about the form which tenders will take, so it seems natural to focus on the stronger tenderers. At the same time, a proportionality assessment which (pursuant to Article 58(1) and in general under Article 18(1)) must be applied to selections is not regarded as making a relative assessment of technical and financial capacities. It is indisputable that there is a mismatch between the requirement that a selection must primarily ensure that applicants have the necessary competences to carry out the tasks required to fulfil the contract (as well as to satisfy the political aim of giving SMEs greater opportunities of being awarded public contracts) and the requirement that the best qualified economic operators should be chosen. However, it is impossible to ignore that giving relative weightings to selection criteria clearly seems to be the best method. While this point has not been expressly discussed in the legal literature, the general agreement that giving relative weightings to the selection criteria is applicable indicates that this is a legitimate possibility. Giving relative weightings to the selection criteria is probably applicable in the great majority of cases, at least in the form in which contracting authorities assess each applicant’s application against each of the selection criteria, and on this basis select the undertakings that have the best financial, professional and technical capacities. The same must be assumed to apply if a contracting authority decides to include the factors used for assessing professional and technical capacities in the criterion for quantitative restrictions. On the other hand it is not equally obvious that an applicant’ financial circumstances are a proper criterion for determining which candidates should be selected. The significance of an applicant’s financial capacity will often be a matter of whether or not the applicant has sufficient resources to perform the contract. Thus having greater financial resources than needed to perform the contract is of little or no relevance. It can very well be that a candidate’s financial reserves or insurance cover can be relevant to complex development projects so that it can be appropriate to give weighting to such capacities in the qualitative selection. 17 Article 58(3) of the Public Sector Directive states: ‘The minimum yearly turnover that economic operators are required to have shall not exceed two times the estimated contract value, except in duly justified cases such as relating to the special risks attached to the nature of the works, services or supplies.’ This is the first time that the legislator has set a cap on the requirements that contracting authorities can make with regard to selection. This provision is a challenge to the application of relative weightings to the selection criteria. If a contracting authority were free to use relative turnover in making a 5

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quantitative selection, it can be argued that there is scope for getting around some of the criteria laid down in the legislation. It can thus be argued that it will not be possible to use an economic operator’s relative turnover. Where a contracting authority can legitimately impose a higher turnover requirement than that laid down in the legislation, it can be argued that there are wider grounds for applying the relative fulfilment of the turnover requirements. The contracting authority should make a specific assessment of the appropriateness 18 of choosing one or other of the criteria that has been used as a criterion for making the qualitative selection as a criterion for making a quantitative restriction. There is often no need for deeper consideration; a factor like an applicant’s experience, for example, will typically be highly relevant and appropriate to quantitative restrictions in connection with services and public works contracts. On the other hand there can be a need for deeper consideration if the quantitative selection must be made, for example, purely on the basis of which applicants have the latest software that is relevant to the performance of the contract. A contracting authority may thus specify a criterion for a quantitative selection that has been included in the qualitative selection. For example, a criterion such as references to similar tasks previously undertaken can be stipulated as the criterion for making a quantitative selection, so that only references of the specified nature are taken into account. As a special variant of the relative application of the selection criteria, it must be as- 19 sumed that a contracting authority may refrain from using one of the criteria listed in Article 58 of the Public Sector Directive for qualitative selection but may nevertheless use a quantitative selection. For example, qualitative criteria relating to professional and technical capacities can be applied on the basis of references and the qualifications of the relevant personnel, while a quantitative selection should be based on the extent and quality of the technical equipment available for performing the contract in question. However, there are potential problems with using what is by its nature a qualitative selection criterion in making a quantitative restriction. This can be because the contracting authority will not have found the criterion in question sufficiently important to include it in the qualitative selection. If the criterion is not important enough for the contracting authority to take it into account for making the qualitative selection, it is questionable whether it should be applicable as the only criterion for making the quantitative restriction. It might be argued that the criterion is in fact part of the selection criteria since all applicants must be assessed in relation to it for the purposes of the quantitative selection. This will be the case in most procurement proceedings, but not necessarily so. A criterion used for quantitative selection will only be taken into account if there are more applicants interested and qualified to take part than the contracting authority wishes to qualify. If there is the exact number of or fewer of applicants interested and qualified to take part than the contracting authority wishes to qualify there will be no quantitative selection and the applicants will not be assessed against the criterion for quantitative selection. If a contracting authority has specified several elements in the relative fulfilment of 20 the selection criteria, the question will arise as to the prioritisation or weighting of these elements and the publication of such prioritisation or weighting. Contracting authorities may apply weightings to the elements included as criteria for the quantitative selection of undertakings. However there is no obligation to apply weightings and presumably no obligation to prioritise the elements. Likewise, contracting authorities may use a points system like that used for the award of a contract; see further the commentary on Article 67. A points system is usually based

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both on the weightings given to the elements of the selection criteria and the award of points depending on the extent to which candidates fulfil each element. Thus a points system goes a step further than weighting, as it systematises assessments for each of the weighted elements. If a contracting authority has laid down rules, in advance, for how the selection criteria will be weighted for making a quantitative selection, that authority will be bound to publish these rules either in the contract notice or in the supplementary procurement documentation made available to undertakings prior to making applications. Thus, where a contracting authority has determined a prioritising, a weighting or a points system in advance, it must make this public so that applicants have the possibility of knowing about it and obtaining sufficient information about it so as to be able to submit their best possible application. In Case C-470/99 Universale-Bau, the CJEU was asked whether it was sufficient for the contracting authority to determine that the applications would be evaluated according to a method lodged with a notary, or whether it was necessary for the evaluation criteria to have been communicated in the contract notice or tender documents. The case concerned procedures for the award of a public works contract for the construction of the second biological treatment phase of the principal sewage treatment plant of Vienna. It was stated that, for the ranking of the applications to take part, the candidates’ technical operating capacity would be taken into account, and the highest ranked candidates would be invited to submit a tender. It was also stated that the required references would be evaluated according to a ‘scoring’ method lodged with a notary prior to the receipt of the first application to take part. With reference to the case law on the publication of selection and award criteria, and the requirement for prioritising the elements used in connection with the award criterion of ‘the most economically advantageous tender’ (now ‘the best price-quality ratio’) and the transparency principle, the CJEU stated that: ‘the interpretation according to which, where, in the context of a restricted procedure, the contracting authority has laid down prior to the publication of the contract notice the rules for the weighting of the selection criteria it intends to use, it is obliged to bring them to the prior knowledge of the candidates, is the only interpretation which complies with the objective of Directive 93/37 … since it is the only one which is apt to guarantee an appropriate level of transparency and, therefore, compliance with the principle of equal treatment in the procedures awarding contracts to which that directive applies.’ 6 The CJEU has not ruled on whether contracting authorities are precluded from determining priorities, weightings or points systems for making quantitative selections after publication of a contract notice or receiving applications. This is somewhat parallel to the publication of weightings for award criteria, though with the difference that in relation to quantitative selections it is expressly provided that there must be publication of any weighting or prioritisation. It must generally be assumed that, in applying specific criteria, a contracting authority’s scope for flexibility is broader in the selection phase than in the award phase. The rules governing these two phases clearly show the difference. Accordingly it must be assumed that a contracting authority will have scope to use some weighting, prioritising or a points system in connection with selecting candidates, even where this is not stated in the contract notice, since in the case of quantitative selections, unlike in the award of a contract, there are no clear limits to which criteria may be used or requirements for them to be weighted or prioritised. This difference suggests that greater discretion is allowed in selecting candidates than in awarding contracts. The establishment of weightings or points systems will naturally be subject to the general 6

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principles of EU law, including equal treatment, transparency and presumably that the contracting authority’s decisions must be reasonable. In particular in relation to points systems, contracting authorities must ensure that an 21 undertaking can obtain transparency about the selection criteria even if it is unable to fulfil certain elements of them satisfactorily. In this context what is important is that, in the calculation of averages, undertakings are not qualified if they do not fulfil one or more of the selection criteria. This risk can arise if too much attention is paid to the average and not to what of primary importance which is that, as a principle, all the selection criteria must be fulfilled. A contracting authority must dismiss an application if the applicant does not fulfil all the criteria, regardless of how well the undertaking fulfils the criteria on average. This risk can be avoided by making a ‘normal’ assessment of applications and their compliance with the fundamental selection criteria prior to calculating any averages. After this it is often possible to eliminate some applications and reduce the administrative burden of applying a points system and calculating averages. It is uncertain whether a single selection criterion on its own can constitute the basis 22 for making a quantitative selection. For example, a requirement for evidence of the employees’ professional qualifications could be the only determinant for which undertakings are encouraged to submit tenders. If the contracting authority has asked for a lot of evidence for the qualitative selection, there will be a question as to whether a contracting authority’s use of only some of this evidence for the quantitative selection will be in accordance with the rules. The assessment of this will probably depend on many things. First, the factors on which the contracting authority bases its quantitative selection will presumably be relevant. If there is some factor which is clearly of secondary importance to the qualitative selection, it is doubtful whether this alone can be decisive for the elimination of an applicant. Where many factors are taken into account in assessing a quantitative selection, it will be difficult to lay down specific guidelines, as it will depend on the actual contract and which factors are regarded as decisive for the performance of the contract. 65.1.5. Selection on the basis of commercial considerations, e.g. the development of cooperative relations There is a question of whether a contracting authority could be entitled to base a 23 quantitative selection on commercial considerations, of which the most obvious seems to be regard for developing a cooperative relationship. In principle this sounds like a reasonable consideration for which most undertakings and public bodies would have some sympathy as developing cooperative relations could lead to the parties knowing each other better and understanding the needs of the other party or parties to the contract. However, it must be assumed that, whatever the commercial justification of such a policy, it would be contrary to the reasoning that lies behind the procurement rules. Building up cooperative relations (in the medium to long term, i.e. beyond the period of the immediate contract) would not be compatible with the considerations for competition which are served by the Procurement Directives. Establishing long-term cooperative relations presumably means that the parties wish to continue working together in future, and this would be incompatible with the aim of giving all undertakings equal access to tender for subsequent contracts. If a contracting authority wishes to reserve a contract to specified undertakings this can presumably be done if the contract lies outside the scope of the Procurement Directives. Moreover, where a contract is with more than one undertaking this can be reflected in the type of contract chosen, as a contracting authority can enter into contracts with several undertakings by using framework contracts. Michael Steinicke

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65.1.6. Selection on the basis of secondary or non-economic criteria 24

A contracting authority could be tempted to base its quantitative selection on secondary or non-financial criteria, such as social or environmental criteria. It must be assumed that this would be subject to the same considerations as apply in laying down selection criteria and award criteria in general. To the extent that it is relevant to take account of social considerations, for example, in the selection criteria or award criteria, it will presumably also be permissible to use such criteria for making a quantitative selection. Thus there is nothing to prevent a secondary criterion being applied also to quantitative selections, provided the criteria fulfil the conditions for use as selection criteria. Conversely, it must be assumed that it is not possible to base a quantitative selection on secondary criteria that may not be used as selection criteria in general. It must thus be assumed that Article 62 of the Public Sector Directive, on environmental certificates, can form the basis for making quantitative selections in the same way as the other rules in Articles 57-64. 65.1.7. Selection on the basis of rotating between potential tenderers

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It must be assumed that it is not permitted to make a quantitative selection by rotating between the undertakings that are to be admitted to participate in tendering. First, such an approach would not appear to be focused on the specific qualifications required of applicants for fulfilment of the contract and the requirements of the Public Sector Directives for selection, namely that the focus must be on the qualifications of the undertakings and the nature of the tasks to be carried out. In principle, a selection model based on rotation could be formulated in an objective and non-discriminatory way, as required by Article 65. However, the lack of a focus on the qualifications required and the nature of the tasks to be performed, as well as the method of rotation, could be problematic. Such a system of rotation would mean that an undertaking would have the opportunity to submit a tender sooner or later (provided the qualitative selection criteria are met). For such an arrangement to be reasonable and fair, all undertakings would have to take part in all the procurement procedures covered by the rotation system. It would also be wholly contrary to the idea behind the Public Sector Directives, as all undertakings taking part in a procurement procedure must have a genuine chance of being awarded the contract. Moreover, the criteria on which a rotation arrangement would be based could be contrary to the procurement rules. 65.1.8. Selection on the basis of attaining the most competitive situation

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It has also been suggested that a contracting authority could make a quantitative selection on the basis of assessing which undertaking (or group of undertakings) could give the most competitive situation.7 It can be difficult to reconcile such an approach with consideration for the participating undertakings. If the contracting authority is not bound to inform the participants in advance which selection model will be used for the quantitative selection this would be incompatible with the transparency principle. Also, a model whereby a contracting authority seeks to establish the most competitive situation possible will be uncertain and inappropriate. Among other things, this is because of the difficulty in determining precisely what is meant by ‘most competitive situation’. Is it the situation in which the selected undertakings are most like each other, as regards their capacities and capabilities? 7 Steen Treumer, ‘The Selection of Qualified Firms to be Invited to Tender under the EC Procurement Directive’, PPLR, 1998, p. 147.

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Moreover there will be lack of clarity about how the selection will be made to achieve the most competitive situation. It will also be difficult to state with precision what will result in the most competitive situation since the tenders will not have been submitted at this stage in the proceedings. Two undertakings with very similar economic, financial, technical and professional capacities need not necessarily submit very similar tenders. Their tenders can be very different. It will be difficult to predict the competitiveness of tenders that have not yet been submitted on the basis of the capacities of the undertakings, other than on the level that has already been addressed in the relative weighting of the selection criteria; see section 65.1.4. However, there could be special circumstances in which factors that do not concern the qualifications of applicants could be actually and objectively related to the future competitive situation in the tendering phase, and could thus be expressed in the contract notice. However, as a rule there will be such problems associated with the criterion of the ‘most competitive situation’ in respect of anything other than the qualifications of the undertakings, as this method is often regarded as inappropriate for making quantitative selections. 65.1.9. Other methods Apart from the methods referred to above, there may be other potential methods for 27 making a quantitative selection. These could be used if the principles of Article 65 of the Public Sector Directive are fulfilled both in the selection phase and in the award phase. Special considerations, such as admitting SMEs to participate in procurement pro- 28 ceedings or promoting innovation or innovative solutions might play a role in quantitative selections. These factors are relevant as they were key themes in the new Public Sector Directives. There is nothing to prevent taking account of increasing access for SMEs or promoting innovation when making quantitative selections, though all other criteria must be satisfied, including the requirements for objectivity and non-discrimination. As a result, it can be difficult for a contracting authority to formulate a criterion, such as requiring the selection of at least three SMEs, since this would discriminate against the other applicants. The Procurement Directives seem to require a balance that is difficult to achieve. Giving priority to SMEs would appear to be discriminatory, but on the other hand the use of relative weightings of the selection criteria (which is regarded as legitimate) would seem to favour larger undertakings. Under Article 31(6) of the Public Sector Directive there is a special provision stating 29 that in selecting candidates, ‘contracting authorities shall in particular apply criteria concerning the candidates’ capacity in the field of research and development and of developing and implementing innovative solutions.’ As a natural extension of this, such criteria may be applied in quantitative selections, if they are objective and non-discriminatory. However, a different question is whether these criteria must be applied in connection with quantitative selections. The answer to this must be in the negative; see the wording of Article 31(6). If capacities in the areas of research, development and the implementation of innovative solutions are taken fully into account in a qualitative selection, the contracting authority will be able to focus on other parameters when making a quantitative selection.

65.2. The number of qualified candidates Article 65 of the Public Sector Directive does not provide any range for the number of 30 qualified candidates which a contracting authority can invite to submit tenders. There is

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a lower limit (see immediately below), but there is no upper limit for the number of invitees. In principle the lower limit is relative, as a contracting authority must determine a number of qualified candidates that is sufficiently large to ensure genuine competition. It must be assumed that this refers to competition at the tendering phase. The contracting authority must therefore assess how many qualified candidates must be invited to submit tenders in order to ensure competition in the tendering phase. Contracting authorities will normally reckon that all the qualified candidates that are invited to do so will want to submit tenders, so an authority need not take account of the possibility of any candidates dropping out at this stage. If a contracting authority has special reasons for expecting that some candidates will drop out, it will have to take account of this in determining the number of qualified candidates. There is a lower limit which a contracting authority must set for the number of qualified candidates invited to submit tenders. This number is five qualified candidates with restricted procedures, and at least three qualified candidates with a competitive procedure with negotiation, competitive dialogue and innovation partnerships. Thus, with restricted procedures a contracting authority cannot determine that there will be at least four qualified candidates, even though the authority might consider this to be sufficient to ensure a competitive proceeding. In Case C-225/98 Commission v France, in relation to corresponding requirements under the former Directive on procedures for the award of public works contracts, on the minimum number of qualified candidates and the number of qualified candidates which a contracting authority intends to invite to submit renders for a restricted procedure the CJEU ruled that: ‘the number of undertakings which a contracting authority intends to invite to tender in the context of a restricted procedure cannot ever be less than five’. This was regardless of whether the contracting authority believed that a smaller number would ensure competition. In the same case the CJEU ruled that a form of wording such as ‘Maximum number of candidates which may be invited to submit a tender: 5’ is contrary to the rule in Article 65. This is because, depending on the circumstances, this gives the impression that there could be fewer than five qualified candidates.8 31 If a contracting authority has stated that it will accept 15 qualified candidates and if there are only 10 candidates qualified to perform the contract according to the selection criteria, the authority need only accept the 10 qualified candidates. This means there is no obligation to cancel the procurement proceedings and start new proceedings just because fewer qualified candidates than expected are interested in participating. In this context the right of a contracting authority to cancel the procurement proceedings will depend on whether the competitive situation really is so much weaker than desired that it must be considered proper to cancel the proceeding. The judgment in Case C-27/98 Metalmeccanica, on contracting authorities’ scope for cancelling proceedings is relevant in this context; see the commentary on Article 18. The same may apply if there are fewer qualified candidates than the minimum number pursuant to Article 65(2), for example if there are only four qualified candidates for a restricted procedure. Contracting authorities are required to state in the contract notice that the number of qualified candidates required (with restricted procedures) is at least five, but they are not required to state that they must select such a number of applicants in all cases. On the contrary, Article 65(2), third paragraph, specifically states that where the number of candidates meeting the selection criteria is below the minimum number, 8

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Case C-225/98 Commission v France, paras 61-63.

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the contracting authority may continue the procedure with the candidates that fulfil the criteria. This wording gives the impression that, as there are qualified candidates, then the contracting authority may proceed with the procurement. However, the requirement for genuine competition must still be respected. This means that the contracting authority may continue with the procedure if the number of qualified candidates allows there to be genuine competition. The requirement for genuine competition must be assumed to mean that a contracting authority may not continue if there is only one candidate, as this will not result in genuine competition.9 It is possible that the rules could be interpreted differently, so there is some uncertainty about how a contracting authority should act if there are very few qualified candidates. According to Article 65(2) a minimum number of qualified candidates must be stated 32 in the contract notice. A maximum number may also be stated. This means there is no obligation to provide for a maximum number. It must be assumed that if a contracting authority has set a maximum number, this must be published in the contract notice. As there is no upper limit to the number of candidates, a contracting authority may accept any number between 5 or 3 (the minimum numbers in the Directive) and 25, for example. There is probably less of a need for a legally required upper limit than a legally required lower limit. Where a contracting authority wishes to limit the number of qualified candidates participating further, usually no more than 20 candidates will be accepted since assessing so many tenders would lead to disproportionately high administrative costs in the award phase, without there being any gains in terms of having a wider range of proposals for solutions for carrying out a task or a keener competitive situation. It must be assumed that such objectives can often be fulfilled with far fewer qualified candidates, depending on the contract and the business sector. In any case, contracting authorities are free to set the maximum number they want. While the focus of Article 65(2) is on the minimum number of candidates, it is possible to state a range since a minimum number of candidates must always be given and a contracting authority may state the maximum number of candidates. There is a question of whether there is any limit as to how wide this range may be. For example, a limit might be based in regard to transparency. It could be argued that if a range is too wide candidates will lack certainty about precisely how many will be selected for the next phase. Nevertheless it must be assumed that there is no absolute limit as to how wide the range can be. The same conclusion can be drawn from Article 58(1) of the Public Sector Directive, according to which the requirements referred to in Article 58(2) to (4) must be related to and proportionate to the subject-matter of the contract. Article 58(1) does not refer directly to the application of these criteria, but rather to the extent of the information required and the minimum requirements for suitability. If a contracting authority has stipulated both a minimum number and a maximum 33 number (i.e. a range), the number of qualified candidates must fall within that range. Within the range, a contracting authority has a relatively wide margin of discretion to determine the number of candidates accepted, as long as the requirement for genuine competition is met.

9 Previously, the wording in Article 44(3) of Directive 2004/18/EC was that ‘the contracting authority may continue the procedure by inviting the candidate(s) with the required capabilities.’ This suggests that a contracting authority could continue the procedure even if there was only one candidate remaining. The wording has now been amended so as to be better in accord with the requirement for genuine competition.

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As for whether there is sufficient competition, the CJEU has stated that whether a number of candidates is sufficient to ensure genuine competition must be assessed on the basis of the characteristics and the nature of the contract in question. 10

Article 66 Reduction of the number of tenders and solutions Where contracting authorities exercise the option of reducing the number of tenders to be negotiated as provided for in Article 29(6) or of solutions to be discussed as provided for in Article 30(4), they shall do so by applying the award criteria stated in the procurement documents. In the final stage, the number arrived at shall make for genuine competition in so far as there are enough tenders, solutions or qualified candidates. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 910.

This provision is carried forward from Article 44(4) of Directive 2004/18/EC. There are corresponding provisions in Article 38(5) of Directive 2009/81/EC (the ‘Defence and Security Directive’), and Article 37(3) of Directive 2014/23/EU (the ‘Concessions Directive’). The provisions in Article 66 were introduced in the 2004 Public Sector Directive. There had not previously been express rules on how to restrict the number of solutions or tenders submitted to a contracting authority. The provision only applies to competitive procedures with negotiation and competitive dialogue. The provision states that, where a contracting authority exercises the option to reduce the number of tenders to be negotiated, it must do so on the basis of the award criteria stated in the procurement documents. Moreover, the number of solutions in the final stage must ensure genuine competition, in so far as there are enough tenders, solutions or qualified candidates. The provision emphasises the chronology and allocation of the various criteria laid down in Article 56. While the qualitative restriction of applicants pursuant to Article 65 must be based on the selection criteria and the quantitative selection must be based on any supplementary objective criteria, a restriction of the number of tenders or solutions in the award phase of a procurement should be based on the award criteria applicable to the procurement. 2 The wording of Article 66 is not entirely clear about what is meant by reductions having to be made ‘by applying the award criteria’. The wording can and probably should be understood as meaning that the reduction should be made so that the tenders should be chosen that appear best able to fulfil the award criteria at the time of making the reduction. This means that the tenders must be assessed according to the sub-criteria of complying with their weighting under the best price-quality ratio, that the tenders must be assessed purely on the basis of their price according to the lowest price standard, and that the costs must be taken account of when applying the cost-effectiveness criterion. No minimum number is stipulated for the number of proposals that a contracting authority should have remaining in connection with these reductions of numbers of proposals for solutions. However, it must follow from the connection with Article 65 that, depending on the circumstances, there can be a limit so that there must be at least two tenders remaining. Since, under Article 65, depending on the circumstances there can be three qualified candidates remaining (in the case of competitive procedures with nego1

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tiation, competitive dialogue procedures and innovation partnerships), it can be assumed that it follows that in reducing the number of tenders there can be as few as two tenders remaining. However, as stated in Article 66, the two tenders must make for genuine competition.1 As a starting point it must assumed that this can be the case, depending on the circumstances, but that the requirement for there to be competition in a specific case can mean that the contracting authority will need to accept more than three qualified candidates if it subsequently wants to eliminate solutions or tenders pursuant to Article 66. Article 66 also provides that the requirement for a number of candidates to ensure 3 genuine competition can be derogated from if there are not enough tenders, solutions or qualified candidates. Depending on the circumstances, this could mean that it can be acceptable for a contracting authority to be left with only one tenderer. Article 66 uses the terms ‘solutions’ and ‘qualified candidates’ together. This gives the impression that the number of tenders will not always be decisive for whether there is a genuine competitive situation. It can be the case that candidates have the possibility of submitting alternative tenders, allowing there to be more tenders than candidates. In these situations it will not be the number of tenders that will determine whether there is a genuinely competitive situation, but the number of candidates which have submitted tenders (two tenders from the same undertaking cannot be said to compete with each other). However, it is unfortunate that the term ‘qualified candidates’ is used as it is generally used to refer to undertakings that seek pre-qualification. As soon as a tender or proposal for a solution is submitted, the undertaking concerned should be considered a ‘tenderer’.

Subsection 3 Award of the contract Article 67 Contract award criteria 1. Without prejudice to national laws, regulations or administrative provisions concerning the price of certain supplies or the remuneration of certain services, contracting authorities shall base the award of public contracts on the most economically advantageous tender. 2. The most economically advantageous tender from the point of view of the contracting authority shall be identified on the basis of the price or cost, using a costeffectiveness approach, such as life-cycle costing in accordance with Article 68, and may include the best price-quality ratio, which shall be assessed on the basis of criteria, including qualitative, environmental and/or social aspects, linked to the subject-matter of the public contract in question. Such criteria may comprise, for instance: (a) quality, including technical merit, aesthetic and functional characteristics, accessibility, design for all users, social, environmental and innovative characteristics and trading and its conditions;

1 This question has been discussed, among other things in connection with the possibility of cancelling a procurement proceeding; see Case C-27/98 Metalmeccanica. In this case the Court of Justice of the European Union (CJEU) ruled that cancellation was legitimate if there was no competition. In this case there was only one tenderer remaining and there had been discussion of whether in the circumstances there would have been sufficient competition if there had been two tenderers.

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(b) organisation, qualification and experience of staff assigned to performing the contract, where the quality of the staff assigned can have a significant impact on the level of performance of the contract; or (c) after-sales service and technical assistance, delivery conditions such as delivery date, delivery process and delivery period or period of completion. The cost element may also take the form of a fixed price or cost on the basis of which economic operators will compete on quality criteria only. Member States may provide that contracting authorities may not use price only or cost only as the sole award criterion or restrict their use to certain categories of contracting authorities or certain types of contracts. 3. Award criteria shall be considered to be linked to the subject-matter of the public contract where they relate to the works, supplies or services to be provided under that contract in any respect and at any stage of their life cycle, including factors involved in: (a) the specific process of production, provision or trading of those works, supplies or services; or (b) a specific process for another stage of their life cycle, even where such factors do not form part of their material substance. 4. Award criteria shall not have the effect of conferring an unrestricted freedom of choice on the contracting authority. They shall ensure the possibility of effective competition and shall be accompanied by specifications that allow the information provided by the tenderers to be effectively verified in order to assess how well the tenders meet the award criteria. In case of doubt, contracting authorities shall verify effectively the accuracy of the information and proof provided by the tenderers. 5. The contracting authority shall specify, in the procurement documents, the relative weighting which it gives to each of the criteria chosen to determine the most economically advantageous tender, except where this is identified on the basis of price alone. Those weightings may be expressed by providing for a range with an appropriate maximum spread. Where weighting is not possible for objective reasons, the contracting authority shall indicate the criteria in decreasing order of importance. Literature: Arrowsmith, The Law of Public and Utilities Procurement, 2014, p. 735; Bordalo Faustino, ‘Award criteria in the new EU Directive on public procurement’, PPLR 2014, p. 124-133; Poulsen, Jakobsen and Kalsmose-Hjelmborg, EU Public Procurement Law, 2012, chap. 8. 67.1. Award criteria and national provisions concerning price . . . . . . . . . . . . . . . . . . 67.2. The most economically advantageous tender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.2.1. Cost-effectiveness approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.2.2. Economic criteria related to the subject-matter of the public contract. . . 67.2.1.1. Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.2.1.2. Trading conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.2.1.3. Organisation, qualification and experience. . . . . . . . . . . . . . . . . . . . . . . . . 67.2.2. Fixed prices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.2.3. Member States’ options for restricting the use of price or cost only as the sole criterion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.2.4. Award criteria and general principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.2.4.1. The principle of equal treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.2.4.2. Transparency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.3. Linked to the subject-matter of the contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.4. Unrestricted freedom and effective competition etc.. . . . . . . . . . . . . . . . . . . . . . .

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TITLE II RULES ON PUBLIC CONTRACTS 67.4.1. Unrestricted freedom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.4.2. The possibility of effective competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.4.3. Effectively verified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.5. Publication and weighting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.5.1. Weighting or prioritising of the criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.5.1.1. Point models. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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According to Recital 2 in the Public Sector Directive, public procurement plays a key role in the Europe 2020 strategy, set out in the Commission Communication of 3 March 2010 entitled ‘Europe 2020, a strategy for smart, sustainable and inclusive growth’. 1 Public procurement may function as one of the market-based instruments to be applied to achieve smart, sustainable and inclusive growth while ensuring the most efficient expenditure of public funds. Contracting authorities should therefore be able to use the Public Procurement Directives in their purchasing strategies to pursue the objectives of the Europe 2020 Strategy. The European Commission’s comprehensive aim with the new Procurement Directives is two-fold. Firstly, the aim of the new directive is to make sure that public funds are used efficiently to ensure the best possible procurement outcomes in terms of value for money. This aim is achieved by simplifying the rules governing public procurement and by making the rules more flexible. A streamlined, more efficient procedure is also said to benefit all economic operators and facilitate the participation of small and medium sized enterprises (SME) and cross-border bidders. The second aim is to ensure contracting authorities better opportunities to use public procurement as a tool to achieve other common societal goals, such as protection of the environment, higher resource and energy efficiency, to combat climate change, promote innovation, employment and social inclusion and ensure the best possible conditions for the provision of high-quality social services.2 The objective of ensuring contracting authorities better opportunities to use procurement as a tool to achieve common societal goals is realised, inter alia, through the consideration of the environment in the awarding of public contracts. The most obvious example of this is found in the option of contracting to use life-cycle costs (LCC) as award criterion. For this reason, the new directive implies that the link between the award criteria and the subject matter of the contract has been relaxed.3 The new Public Sector Directive also allows contracting authorities to require that the requested works, supplies or services, under certain circumstances, have a specific label as a means of proof that the works, services or supplies correspond to the required characteristics. This could be done either in the technical specifications, the award criteria or the contract performance conditions, which follow from Article 43. Other types of documentation or certificates should be accepted by contracting authorities as a means for economic operators to prove that their works, supplies or services meet equivalent label requirements (see Article 43 above). Even if Article 67 is broadly similar to Directive 2004/18/EC in its criteria for the award of contracts, Article 67 contains several changes compared to the old regime. Some of the changes are merely of a formal nature and relate to wording, but other

1 Communication from the Commission, Europe – A strategy for smart, sustainable and inclusive growth (COM(2010) 2020). 2 Proposal for a directive of the European Parliament and of the Council on public procurement (COM/ 2011/0896 final). 3 P. Bordalo Faustino, ‘Award criteria in the new EU Directive on public procurement’, PPLR 2014, p. 124.

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changes are substantial and constitute important modifications to the rules governing the award criteria contracting authorities may apply. The greatest change to the award criteria compared with the previous regulations, at least in terms of their wording, consists of the fact that contracts now need to be awarded to the economic operator who submits the most economically advantageous tender – the lowest price as a means of awarding public contracts has (at least in respect of terminology) in part been removed from the new directive (see Article 67(1)). However, there is nothing in the new directive that precludes contracting authorities to award contracts on the basis of price alone, if this is acceptable according to the national legislation in question. 5 According to Article 67(2) the most economically advantageous tender: “shall be identified on the basis of the price or cost, using a cost-effectiveness approach, such as lifecycle costing in accordance with Article 68, and may include the best price-quality ratio”.

The most economically advantageous tender may therefore be the tender with the lowest price, the lowest cost for the contracting authority or the tender that best represents the relationship between price and quality, all based on the preferences the contracting authority has indicated in its procurement documents. According to the new directive, the most economically advantageous tender is the comprehensive criterion which, in each procurement, all contracting authorities should apply when awarding contracts. 6 With the new Public Sector Directive the best cost-effectiveness approach is closely related to what used to be defined as “the most economically advantageous tender”, not least due to the fact that contracting authorities according to the new Public Sector Directive always have to state the criteria they will apply in defining the best tender, even in cases where they intend to award the contract solely based on the price of the tenders (in such cases, the price will function as the only sub criterion). Criteria that may be applied to the contract include: – – – – –

quality, including technical merit aesthetic and functional characteristics accessibility design for all users social, environmental and innovative characteristics

In the Commission’s proposal for a new Public Sector Directive, it was specified that contracts should be awarded either on the basis of the criterion of the most economically advantageous tender or on the basis of the criterion of the lowest cost. The Parliament, however, considered it more appropriate to award public contracts according to the criterion of “the most economically advantageous tender”, and not the criterion of “lowest cost or price”. Even though the final text has been worded according to the Parliament’s proposal, this does, as a general rule, not exclude the possibility for contracting authorities to award contracts to the economic operator who submits the tender with the lowest price, just as was the case with the previous directive. For that reason, the chosen wording can be seen as a distinct compromise between the different views of the European Commission and the European Parliament. 8 According to Recital 89 of the preamble to the Public Sector Directive, the changes to the award criteria regulations are motivated by the fact that it is important that the provisions governing award criteria are presented in as simple and streamlined a way as possible. This may be achieved by using the term “most economically advantageous tender” as the overriding concept, since all winning tenders should finally be chosen on the 7

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basis of what the particular contracting authority considers to be the economically best solution among those offered. In order to avoid confusion with the currently known award criterion of “the most economically advantageous tender” contained in Directives 2004/17/EC and 2004/18/EC, a different term is used in the new Directive to cover this concept, namely “the best price-quality ratio”. Consequently, this should be interpreted in accordance with the case law relating to the former directives, except where the new directive contains a materially different solution. Regardless of the wording in the final Public Sector Directive, public authorities may 9 choose to award a contract solely on the basis of price or on the basis of a combination of price and quality, just as before, as well as it is possible to base the award of a contract on a cost-effectiveness analysis. It has been argued that by setting the criterion of “the most economically advantageous tender” as a priority, the European legislator is encouraging contracting authorities to procure in a more quality-oriented way.4 Although it is hard to find any other reason for the change of wording concerning 10 award criteria in the new directive, the new wording sends a strong signal to contracting authorities not just to focus on price, but to take other considerations, such as quality, accessibility and environmental characteristics, into account when awarding public contracts. The new directive includes another important change to the rules governing award criteria, namely a rule stating that member states may dictate that contracting authorities may not use price only or cost only as the sole award criterion or that member states may restrict their use to certain categories of contracting authorities or certain types of contract (see Article 67 (2)).

67.1. Award criteria and national provisions concerning price Article 67 (1) states that contracting authorities must base the award of public con- 11 tracts on the most economically advantageous tender, without prejudice to national laws, regulations or administrative provisions concerning the price of certain supplies or the remuneration of certain services. The initial subsection of Article 67 (1) refers to national laws, regulations and admin- 12 istrative provisions, in which the price of certain supplies or the remuneration of certain services are determined. The effect of national provisions in which the price of certain supplies or the remuneration of certain services is established is that the price cannot function as a competitive parameter in public procurements of such supplies or services.5 In such cases, the award of a public contract may instead be based on other criteria, for instance quality or environmental impact of the supplies or services. There is nothing contained in the regulations that prevents contracting authorities from using the overriding award criterion of “most economically advantageous tender” in situations where the price has already been established by public regulations. This is a consequence of the fact that the most economically advantageous tender will be a balance of different economic aspects. Even if the price has already been fixed, the tenders can be compared to each other on the basis of other economic aspects. In a situation where the price is fixed, a contracting authority cannot use the price as a sole award criterion.

4 See Bordalo Faustino, ‘Award criteria in the new EU Directive on public procurement’, PPLR 2014, p. 125. 5 See S. Arrowsmith, The Law of Public and Utilities Procurement, p. 500.

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Recital 93 in the preamble clarifies that even where national provisions determine the remuneration of certain services or set out fixed prices for certain supplies, it remains possible to assess value for money on the basis of other factors than solely the price or remuneration. Such factors may, for instance, include conditions of delivery and payment, aspects of after-sale service or environmental or social aspects. As examples of environmental and social factors that form a part of an evaluation, the recital mentions books printed on recycled paper or paper from sustainable timber, environmental costs or whether the social integration of disadvantaged persons or members of vulnerable groups amongst the persons assigned to performing the contract has been promoted.

67.2. The most economically advantageous tender 13

According to Article 67(2), the contracting authority must select the most economically advantageous tender, from the point of view of the contracting authority. Contracts must be awarded on the basis of objective criteria that ensure compliance with the principles of transparency, non-discrimination and equality. This is to ensure an objective comparison of the relative value of the tenders in order to determine, in a competitive environment, which tender is the most economically advantageous tender. 67.2.1. Cost-effectiveness approach

The most economically advantageous tender must be identified on the basis of the price or cost, using a cost-effectiveness approach, such as life-cycle costing. In that respect, the analyses may include the best price-quality ratio, which must be assessed on the basis of criteria, including qualitative, environmental and/or social aspects, which should all have a bearing on the subject-matter of the public contract in question. Regardless of the wording of the provision, namely that the most economically advantageous tender must be identified on the basis of price or cost, using a cost-effectiveness approach, there is, as a general rule, nothing that prohibits a contracting authority from using price as a sole award criterion, for instance in cases where there is little margin for considering other factors apart from price, as is often the case when purchasing products off the shelf. 15 Article 67(2) explicitly states that taking some criteria into consideration is legitimate in the context of determining the most economically advantageous tender. In order for an award criterion to be legitimate, it must be relevant to the subject-matter of the public contract at hand. In Article 67(2) the following criteria are mentioned: 14

(a) quality, including technical merit, aesthetic and functional characteristics, accessibility, design for all users, social, environmental and innovative characteristics and trading and its conditions; (b) organisation, qualification and experience of staff assigned to performing the contract, where the quality of the staff assigned can have a significant impact on the level of performance of the contract; or (c) after-sales service and technical assistance, delivery conditions such as delivery date, delivery process and delivery period or period of completion. It should, however, be noted that the list of criteria in the provision only contains examples of criteria that can be used to determine the most economically advantageous tender. The list is not in any way exhaustive. There is therefore nothing that prevents a contracting authority from making use of other criteria than the ones listed in its award of a 718

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public contract, provided that the chosen criteria have a bearing on the subject-matter of the contract. In accordance with what the ECJ stated in their judgments, criteria used for defining 16 the most economically advantageous tender need not be of a purely economic nature. Therefore a contracting authority may put non-economic considerations, mainly environmental and social, into play when awarding public contracts.6 In contrast to the previous Directive, the new Public Sector Directive, i.e. from Article 67 (2), now explicitly states that social and innovative aspects may be applied as award criteria. An example of a social consideration is given in Recital 99 in the preamble: “Measures aiming at the protection of health of the staff involved in the production process, the favouring of social integration of disadvantaged persons or members of vulnerable groups amongst the persons assigned to performing the contract or training in the skills needed for the contract in question can also be the subject of award criteria or contract performance conditions provided that they relate to the works, supplies or services to be provided under the contract. For instance, such criteria or conditions might refer, amongst other things, to the employment of long-term job-seekers, the implementation of training measures for the unemployed or young persons in the course of the performance of the contract to be awarded. In technical specifications contracting authorities can provide such social requirements which directly characterise the product or service in question, such as accessibility for persons with disabilities or design for all users.”

To what extent social considerations may be applied as an award criterion is thus determined primarily by how it relates to the contract.7 In contrast to the former Public Sector Directive, it explicitly follows from the current 17 Directive that contracting authorities may apply a life cycle-analysis as an award criterion; contracting authorities may consider all aspects of the tenders that relate to the works, supplies or services to be provided under the contract in any respect and at any stage of their life cycle, including factors involved in the specific process of production, provision or trading of those works, supplies or services; or a specific process for another stage of their life cycle, even where such factors do not form part of their material substance. It is impossible to list all legitimate award criteria due to the fact that an award criteri- 18 on that is legitimate as regards one procurement may not necessarily be legitimate in another. The award criteria that can be used depend, among other things, on what the subject-matter of the contract is. Criteria that are appropriate when awarding a contract concerning a complicated information technology system may not necessarily be suitable when a contracting authority procures products off the shelf.8 The fact that a contracting authority must choose the most economically advanta- 19 geous tender implies that the economic aspects of the tenders should be the most important ones. However, in such a context the concept of ‘economic’ must be interpreted in its broadest sense. Accordingly, it is sufficient that the aspects given priority when awarding public contracts are relevant to the contract at hand. Inversely, this also implies that all economic criteria are not necessarily allowed to influence the award of public contracts since these criteria have to be related to the subject-matter of the public contract. In order for a contracting authority to be permitted to apply a certain criterion, the criterion has to contribute to defining the most economically advantageous tender. The

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contracting authority may therefore not take into consideration conditions which have no bearing on the contract. 20 It should also be mentioned that a criterion is only suitable as an instrument for defining the most economically advantageous tender when the criterion relates to the information requested by the contracting authority and must be specified by the tenderers in their tenders. If the tenders, according to the information provided in the procurement documents, do not need to contain information which makes it possible to compare the tenders against certain award criteria, the contracting authority is not allowed to let such criteria affect the assessment of the tenders. In Case C-513/99, Concordia Bus, the ECJ concluded that the criteria used for determining the most economically advantageous tender must:9 – – – –

Be linked to the subject-matter of the contract Not provide the contracting authority with an unrestricted freedom of choice expressly be mentioned in the contract documents or the tender notice comply with all the fundamental principles of EU law, in particular the principle of non-discrimination

However, the ECJ added a criterion to the above criteria in case C-448/01, EVN, namely a requirement that it should be possible effectively to verify the information provided by the tenderers.10 These requirements now follow explicitly from Article 67(3) and 67(4). 67.2.2. Economic criteria related to the subject-matter of the public contract 21

When evaluating the best price-quality ratio, contracting authorities should determine the economic and qualitative criteria linked to the subject-matter of the contract that they will use for that purpose. Those criteria should consequently allow for a comparative evaluation of performance levels presented by each tender in the light of the subject-matter of the contract, as defined in the technical specifications. In terms of what is meant by such economic criteria which may be taken into account when deciding the most economically advantageous tender from the point of view of the contracting authority, the ECJ stated in case C-513/99, Concordia Bus: “Second, Article 36(1)(a) [in Directive 92/50/EEC] cannot be interpreted as meaning that each of the award criteria used by the contracting authority to identify the economically most advantageous tender must necessarily be of a purely economic nature. It cannot be excluded that factors which are not purely economic may influence the value of a tender from the point of view of the contracting authority. That conclusion is also supported by the wording of the provision, which expressly refers to the criterion of the aesthetic characteristics of a tender.”11 (italics added by author)

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The criteria applied to determine the tender that is the most economically advantageous should not only be ‘economic’ in a wide sense, but should also be linked to the subject-matter of the contract. Without regard to how economic a criterion is, in the sense that it can be valued in monetary terms, such a criterion can only be applied as an award criterion if there is a link to the subject-matter of the contract in question. Conditions that are not linked to the contract in question should therefore not be allowed to affect the contracting authority’s choice of a tender as the most economically advantageous from its perspective. Case C-513/99, Concordia Bus [2002] ECR I-7213, para. 64. Case C-448/01, EVN AG and Wienstrom [2003] ECR I-14527, para. 52. 11 Case C-513/99, Concordia Bus [2002] ECR I-7213, para. 55.

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The meaning of the notion “linked to the subject-matter of the contract” is clarified in Article 67(3). For a more comprehensive comment on this, please see below. 67.2.1.1. Price If the price has not already been stated in which cases economic operators are only 23 able to compete for a public contract on other criteria such as quality the price should usually be one of the most important award criteria since all other criteria can be compared on the basis of price in a cost-effectiveness approach.12 In cases where the price is the sole award criterion, as well as in cases where it is complemented by other award criteria, it must be taken into account that price may be determined in different ways. For that reason, contracting authorities must, where necessary, state how the price should be calculated in the procurement documents. In case T-4/01 Renco, the General Court had to decide whether the contracting au- 24 thority's correction of stated prices in one of the tenders complied with public procurement regulations. The task to be provided under the contract was divided into three categories: A, B, and C. Although the contract period was five years, one of the suppliers had in its tender only stated contract values for a year regarding categories A and B. In order to determine the total price, the contracting authority thus had to perform a new calculation of the price using the formula 5A + 5B + C. The applicant argued that the value of the tender was incorrect and that the model as such was unpredictable since the model had not been specified in the procurement documents. The General Court stated: “[…] although the contract documents did not contain the formula in question, the invitation to tender and the contract documents clearly specified that the term of the contract was normally five years […]. In fact, the application of the formula in question permitted an extrapolation, on the basis of the terms of the offers submitted by the three tenderers, of the total cost to the Council of the contract over five years taking into consideration the different characteristics of the jobs in parts A, B and C of the summary. Although the tender price […] per annum submitted by the applicant […] was lower than the annual price of the other two tenders, the extrapolation made by the Council enabled it to compare the overall economic advantages of the three tenders in the light of the five-year term of the contract and the specific characteristics of the jobs specified in parts A, B and C of the summary. That enabled the Council to judge that the applicant's tender was the most expensive in the long term. The Court finds that, although the formula stated in paragraph 85 above was not given in the contract documents, the use of such a formula was nevertheless foreseeable and reasonable, particularly in the light of the duration of the contract in this case.”13

67.2.1.2. Trading conditions Trading and its conditions are listed as possible award criterions, which is claimed to 25 be a direct consequence of the judgement in the case C-368/10 Commission v. Netherlands. In this case, the ECJ ruled on the admissibility of a fair trade factor as an award criterion. In terms of the ability of contracting authorities to take into account social considerations when awarding a contract, the ECJ stated that: “It must therefore be accepted that contracting authorities are also authorised to choose the award criteria based on considerations of a social nature, which may concern the persons using or receiving the works, supplies or services which are the object of the contract, but also other persons.” 14

See recital 92 of the Public Sector Directive. Case T-4/01, Renco SpA [2003] ECR II-171, para. 86. 14 Case C-368/10, Commission v. Netherlands [2012], para. 85.

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The ECJ also specified that a label that provides information on whether the goods to be supplied are traded fairly is a social aspect of a condition relating to the performance of the contract and can therefore be applied as an award criterion. 26 Recital 97 in the preamble also specifies what may constitute criteria relating to trading and its conditions in the context of award criteria: “[…] Criteria and conditions relating to trading and its conditions can for instance refer to the fact that the product concerned is of fair trade origin, including the requirement to pay a minimum price and price premium to producers.”

67.2.1.3. Organisation, qualification and experience 27

Another new element introduced compared to the former Public Sector Directive is that it follows from the new directive that contracting authorities may apply the qualification and experience of staff assigned to performing the contract as award criteria. The introduction of such a provision may be seen as a consequence of a number of judgements from the ECJ, in which the court has ruled that previous experience cannot be applied as an award criterion.15 It has also been said that the explicit possibility of using previous experience is a welcome clarification of the state of the law, not least in the light of the ECJ judgment in the Case C-532/06, Lianakis.16 However, the ECJ have in Case C-601/13, Ambisig also concluded that: “With regard to procurement contracts for the provision of services of an intellectual nature, training and consultancy, Article 53(1)(a) of Directive 2004/18/EC […] does not preclude the contracting authority from using a criterion enabling evaluation of the teams specifically put forward by the tenderers for the performance of the contract and which takes into consideration the composition of the team and the experience and academic and professional background of the team members.” 17

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From Article 67(2)(b), it follows that an economic operator’s previous experience may constitute an award criterion. The provision states that such an award criterion may consist of: “organisation, qualification and experience of staff assigned to performing the contract, where the quality of the staff assigned can have a significant impact on the level of performance of the contract […]”

Applying the previous experience of staff assigned to performing the contract as an award criterion is most relevant in the award of special types of service contracts or contracts related to exceptional types of works. As an example of a contract where it might be relevant to apply such an award criterion Recital 94 mentions contracts for intellectual services, such as consultancy or architectural services. 30 A condition that must be fulfilled in order for a contracting authority to use the quality of the staff employed as an award criterion is that this should be relevant to the level of performance of the contract. The quality and experience of the staff employed can be considered relevant to the contract when this affects the quality of contract performance and, as a result, the economic value of the tender. 31 It should also be noted that the contracting authority must determine what will happen if it becomes necessary for an economic operator to replace staff assigned to per29

15 See ECJ 24.1.2008, Case C-532/06, Lianakis AE [2008] ECR I-251, ECJ 12.11.2009, Case C-199/07, Commission v Greece [2009] ECR I-10669 and EGC 8.12.2011, Case T-39/08, Evropaïki Dynamiki v Commission [2011] ECR II-437. 16 See Bordalo Faustino, ‘Award criteria in the new EU Directive on public procurement’, PPLR 2014, p. 129. 17 Case C-601/13, Ambisig [2015], para. 36.

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forming the contract. The directive does not explain how such a situation should be resolved, but Recital 94 states: “Contracting authorities which make use of this possibility should ensure, by appropriate contractual means, that the staff assigned to contract performance effectively fulfil the specified quality standards and that such staff can only be replaced with the consent of the contracting authority which verifies that the replacement staff affords an equivalent level of quality.”

If the contract does not stipulate what will happen if an economic operator has to replace staff assigned to performing a contract, this could pose a problem since it cannot be ruled out that replacing staff will constitute a material change to the contract at hand. In turn, this could necessitate the contracting authority having to initiate a new procurement procedure. The European Commission has also specified that the possibility of considering pre- 32 vious experience as an award criterion does not change the fact that there is a principal distinction between selection according to Article 58(4) and award criteria and that this distinction should be retained in the Public Sector Directive.18 On the other hand, it has also been stated that this distinction may be very hard to maintain in practice. If a contracting authority decides to use previous experience in the selection phase of the procurement as well as in the award phase, the risk of a ‘double assessment’ is a very real possibility. This can, however, be avoided by assessing quantitative or general aspects of the economic operators’ experience in the selection phase while focusing on qualitative or specific aspects of the experience of the staff assigned to performing the contract in question in the award phase of the procurement procedure. 19 As examples of suitable selection criteria in this context, Bordalo Faustino cites whether the consultancy firm has performed at least a specific number of contracts for similar services. An example of an award criterion in the same case could concentrate around, e.g., how successful the team leader has been in delivering similar projects in the past, for instance in terms of meeting deadlines, supported by evidence such as references.20 67.2.2. Fixed prices Article 67(2) also stipulates that the cost element may take the form of a fixed price or 33 a fixed cost. In such cases, the economic operators will compete on quality criteria alone. Consequently, there is nothing to prevent contracting authorities from determining the remuneration already in the procurement documents. In such situations, the price will be irrelevant as a parameter in the competition. The economic operators would instead have to compete on other aspects of their tenders, but it is up to the contracting authority to determine, and in the procurement documents specify, the criteria, for instance whether the economic operators are to compete on certain environmental aspects of their tenders. In cases where the price or cost is fixed in accordance with legislation or by the contracting authority, the latter must state, not only the award criteria, but also how they will be weighted or, if this is not possible, their order of priority.

18 See Non-paper prepared by the Commission services (DG Internal Market) on Cluster 2 (Strategic use of public procurement) of January 20, 2012 (http://register.consilium.europa.eu/content/out? lang=EN&typ=ENTRY&i=SMPL&DOC_ID=ST%205369%202012%20INIT) p. 3. 19 Bordalo Faustino, ‘Award criteria in the new EU Directive on public procurement’, PPLR 2014, p. 130. 20 Bordalo Faustino, ‘Award criteria in the new EU Directive on public procurement’, PPLR 2014, p. 130.

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67.2.3. Member States’ options for restricting the use of price or cost only as the sole criterion According to the last phrase in Article 67(2), Member States are permitted to prohibit or restrict contracting authorities from using price only or cost only as the sole award criterion in cases where they deem this appropriate. The reason behind this regulation is that this may encourage greater emphasis on quality in public procurement. There is thus nothing to stop Member States from implementing provisions in their legal systems prohibiting contracting authorities from applying price or cost only as an award criteria, in cases where Member States consider this to be appropriate. A Member State may also restrict the use of price or cost only as an award criterion to specific situations. The provision in Article 67(2), which, as stated above, is one of the new elements of the new Directive, gives Member States a wide margin of discretion when it comes to determining when it is appropriate to implement such rules. 35 In the case C-247/02, Sintesi, the ECJ commented on similar circumstances, citing, however, a contrary national provision which stated that contracting authorities were to award public contracts with reference to price as a sole award criterion.21 In this case, the court concluded that Article 30(1) of Directive 93/37/EC concerning the coordination of procedures for the award of public works contracts was to be interpreted as meaning that it precluded national rules which, for the purpose of awarding public works contracts following open or restricted tendering procedures, imposed a general and abstract requirement for the contracting authorities to only use the criterion of the lowest price. According to the court, such rules deprived the contracting authorities of the option of taking into consideration the nature and specific characteristics of the contracts in question by choosing for each of them the criterion most likely to ensure free competition and thus to ensure that the best tender would be accepted. 36 Without regard to the ECJ ruling in Sintesi, it has, to a certain degree, been unclear to what extent Member States were allowed to restrict the use of the lowest price or the most economical advantageous tender as an award criterion,22 but this uncertainty has now been eliminated with the provision contained in Article 67(2). Even if the provision contained in Article 67(2) gives Member States a greater discretion in the sense that clear support currently exists for Member States to impose restrictions on contracting authorities in the sense that they should not be able to use price or cost as the sole award criterion, the provision does not give Member States the ability to restrict the use of the most economically advantageous tender as an award criterion. This position is supported by the fact that the European legislator by means of the new Directive intends to encourage greater focus on quality in public procurement as mentioned above. 34

67.2.4. Award criteria and general principles 37

The award criteria, as well as the contracting authority’s application of them, must comply with the general principles governing all phases of the public procurement procedure, mainly the principles of transparency, equal treatment and non-discrimination.

21 22

126.

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Case C-247/02, Sintesi SpA [2004] ECR I-9215. See Bordalo Faustino, ‘Award criteria in the new EU Directive on public procurement’, PPLR 2014, p.

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67.2.4.1. The principle of equal treatment As is the case in all other phases of a public procurement procedure, contracting au- 38 thorities must take the principle of equal treatment into consideration both when deciding on the award criteria to apply and when applying the criteria in question, i.e. deciding on the most economical advantageous tender from the point of view of the contracting authority.23 On the basis of the principle of equal treatment, a contracting authority may, for ex- 39 ample, chose not to assess the length of the transportation periods when awarding a contract, due to the fact that this would discriminate economic operators from other parts of the Member State as well as those from other Member States. Another example could be that a contracting authority may choose to apply previous experience as an award criterion, in the sense that the economic operator must have supplied the goods or services to others in the past, which may be relevant in order for the contracting authority to establish that the operator has the appropriate logistics solution in place or possesses the technology required in order to be able to fulfil the contract. However, the contracting authority may not apply a former partnership with contracting authorities as an award criterion, since this would contradict one of the fundamental principles contained in the Procurement Directives, i.e. that other economic operators than the ones the contracting authority normally uses should be eligible as a partner in a public contract. At the same time there may be circumstances that affect the value of the tenders and 40 that, without regard to the fact that previous suppliers gain a competitive advantage, may be deemed to constitute acceptable award criteria. In order for the contracting authority to minimise the risk of violating the principle of equal treatment, such circumstances should only be allowed to affect the assessment of the tenders after a thorough analysis by the contracting authority. In case C-513/99, Concordia Bus, the ECJ specified that the principle of equal treatment does not prevent contracting authorities from applying protection of the environment as an award criterion even if this has the effect that an economic operator belonging to the contracting authority is one of a small number of undertakings with the possibility to deliver according to the contract in question: “It must therefore be held that, in such a factual context, the fact that one of the criteria adopted by the contracting entity to identify the economically most advantageous tender could be satisfied only by a small number of undertakings, one of which was an undertaking belonging to the contracting entity, is not in itself such as to constitute a breach of the principle of equal treatment. In those circumstances, the answer to the third question must be that the principle of equal treatment does not preclude the taking into consideration of criteria connected with protection of the environment, such as those at issue in the main proceedings, solely because the contracting entity's own transport undertaking is one of the few undertakings able to offer a bus fleet satisfying those criteria.”24

If the contracting authority, however, defines the supplies or services in a way that in 41 practice has the effect that the previous contract partner is the only economic operator that can be considered as the winner in the new public procurement procedure, the risk is that the contracting authority is acting in breach of the principle of equal treatment.

23 24

See S.T. Poulsen, P.S. Jakobsen and S.E. Kalsmose-Hjelmborg: EU Public Procurement Law, p. 475. Case C-513/99, Concordia Bus [2002] ECR I-7213, para. 85-86.

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67.2.4.2. Transparency 42

The provision in Article 67 does not address the publication of award criteria in any other way than that the contracting authority must specify in the procurement documents the relative weighting given to each of the criteria chosen to determine the most economically advantageous tender. Where weighting is not possible, the contracting authority must indicate the criteria in decreasing order of importance. The principle of transparency, however, comprises a requirement that all economic operators should be given sufficient information regarding the award of the contract to be able to form an idea of the criteria that will be of importance to the contracting authority’s award of the contract.25 The ECJ specified in case C-448/01, EVN the level of information about award criteria required in order to satisfy the prerequisites according the principle in question: “More specifically, this means that the award criteria must be formulated, in the contract documents or the contract notice, in such a way as to allow all reasonably well-informed tenderers of normal diligence to interpret them in the same way (SIAC Construction, paragraph 41). Consequently, in the case at issue in the main proceedings, the fact that in the invitation to tender the contracting authority omitted to determine the period in respect of which tenderers had to state in their tenders the amount of electricity from renewable energy sources which they could supply could be an infringement of the principles of equal treatment and transparency were it to transpire that that omission made it difficult or even impossible for tenderers to know the exact scope of the criterion in question and thus to be able to interpret it in the same way.”26

67.3. Linked to the subject-matter of the contract The criteria used by the contracting authority to determine the most economically advantageous tender must, as stated above, not only be economic in some sense, but it must also be linked to the subject-matter of the contract. How the concept of “linked to the subject-matter of the contract” should be interpreted is defined in Article 67(3). 44 Although a criterion may be economic in the sense that it can be monetised, such a criterion is only allowed to affect the valuation of the tenders if there is a link to the subject-matter of the contract. Conditions which are not related to the contract at hand may therefore not be allowed to influence the determination of the most economically advantageous tender from the point of view of the contracting authority. In case C-448/01, EVN AG, the ECJ ruled on whether a non-economic criteria could be considered to be a legitimate award criterion, namely to what extent production of renewable electricity exceeding the expected annual consumption according the contract in question would constitute an advantage in the procurement procedure. The ECJ stated: 43

“Moreover, the fact that, in accordance with the award criterion applied, it is the amount of electricity in excess of the expected annual consumption as laid down in the invitation to tender which is decisive is liable to confer an advantage on tenderers who, owing to their larger production or supply capacities, are able to supply greater volumes of electricity than other tenderers. That criterion is thus liable to result in unjustified discrimination against tenderers whose tender is fully able to meet the requirements linked to the subject-matter of the contract. Such a limitation on the circle of economic operators in a position to submit a tender would have the effect of thwarting the objective of opening up the market to competition pursued by the directives coordinating procedures for the award of public supply contracts. Finally, even assuming that that criterion was a response to the need to ensure reliability of supplies ─ an assumption which it is for the national court to verify ─ it should be noted that while the relia25 26

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See S.T. Poulsen, P.S. Jakobsen and S.E. Kalsmose-Hjelmborg, EU Public Procurement Law, p. 475. Case C-448/01, EVN AG and Wienstrom [2003] ECR I-14527, para. 57-58.

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bility of supplies can, in principle, number amongst the award criteria used to determine the most economically advantageous tender, the capacity of tenderers to provide the largest amount of electricity possible in excess of the amount laid down in the invitation to tender cannot legitimately be given the status of an award criterion. It follows that in so far as it requires tenderers to state how much electricity they can supply from renewable energy sources to a non-defined group of consumers, and allocates the maximum number of points to whichever tenderer states the highest amount, where the supply volume is taken into account only to the extent that it exceeds the volume of consumption expected in the context of the procurement, the award criterion applied in the case at issue is not compatible with the Community legislation on public procurement.”27

The question of the requirements can be expected to be applied to the link between the award criteria and the contract was also addressed by the ECJ in case C-368/10, Commission v Nederlands. The ECJ concluded that: “[…] there is no requirement that an award criterion relates to an intrinsic characteristic of a product, that is to say something which forms part of the material substance thereof.” 28

Award criteria are considered to be linked to the subject-matter of the contract even if they do not relate to the technical specifications under the prerequisite that they relate to the works, supplies or services covered by the object of the contract in question. In comparison with the previous Public Sector Directive, it is now clearer that con- 45 tracting authorities are able more easily to integrate social and environmental considerations into the procurement procedure, in the sense that contracting authorities are allowed to award criteria or contract performance conditions relating to the works, supplies or services to be provided under the public contract in any respect and at any stage of their life cycles from extraction of raw materials for the product to the disposal of the product. It is therefore possible for a contracting authority to include factors involved in the specific process of production, provision or trading and its conditions of those works, supplies or services or a specific process during a later stage of their life cycle, even where such factors do not form part of their material substance as award criteria. Award criteria referring to such a production or provision process may, for example, stipulate that the manufacturing of the purchased products does not involve toxic chemicals, or that the services are provided using energy-efficient machines. In accordance with the case law of the court, this includes award criteria relating to the supply or utilisation of fair trade products in the performance of the contract. Criteria relating to trading and its conditions may, for instance, refer to the fact that the product is of fair trade origin, including the requirement to pay a minimum price and price premium to producers. An award criterion promoting the production of goods or services by persons with disabilities etc. may also be considered to be linked to the subject-matter of the contract. This broader interpretation of the link to the subject matter of the contract favours the use of social, environmental and innovative considerations as award criteria. It also matches the extensive range of the technical specifications as provided for in Article 42. In the technical specifications, the contracting authority must lay down the characteristics required of the works, services or supplies, but according to the new Directive, they may also in the technical specifications choose to refer to a specific process or method of production or provision for the requested works, supplies or services or to a specific process for another stage of its life cycle even where such factors do not form part of their material substance. A requirement in that context is however that the characteristics are 27 28

Case C-448/01, EVN AG and Wienstrom [2003] ECR I-14527, para. 69-71. Case C-368/10, Commission v Netherlands [2012], para. 91.

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linked to the subject-matter of the contract and that it also is proportionate to its value and its objectives (see Public Sector Directive, Art. 42). 46 Conversely, the requirement of a link with the subject-matter of the contract excludes criteria and conditions relating to general corporate policy, which cannot be considered as a factor characterising the specific process of production or provision of the purchased works, supplies or services. Contracting authorities should therefore not be allowed to require that tenderers have a certain corporate social or environmental responsibility policy in place. Consequently, applying criteria such as gender equality in management or a certain percentage of the employees being disadvantaged persons as an award criterion would not be in compliance with the rules. The same can be said about an award criterion that stipulates that all production at a certain plant should meet certain environmental objectives. The above do, of course, not preclude the possibility of reserving the contract for sheltered workshops etc. in conformity with Article 20. Contracting authorities may not apply conditions or criteria that are only remotely linked to the production process related to the contract in question as award criteria, due to the fact that the link to the subject-matter of the contract in such cases would not be considered to be adequate. An example of such a criterion would be a requirement that a percentage of the price paid for the purchased product must be invested in social projects in the region of production, such as the building of a school for the children of the workers at a coffee plantation. 47 As a result of the new Public Sector Directive, more criteria and conditions than before can be considered to have a link to the subject-matter of the contract. In its explanatory notes, the European Commission declares that the possibility of considering the method of production as an award criterion is one of ”[…] the major innovations of the proposal”.29 If a contracting authority is to consider production methods as an award criterion, it should ensure that it obtains suitable documentation in order to make sure that the economic operator fulfils its obligations. The principle of equal treatment, as well as the principle of transparency, contains a requirement that the contracting authority should be able to check whether the economic operators are able to fulfil their commitments. Recital 98 in the preamblen also states that it is essential that award criteria concerning social aspects of the production process should relate to the works, supplies or services to be provided under the contract and that the criteria be applied in accordance with Directive 96/71/EC. Such criteria should not be chosen or applied in a way that discriminates directly or indirectly against economic operators from other Member States or from third countries party to the GPA or free trade agreements to which the Union is also a party. Thus, requirements concerning the basic working conditions regulated in Directive 96/71/EC, such as minimum rates of pay, should remain at the level set by national legislation or by collective agreements applied in accordance with union law in the context of that directive.30

29 See Non-paper prepared by the Commission services (DG Internal Market) on Cluster 2 (Strategic use of public procurement) of January 20, 2012 (http://register.consilium.europa.eu/content/out?lang=EN &typ=ENTRY&i=SMPL&DOC_ID=ST%205369%202012%20INIT) p. 3. 30 Cf. Case C-549/13, Bundesdruckerei GmbH v Stadt Dortmund [2014], para. 37 and Case C-115/14, RegioPost v Stadt Landau [2015], para. 89.

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67.4. Unrestricted freedom and effective competition etc. Article 67(4) clarifies the requirements that apply to award criteria that contracting 48 authorities choose to apply based on cases from the ECJ among others. 67.4.1. Unrestricted freedom According to Article 67(4), the award criteria must not have the effect of conferring 49 unrestricted freedom of choice on the contracting authority. Even if there is a certain degree of freedom for a contracting authority in its award of a contract, freedom of choice must be applied within the framework of the award criteria, the relative weighting of the criteria or, in cases where this is not possible, the order in which they are prioritised, as well as all other rules and principles governing the award of the contract in question. It should also be noted that a contracting authority may limit its own discretion part- 50 ly by applying many and detailed award criteria and partly by applying a detailed weighting of the chosen criteria. 67.4.2. The possibility of effective competition As stated in Article 67(4), the award criteria must also ensure the possibility of effect- 51 ive competition. This prerequisite means that an application of the award criteria chosen by the contracting authority should result in a ranking of the tenders in a way that makes clear the most economically advantageous tender. Contracting authorities may therefore not apply criteria which do not result in defining the most economically advantageous tender among those submitted. The prerequisite that award criteria should be selected in a way that ensures the possibility of effective competition has previously not been explicitly mentioned in the directives, only in recitals. The fact that this is contained in Article 67(4) of the new Directive has been said to “mirror the inclusion of a prohibition of artificially narrowing competition in the light of the procurement principles under Article 18 of the 2014 Public Procurement Directive.”31 In this context it should also be noted that the ECJ in case 274/83, Commission v. Italy 52 stated that it is not in accordance with the regulation to subject award criteria to special conditions. In its judgement, the ECJ stated that: “The Italian government´s contention that the criterion for the award of the contract to the person who submits the tender which equals the average tender or is the closest to it serves to determine the most economically advantageous tender within the meaning of Article 29 of the directive is incorrect. In order to determine the most economically advantageous tender, the authority making the decision must be able to exercise its discretion in taking a decision on the basis of qualitative and quantitative criteria that vary according to the contract in question and cannot therefore rely solely on the quantitative criterion of the average price.”32

From this judgment, it is possible to draw the conclusion that award criteria should be an expression of commercial considerations. Contracting authorities should therefore not apply award criteria which do not respect the competition that arises between different tenders in a procurement environment. As expressed in Article 67(4), an application of the chosen award criteria should therefore result in the situation where the contracting authority can award the contract to the economic operator who has submitted the

31 32

Bordalo Faustino, ‘Award criteria in the new EU Directive on public procurement’, PPLR 2014, p. 132. Case 274/83, Commission v Italy [1985] ECR 1077, p. 25.

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most economically advantageous tender, in the sense that the contracting authority can obtain the best and cheapest product offered. 53 Accordingly, award criteria should enable competition among the tenders in the sense that economic operators should be able to submit tenders in which the criteria can be fulfilled to different degrees. In cases where such a possibility does not exist, the criteria may not be applied as award criteria. 67.4.3. Effectively verified 54

From Article 67(4) it also follows that the specifications of award criteria should be accompanied by specifications that allow the information provided by the tenderers to be effectively verified in order to assess how well the tenders meet the award criteria. In case of doubt, contracting authorities must verify the accuracy of the information and supporting documentation provided by the tenderers. The requirement that the information provided by the tenderers must be of the type that the contracting authority must be able to verify is, as noted above, a codification of the judgments from the ECJ. In case C-448/01, EVN, the ECJ specified that a contracting authority could not apply an award criterion unless there were conditions linked to the criteria in question that would make it possible for the contracting authority to check that the information provided by the tenderers was correct.33 The prerequisite that a contracting authority should be able to check the provided information is also a natural consequence of the principle of equal treatment (see Article 18).

67.5. Publication and weighting According to Article 67(5), the contracting authority must in the procurement documents specify the relative weighting which it intends to give to each of the criteria chosen to determine the most economically advantageous tender, except where this is identified on the basis of price alone. In cases where it is not possible, for objective reasons, to apply a weighting, the contracting authority must instead, in the procurement documents, indicate the chosen criteria in decreasing order of importance. 56 The fact that the contracting authority should indicate how the chosen award criteria should be weighted or, if that is not possible, how the criteria should be listed in order of priority, means that this should be stated in the contract notice or in other procurement documents the contracting authority chooses to produce. 57 It is not always possible to state the relative weighting of criteria as early as in the contract notice stage. This is liable to be particularly difficult in the case of complex contracts. The provisions therefore provide scope for waiving the aforementioned obligation, but the contracting authority has to ensure that the weighting is known to all tenderers when they draw up their tenders. From the ECJ ruling in case C-87/94, Commission v Belgium (Walloon Buses), the conclusion can be drawn that economic operators must be informed about the award criteria before the prequalification is complete. The Court specified that the publication of the criteria has as its aim to inform potential tenderers about the conditions pertaining to the award of a public contract.34 55

33 34

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Case C-448/01, EVN AG and Wienstrom [2003] ECR I-14527, para. 52. Case C-87/94, Commission v Belgium (Walloon buses) [1996] ECR I-2043.

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In order for the economic operators to form an opinion about whether they are interested in participating in the procurement procedure, it is therefore reasonable to suppose that all potential tenderers must be able to inform themselves about the criteria that will be used to determine the most economically advantageous tender, and how these criteria will be weighted, as early in the procurement process as possible. 67.5.1. Weighting or prioritising of the criteria To ensure compliance with the principle of equal treatment in the award of public 58 contracts, contracting authorities are obliged to create the necessary transparency to enable all tenderers to be reasonably informed of the criteria and arrangements which will be applied in the contract award decision. Contracting authorities are therefore obliged to indicate the contract award criteria and the relative weighting given to each of those criteria. There are big differences between how economic operators choose to design their 59 tenders, and their choices are based on the factors (for example price or quality) that the contracting authorities consider to be important in a specific procurement process. If a contracting authority attaches great importance on price in a procurement, the economic operators will, when designing their tenders, try to focus on price in the sense that they will try to find economical solutions, at the expense of quality. In cases where the contracting authority in the procurement documents specifies that it intends to purchase the best product or the qualitatively best solution, the economic operators will focus on delivering such products or solutions in their tenders at the expense of price. The publication of the criteria which determine these conditions and how they will be applied by the contracting authority in the award phase of the procurement procedure therefore forms an important part of the general attempt to attain transparency, both with the aim of creating competition for public contracts and making it possible to check compliance with procurement legislation.35 Prior to Directive 2004/18/EC coming into force, contracting authorities only had to 60 publish the criteria on which they would base the award and the order in which they would apply them, unless it was impossible to do so. In cases where it was not possible to state the priority in which the criteria were to be applied, contracting authorities in practice had great leeway in applying the award criteria at their own discretion. As this did not satisfy the European legislator, Directive 2004/18/EC was used to adopt a general requirement that the criteria applied in the award process should be weighted and that this weighting should be stated in the procurement documents. This requirement has not been changed in the new directive. According to Article 67(5), the contracting authority must, in the procurement documents, set out not only the applicable criteria, but also how these criteria are to be weighted and in cases where it is not possible to state a weighting, the order in which the criteria are to be prioritised. It is therefore much harder for contracting authorities to apply award criteria at their own discretion compared to the entry into force of Directive 2004/18/EC. With the adoption of Directive 2004/18/EC the European Commission stated in its proposal: “As this provision is far from binding as regards the mention of a descending order of importance, it is necessary to clarify the scope of the obligation which flows from it. 6.2 What is more, the Commission has concluded from its investigations of complaints that, even though the contracting authorities have to establish and set out a descending order of importance 35

See S.T. Poulsen, P.S. Jakobsen and S.E. Kalsmose-Hjelmborg, EU Public Procurement Law, p. 487.

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attached to the award criteria, they still enjoy a considerable margin of discretion when awarding contracts. In merely stating a descending order of importance, the contracting authority retains the option of attaching to the criteria, at the time of evaluation, a specific weighting, and hence a relative value, of which the tenderers are not aware. A possible consequence of this lack of transparency may be that some contracting authorities attach an unexpected or unforeseeable importance to one or more criteria, even after the opening of the tenders, so as to favour one tenderer or another. Thus, if there are two criteria, the order of preference may equally result in 90% or 51% of the relative value being attached to the first criterion. Also, in the absence of a general rule making it compulsory to state the relative weighting of the criteria from the start of the procedure, it is difficult to keep a check on the final choice of the contracting authority. Therefore, it has to be recognised that, at the crucial stage in the award of a contract, such absence renders ineffective the rules governing the preceding stages of the award procedure. All these rules are aimed at the same objective of ensuring that the rights of the tenderers are respected, and in particular that the principles of equality of treatment and transparency are upheld. The Directive must therefore be amended so as to make it compulsory to state the relative weighting of each criterion at the contract notice stage or in the contract documents. This weighting may take different forms (in particular, it may be expressed as a percentage or in terms of relative share compared with another criterion) and to ensure a certain flexibility, may be expressed as a range within which the value attributed to each criterion shall be stated.”36

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The requirement to state the relative weighting of each criterion in the procurement documents is therefore supplemented by the option both to express the weighting by providing for a range with an appropriate maximum spread as well as an option to specify the criteria in a descending order of importance in the documents, in cases where it is impossible to specify the relative weighting of the criteria. As for what is meant by “a range with an appropriate maximum spread”, the Public Sector Directive does not specify how such a framework can be established. For that reason, it is uncertain how this should be interpreted. The option of stating a maximum spread in terms of weighting of the award criteria, however, gives contracting authorities the option in the procurement documents to specify a range within which it will weigh the different award criteria instead of using a fixed weighting. Even though a contracting authority may exercise its option to state the relative weighting as a range with an appropriate maximum spread, the preferred method is to specify the precise weighting where this is possible, as this will increase the transparency in the procurement procedure. If the weighing is specified in a well-defined way, economic operators are able to make more detailed assumptions when it comes to their own products or solutions as a part of the competition. In cases where a contracting authority chooses to exercise its option to state the relative weighting as a range, the size of the range constitutes a balance between very specific and very broad weightings. If the weighting becomes too specific, this could cause the contracting authority problems in that this would limit its options in the award procedure. If the weighting, on the other hand, is too broad, this could pose a problem from the point of view of the economic operators, due to the fact that this would decrease transparency and make it harder for them to know what to focus on when constructing their tenders. As mentioned above, the provision does not state what is meant by the expression “an appropriate maximum spread”, but from the word ‘appropriate’ the conclusion may be drawn that what can be interpreted as an appropriate spread will differ from case to

36 Proposal for a Directive of the European Parliament and of the Council on the coordination of procedures for the award of public supply contracts, public service contracts and public works contracts, COM (2000) 275, para. 6.1-6.2.

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case. A spread that seems appropriate in one public procurement procedure is not necessarily appropriate with regard to another procurement. When determining an appropriate spread, contracting authorities also have to ensure that economic operators have a realistic notion of how the criteria relate to each other. What can be considered to be an appropriate spread ought to be reliant on how many criteria a contracting authority chooses to apply and how these criteria relate to one another. If, for instance, a contracting authority only applies two award criteria and these are weighted at 60 percent and 40 percent respectively, it could be said that a maximum spread of 10 percent might be appropriate. If the contracting authority instead makes the choice to apply 20 different award criteria, it is less likely that such a wide spread could be considered appropriate since the weighting in such a scenario would lack meaning. It should also be mentioned that there is nothing that prevents a contracting authority from specifying the weighting applicable to some the criteria while at the same time specifying that other criteria are to be weighted within a certain range. It can also be assumed that an appropriate maximum spread in the weighting of award criteria can be used as a form of safety valve by the contracting authority in cases where two or more tenders are considered to be equally advantageous. If a contracting authority, for instance, uses some form of points calculation model in the award procedure, there will be a need for a solution to the problem of two tenders scoring the same number of points. An assertion in the procurement document specifying, for example, that price will be given a greater weighting if two tenders score the same number of points must be in accordance with Article 67(5). In order for such a clause to be applicable, the tenders will need to be identical and they must have scored the exact same number of points. For this reason, a model like the one mentioned above cannot be applied if one tender has scored more points than another. In cases where several criteria are weighted in almost the same way and where the interval range within which the criteria are to be weighted has been specified, it may be difficult for an economic operator to determine which criteria are the most important in the procurement in question. In such cases, an alternative could be both to specify the weighting and to specify the criteria in order of priority. Even though it follows from the wording in Article 67(5) that the criteria should be weighted or specified in order of priority, such a solution is most likely in accordance with the Public Sector Directive, since this would increase the transparency and make it easier for the economic operators to foresee how the contracting authority intent to decide who will be awarded the contract. In general, it is for contracting authorities themselves to decide how many criteria they will apply in order to determine the most economically advantageous tender.37 In case C-448/01, EVN AG, the ECJ stated that EU rules on public procurement do not infringe the right of a contracting authority for a contract for the supply of electricity to apply a criterion requiring that the electricity supplied be produced from renewable energy sources and to weight the award criterion in question at 45 percent. According to Article 67(5), contracting authorities are permitted to derogate from the obligation to indicate the weighting of the criteria in cases where the weighting cannot be established in advance, in particular because of the complexity of the contract. In such cases, they must instead indicate the criteria in decreasing order of importance. The fact that the criteria must be stated in order of priority means that the most important criterion should appear first in the procurement documents, followed by the second most important and so forth. 37

Case C-448/01, EVN AG and Wienstrom [2003] ECR I-14527, para. 43.

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With regard to the fact that the possibility of presenting the award criteria in order of priority instead of according to relative weighting and to the fact that the relative weighting may also include an appropriate weighting range, this may only be applied in special cases where it is not possible to present a weighting. Contracting authorities are not under an obligation to publish their reasons for specifying the award criteria in order of priority instead of presenting a weighting in the procurement documents. However, contracting authorities should be able to present a motivated answer to the question of why they have chosen to present the criteria in order of priority if the procurement is submitted for judicial review. If the procurement documents do not state how the award criteria are to be weighted, it can be assumed that the criteria are instead specified in order of priority. 66 In this context, it should also be noted that a contracting authority citing a shortage of time in preparing the procurement is most likely not a legitimate reason for presenting the award criteria in order of priority instead of weighting them. 67 There is nothing to preclude contracting authorities from presenting sub-criteria, which delimit or describe the main criteria. If a contracting authority chooses to apply such a solution, it does not have to present a relative weighting of the sub-criteria. In case C-331/04, ATI EAC, the ECJ concluded: ”[…] that Community law does not preclude a jury from attaching specific weight to the subheadings of an award criterion which are defined in advance, by dividing among those headings the points awarded for that criterion by the contracting authority when the contract documents or the contract notice were prepared, provided that that decision: – does not alter the criteria for the award of the contract set out in the contract documents or the contract notice; – does not contain elements which, if they had been known at the time the tenders were prepared, could have effected that preparation; – was not adopted on the basis of matters likely to give rise to discrimination against one of the tenderers.”38

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Situations may also arise in which it is difficult or even impossible for a contracting authority to present the award criteria in order of priority. In such cases, it may be argued that it is in accordance with the procurement legislation for the contracting authority to present the criteria in groups, in the sense that the most important criteria are presented as a group, the second most important criteria as another group and so forth. 67.5.1.1. Point models

It is not uncommon for contracting authorities to apply different types of model when defining the most economically advantageous tender. These models may include awarding points in certain categories to the different tenders. Even though such models may be constructed in many different ways, they all assess and award points to the tenders according to the fulfilment of each award criterion. In that way, each tender can be awarded a certain number of points or be given a certain value in order for the contracting authority to be able to rank the tenders in relation to each other. 70 The Public Sector Directive does not contain a specific provision governing point models, but such models must be constructed, as well as applied, in accordance with general procurement principles. 69

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Case C-331/04, ATI EAC [2005] ECR I-10109, para. 32.

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It should also be mentioned that a contracting authority that has chosen to apply some sort of point model in order to determine the most economically advantageous tender must apply the model in accordance with the weighting or priority published in the procurement documents. A requirement to describe the point model in detail in the procurement documents does not, however, exist, even if such a description would tend to increase transparency in the procurement. The fact that a contracting authority chooses to apply a point model of some sort 71 does not mean that the award procedure is automatically considered objective and unbiased. The reason is that contracting authorities, regardless of the criteria and the number of criteria they apply, have some discretion when awarding points to each tender. Due to the fact that point models must be subordinate to the requirement that follows 72 from the general principles, the way in which the scale applicable to awarding tenders points is fashioned may be problematic. For example, if a scale is constructed in such a way that the different criteria are given points according to a model where the best tender is given 10 points, the second best three points and the third best two points, it could be argued that the difference between the best and the second best tender is far too big as it is then difficult to consider the nuances in the tenders. Such a model must therefore be assessed on the principle of proportionality.

Article 68 Life-cycle costing 1. Life-cycle costing shall to the extent relevant cover parts or all of the following costs over the life cycle of a product, service or works: (a) costs, borne by the contracting authority or other users, such as: (i) costs relating to acquisition, (ii) costs of use, such as consumption of energy and other resources, (iii) maintenance costs, (iv) end of life costs, such as collection and recycling costs. (b) costs imputed to environmental externalities linked to the product, service or works during its life cycle, provided their monetary value can be determined and verified; such costs may include the cost of emissions of greenhouse gases and of other pollutant emissions and other climate change mitigation costs. 2. Where contracting authorities assess the costs using a life-cycle costing approach, they shall indicate in the procurement documents the data to be provided by the tenderers and the method which the contracting authority will use to determine the life-cycle costs on the basis of those data. The method used for the assessment of costs imputed to environmental externalities shall fulfil all of the following conditions: (a) it is based on objectively verifiable and non-discriminatory criteria. In particular, where it has not been established for repeated or continuous application, it shall not unduly favour or disadvantage certain economic operators; (b) it is accessible to all interested parties; (c) the data required can be provided with reasonable effort by normally diligent economic operators, including economic operators from third countries party to the GPA or other international agreements by which the Union is bound. 3. Whenever a common method for the calculation of life-cycle costs has been made mandatory by a legislative act of the Union, that common method shall be applied for the assessment of life-cycle costs.

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A list of such legislative acts, and where necessary the delegated acts supplementing them, is set out in Annex XIII. The Commission shall be empowered to adopt delegated acts in accordance with Article 87 concerning the update of that list, when an update of the list is necessary due to the adoption of new legislation making a common method mandatory or the repeal or modification of existing legal acts. Literature: Dragos and Neamtu, ‘Sustainable Public Procurement, Life-Cycle Costing in the New EU Directive Proposal’, EPPPL 2013, pp. 19-30; Bordalo Faustino, ‘Award criteria in the new EU Directive on public procurement’, PPLR 2014, pp. 124-133; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2014, pp. 795-799.

When applying a cost-effectiveness approach in order to determine which tender is the most economically advantageous in accordance with Article 67, contracting authorities may take both internal and external costs related to a specific work, supply or service into consideration. In connection with such an analysis, other aspects than those having a direct relationship to the price may, from the point of view of the contracting authority, have an economic impact on the value of said work, product or service. One example of a cost-effectiveness approach can be found in Article 68, to which a reference in Article 67 can also be found. From the provision in Article 68, it follows that life-cycle costs (LCC) can cover part or all of the costs over the life-cycle of a product, service or works such as costs relating to acquisition, use, maintenance and end-of-life costs as well as costs imputed to environmental externalities linked to the product, service or works during its life-cycle. 2 In the EU 2020 strategy set out in the Commission Communication of 3 March 2010 entitled “Europe 2020, a strategy for smart, sustainable and inclusive growth”, public procurement plays an important part in achieving a more resource-efficient, greener and more competitive economy with high employment as well as social and territorial inclusion. With the help of public procurement, contracting authorities should be able to take elements other than reducing its costs into consideration when purchasing supplies, services and works. One way of taking other elements into consideration is to use award criteria to prioritise economic operators who submit tenders in which they present sustainable alternatives while at the same time allowing contracting authorities to take the value-for-money principle into account. One of the most noteworthy items in the new public procurement directive is the fact that contracting authorities now have explicit support from the Directive to apply a lifecycle cost analysis as a part of the process when deciding which tender is the most economically advantageous. However, both the criteria themselves and the chosen life-cycle cost methodology must, in terms of realising other societal goals such as social and environmental objectives, be reconciled with the principles of competition, transparency and equal treatment. 3 The provision in Article 68 was suggested by the European Commission and its aim is to clarify which criteria can be taken into account when operationalising a cost-effectiveness approach and thereby creating legal certainty and incentivising the use of this method. In the new Directive, a life-cycle cost approach therefore forms an important part of the regulation concerning award criteria, and due to the new Directive it is plausible that contracting authorities to a greater extent than before will choose to apply some form of life-cycle cost approach when awarding public contracts. The aim of the new provision is also to encourage contracting authorities to “think outside the (price) box in the context of sustainable public procurement”.1 1

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It should be noted that contracting authorities are not forced to apply any kind of life- 4 cycle cost approach in their award of contracts unless this does not follow from national or EU legislation, which for instance is the case when contracting authorities purchase road transportation vehicles. In such cases, contracting authorities have to act in accordance with the requirements contained in Directive 2009/33/EC (the Clean Vehicles Directive).2

68.1. Relevant costs As mentioned above, LCC is an instrument that is applied in order to determine the 5 cost of an asset throughout its life-cycle. In that context, the assumption is that the purchase price alone does not reflect the real cost, not least in terms of externalities such as the cost of a product, its service impact on the environment or its social effects. In Recital 96 it is stated that: “The notion of life-cycle costing includes all costs over the life cycle of works, supplies or services. This means internal costs, such as research to be carried out, development, production, transport, use, maintenance and end-of-life disposal costs but can also include costs imputed to environmental externalities, such as pollution caused by extraction of the raw materials used in the product or caused by the product itself or its manufacturing, provided they can be monetised and monitored.”

In the context of procuring products and works, the life-cycle covers all stages from 6 the extraction of the raw materials used in the product or produced by the product itself or its manufacturing to the final disposal of the product such as production, transportation, maintenance and recycling. When it comes to services, the life-cycle covers all stages from the planning of the service in question to both the execution of it and the stages following its completion. A life-cycle cost analysis includes all costs from direct economic contributions to external environmental costs. Such externalities may include costs following from the emission of greenhouse gases, pollution caused by the extraction of raw materials used in the product or produced by the product itself or its manufacturing. Article 68(1) includes a list of examples of internal costs borne by the contracting au- 7 thority or other users as well as examples of external costs imputed to environmental externalities produced during the life-cycle of the product, service or works in question. It should be mentioned that this provision does not stipulate that contracting authorities must include all the different costs in their life-cycle cost analyses, and they may generally also decide themselves which types of costs, internal and/or external, they want to include in their analyses. One exemption from this is if the method for the calculation of life-cycle costs has been made mandatory by a legislative act of the Union or where contracting authorities are bound by national regulations to use a certain method when calculating life-cycle costs. 68.1.1. Internal costs A list of examples of internal costs can be found in Article 68(1)(a). The list includes 8 costs relating to acquisition, costs of use such as consumption of energy and other resources, maintenance costs and end of life costs such as collection and recycling costs.

1 D. Dragos and B. Neamtu, ‘Sustainable Public Procurement, Life-Cycle Costing in the New EU Directive Proposal’, EPPPL 2013, p. 19. 2 Directive 2009/33/EC of the European Parliament and the Council of 23 April 2009 on the promotion of clean and energy-efficient road transport vehicles.

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Even though it follows from Article 68(1) that life-cycle costing must, to the extent relevant, cover part or all of the costs listed in the paragraph, contracting authorities may have some freedom in choosing which costs are relevant to them. One cost that probably must be taken into account in every life-cycle cost approach is the cost concerning the acquisition itself, in terms of the price. Since a life-cycle cost methodology is a form of cost-effectiveness approach, the different quality aspects must be measured and compared to the price in each tender. Therefore, the price for products, services or works must most likely be an essential part of all life-cycle cost analyses. Other costs, i.e. costs of use, such as consumption of energy and other resources, maintenance costs and end of life costs such as collection and recycling costs, are most likely costs that contracting authorities m ay choose to incorporate into their life-cycle cost analyses. If there is a common method for the calculation of life-cycle costs and this has been made mandatory by a legislative act of the Union, that method must be applied by contracting authorities and the factors included in the method must be taken into consideration when assessing the life-cycle costs. However, there are also costs that are relatively easy for a contracting authority to foresee that affect the tenders’ economic value in different aspects, and such costs ought to form part of life-cycle cost analyses in order for the contracting authority to be able to compare tenders objectively. An example of such easily predictable costs may be costs relating to the use of energy when purchasing vehicles. Contracting authorities may, according to the formulation in Article 68, also choose to focus on certain parts of the life-cycle. If a contracting authority considers the costs of use to be most important to them, they may decide to only include costs relating to the acquisition itself and the use of the product during its lifespan in their life-cycle cost analyses, excluding other costs such as costs relating to the final disposal of the product. However, if contracting authorities choose to focus on certain parts of the life-cycle, they must act in accordance with the general principles, such as the principle of equal treatment (see Section 18(1)), both in terms of the choice and in terms of application of the criteria’s. Contracting authorities must therefore make sure that a certain focus don´t have the effect that specific undertakings are given unjustified benefits. Due to the fact that it may be difficult to predict many types of both internal and external costs during a product’s life-cycle, it is likely that a life-cycle cost analysis from that perspective will not always be comprehensive, and the provision should not be interpreted in a way that forces contracting authorities to make sure that their life-cycle cost methodologies are complete. This also follows from the provision in Article 68, which states that the life-cycle costing may cover part or all of the costs over the lifecycle of a product, service or works. 68.1.2. Environmental externalities 9

The most common life-cycle cost methodologies used by governments are based on financial considerations that can be divided into four main categories, namely investment, operation, maintenance and end-of-life disposal costs.3 But in order to achieve the goals in the 2020 strategy, other costs, i.e. externalities such as environmental costs, must also be taken into consideration and included in life-cycle cost calculations. In the context of environmental considerations in public procurements, an environmental life-cycle cost approach (ELCC) should not only take financial aspects of the ten-

3 Dragos and Neamtu, ‘Sustainable Public Procurement, Life-Cycle Costing in the New EU Directive Proposal’, EPPPL 2013, p. 20.

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ders into consideration, but also the external impact on the environment, which may be based on a life-cycle assessment in which the environmental impact is analysed. Such an analysis aims to define the impact a product has on the environment throughout its life-cycle. The purpose is to increase efficiency in terms of utilising resources and diminish the impact on the environment. As an example, an analysis may have the objective of determining the cost of global warming due to the manufacture of a certain product. The current ISO standard for performing a life-cycle assessment, laid down in ISO 14040-14044:2006, gives guidance on how to perform an LCC analysis. However, this standard is not intended for contractual or regulatory purposes or registration and certification. The European Commission has also stated that a life-cycle cost calculation according to that standard may contravene the requirements following from the general procurement principles.4 Environmental externalities are not the only types of externalities conceivable. Other 10 types of externalities may be of a social nature. However, it is specified in Recital 96 that: “[…] the feasibility of establishing a common methodology on social life cycle costing should be examined, taking into account existing methodologies such as the Guidelines for Social Life Cycle Assessment of Products adopted within the framework of the United Nations Environment Programme.”

From the statement and the formulation in Article 68, it is thus clear that contracting authorities should only make use of an ELCC calculation in the award phase of a public procurement. However, even if social life-cycle costs are not covered by Article 68, this does not preclude contracting authorities taking social factors into consideration. Such considerations may be taken into account both when deciding which award criteria to use – although they cannot form part of a life-cycle cost analysis – and in the contractual terms as contained in Article 70. In this context, it should be mentioned that only environmental externalities are expressly mentioned in the provision, which could be seen as an indication that other types of externalities, namely social costs, cannot be included in the life-cycle costing analysis.5 The European Commission’s view seems to point in the direction of a restrictive interpretation of the notion of life-cycle costing. According to the European Commission, the requirement for the link between externalities such as social exclusion to the product, service or works excludes conditions or criteria that are only remotely linked to the production process, and as an example a fair trade premium is mentioned by the European Commission.6 A restrictive interpretation of the possibility of taking social aspects into consideration when analysing life-cycle costing is, according to the European Commission, also argued to be a consequence of the fact that social considerations are closely linked to the regulatory environment and that this means that such considerations: “might be considered as a de facto barrier to market access of third country operators, contrary to the GPA. Hence, such considerations may only be taken into account to the extent that they are covered by the relevant exception of the GPA” 4 Dragos and Neamtu, ‘Sustainable Public Procurement, Life-Cycle Costing in the New EU Directive Proposal’, EPPPL 2013, p. 21. 5 P. Bordalo Faustino, ‘Award criteria in the new EU Directive on public procurement’, PPLR 2014, p. 127 f. 6 Non-paper prepared by the Commission services (DG Internal Market) on Cluster 2 (Strategic use of public procurement) of January 20, 2012 (http://register.consilium.europa.eu/content/out? lang=EN&typ=ENTRY&i=SMPL&DOC_ID=ST%205369%202012%20INIT) p. 5.

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In the Final Report on the proposal for a Directive from the European Parliament and Council, the European Parliament explicitly suggested that social externalities should be covered by the life-cycle costing approach, but this has not been included in the final text of the 2014 Public Sector Directive, which further indicates that contracting authorities cannot use costs imputed to social externalities in a life-cycle costing calculation. Nevertheless, there is nothing that impedes contracting authorities that choose to use a cost-efficiency approach from taking social considerations into account as an award criteria insofar as the considerations are directly or indirectly linked to the subject matter of the contract in question. Considerations may also be given a monetary value that can be determined and verified, without applying a life-cycle cost calculation.7 11 An important part of most life-cycle cost calculations is the product, works or service’s impact on the environment, and in the context of such a calculation, the environmental externalities play a key role. The concept of environmental externalities encompasses the environmental impact that is not compensated and that lies outside of market mechanisms. As a result of negative externalities, the private cost of production usually does not cover the social cost, in the sense that society has to carry some of the economic burden of the production, for instance due to climate changes as a result of CO2 emissions. The polluter pays principle can be mentioned as an example of a measure that makes households and undertakings internalise externalities in their budgets. 12 Directive 2009/33/EC (the Clean Vehicles Directive) can be mentioned as an example of an ELCC methodology. According to Recital 23 in the Clean Vehicles Directive, the aim and purpose of the Directive is to define a range for the costs of CO2 and pollutant emissions which, on the one hand, enables flexibility for contracting authorities, contracting entities and operators enabling them to take account of their local situation, and, on the other hand, ensures an appropriate degree of harmonisation. The Directive stipulates that Member States should make sure that contracting authorities and contracting entities as well as certain operators take into account lifetime energy and environmental impacts including energy consumption and emissions of CO2 and of certain pollutants when purchasing road transport vehicles (Article 1). This requirement may be satisfied by either including technical specifications for energy and environmental performance in the road transport vehicle purchase documentation for each of the areas of impact considered as well as any additional environmental impact; or by including energy and environmental impact in the purchasing decision. If the latter solution is chosen, this may be done by either using these impacts as award criteria, or by monetising the impacts in accordance with a methodology set out in the Directive, the life-cycle cost methodology (Article 5). 13 In simple terms, the life-cycle cost methodology in the Directive may be described as a methodology that should be used to determine both internal and external costs relating to energy consumption, CO2 emissions and certain pollutant emissions during the life-cycle of a transportation vehicle. The costs related to energy consumption should be determined by multiplying the fuel consumption per kilometre (based on standardised Community test procedures) by a single monetary value per unit of energy that must be the lower of the cost per unit of energy of petrol or diesel before tax when used as a transport fuel and the operational lifetime mileage, which should be taken from Table 3 of the Annex to the Clean Vehicles Directive (for instance, the operational lifetime mileage for passenger cars is 200,000 km).

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The operational lifetime cost for the CO2 emissions of a vehicle should be calculated by multiplying the lifetime mileage (according to Table 3 of the Annex) by the CO2 emissions in kilograms per kilometre (based on standardised Community test procedures) and by the cost per kilogram taken from the range as set out in Table 2 of the Annex. The operational lifetime costs for certain pollutant emissions of a vehicle should be calculated by adding up the operational lifetime costs for emissions of NOx, NMHC and particulate matter. The operational lifetime costs for each pollutant are calculated by multiplying the lifetime mileage by the emissions in grams per kilometre (based on standardised Community test procedures) and by the respective cost per gram (this cost must be taken from the Community-averaged values set out in Table 2 of the Annex). If you combine the above costs, they represent the total ELCC according to the methodology set out in the Clean Vehicles Directive, and a similar methodology can be applied in order to determine the ELCC in many other types of procurement.8

68.2. Methodology If a contracting authority chooses to apply a life-cycle cost approach in the award of a 14 contract, it will according to Article 68(2) be required to indicate in the procurement documents the data to be provided by the tenderers and the method which the contracting authority will use to determine the life-cycle costs on the basis of this data. The fact that procurement documents need to indicate the data to be provided by the 15 tenderers and the method that the contracting authority will use to determine the lifecycle costs on the basis of this data means that this should follow from the contract notice or any of the other procurement documents that the contracting authority chooses to produce. However, the contracting authority has to ensure that the tenderers know which data to provide and which methodology the contracting authority intends to use when assessing the tenders before the economic operators produce their tenders. Since the use of a life-cycle cost approach is a model for awarding contracts, the requirements for publication ought to be similar to the requirements following from Article 67 (see Article 67 above). As opposed to both the European Commission’s and the European Council’s propos- 16 al, the final Public Sector Directive does not require a life-cycle cost methodology to be developed for repeated or continuous application. A contracting authority may therefore develop its own methods, but such methods must be based on objectively verifiable and non-discriminatory criteria and the authority may not unduly favour or disadvantage certain economic operators. It is also a requirement that the methods used by contracting authorities for assessing costs imputed to environmental externalities are established in advance, as follows from Recital 96. The methods established should also be general in the sense that they should not be set up specifically for a particular public procurement procedure, which is motivated by the argument that this would result in distortions of competition. This approach has, however, been criticised with reference to the fact that the conditions governing other award criteria, i.e. that they should be in accordance with the principles of transparency and equality etc., also apply to life-cycle cost calculations. In the context of a life-cycle cost analysis, the publication of the relevant method, criteria and weighting ought to be enough to minimise the risk of distorting competition.9

8 P. Kunzlik, ‘From suspect practice to market-based instrument: policy alignment and the evolution of EU law’s approach to “green” public procurement’, PPLR 2013 p. 110.

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The fact that contracting authorities are allowed to develop their own methods for calculating life-cycle costs (if these methods satisfy the requirements following from the general principles) does not mean that they have to do so. If there is an established method for calculating life-cycle costs, presumably contracting authorities are not prohibited from modifying such a method in order to adapt it to the procurement at hand. This is, however, not permitted in cases where contracting authorities have to act in accordance with a specific method, for example when they procure vehicles for road transportation (as governed by the Clean Vehicles Act).10 17 Methods for calculating life-cycle costs may be established not only by the contracting authorities themselves, but also by national, regional or local administrative bodies. National legislators may also determine which information should be provided in the context of life-cycle costs. If such demands for information are not considered to be in accordance with the Public Sector Directive, national courts and authorities, and ultimately the ECJ, may be required to determine whether the requirements in question satisfy the conditions following mainly from the principle of proportionality. Furthermore, in cases where national legislative acts do not supplement the Directive with appropriate methods or requirements concerning the types of data contracting authorities can obtain from tenderers, courts and authorities may have to determine whether the request is in accordance with the principle of proportionality. 18 In the proposal amended by the Council, it is specified that data requested for lifecycle cost analyses should “be provided with reasonable effort by normally diligent economic operators”. The yardstick when assessing whether information requested by contracting authorities is in accordance with the procurement regulation could therefore be a diligent economic operator. “Where contracting authorities assess the costs using a life-cycle costing approach, they shall indicate in the procurement documents the data to be provided by the tenderers and the method which the contracting authority will use to determine the life-cycle costs on the basis of these data” 11

According to the principles of equal treatment and non-discrimination, a life-cycle cost calculation must not affect the ability of economic operators from other countries to obtain public contracts or result in non-objective comparison of the tenders in a specific procurement.

68.3. Common methods 19

Even though many contracting authorities already use life-cycle costs as a tool in their decision-making, its use is not systematic and the methodologies are often adapted to the circumstances at hand. It should also be mentioned that it is beyond both the resources and expertise of many contracting authorities to produce their own life-cycle cost methodologies, and for that reason the European Commission expects the European Union to develop common life-cycle cost methodologies for specific sectors. 12 The way in which the life-cycle costs are calculated obviously also differs depending on whether the contract at hand concerns products, services or works. In order to ad9 Dragos and Neamtu, ‘Sustainable Public Procurement, Life-Cycle Costing in the New EU Directive Proposal’, EPPPL 2013, p. 25. 10 Directive 2009/33/EC of the European Parliament and the Council of 23 April 2009 on the promotion of clean and energy-efficient road transport vehicles. 11 European Commission, Proposal for a directive of the European Parliament and the Council on public procurement, 20-12-2011, COM(2011)896 final. 12 P. Kunzlik, ‘From suspect practice to market-based instrument: policy alignment and the evolution of EU law’s approach to “green” public procurement’, PPLR 2013 p. 112.

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dress problems with this, the EU legislator may adopt common methodologies that contracting authorities must apply when assessing life-cycle costs. However, the EU legislator does not consider it appropriate to make common methodologies generally applicable. Instead, according to Recital 91: “[…]leaving it to sector-specific legislation to set mandatory objectives and targets in function of the particular policies and conditions prevailing in the relevant sector and to promote the development and use of European approaches to life-cycle costing as a further underpinning for the use of public procurement in support of sustainable growth.”

In general, it is therefore still optional for contracting authorities to apply a life-cycle cost methodology when awarding contracts. An exception from this general rule is when it is compulsory to take life-cycle costs into account in cases where there is a common EU methodology for the calculation of life-cycle costs, and where this methodology has been made mandatory by a legislative act of the European Union. As mentioned above, this is the case for procurements of road transportation vehicles 20 as well as when central governmental authorities purchase IT equipment.13 According to Regulation 106/2008/EU central governmental authorities are obliged to only purchase IT equipment that meets certain minimum energy-efficiency levels.14 A list of legislative acts, and where necessary the delegated acts supplementing them, which states that it is mandatory to apply a life-cycle cost approach to certain types of public procurement is set out in Annex XIII in the Public Sector Directive. However, to this date the only common methodology listed in the Annex is the Clean Vehicle Directive (2009/33/EC). As mentioned above, the Clean Vehicles Directive stipulates that contracting authorities must take energy consumption and emissions into account when procuring road transportation vehicles. The Directive specifies both energy content in different fuel types and the life-time mileage of different categories of vehicle, which makes it possible to include the pricing of emissions in the assessment of tenders when contracting authorities purchase road transportation vehicles.

Article 69 Abnormally low tenders 1. Contracting authorities shall require economic operators to explain the price or costs proposed in the tender where tenders appear to be abnormally low in relation to the works, supplies or services. 2. The explanations referred to in paragraph 1 may in particular relate to: (a) the economics of the manufacturing process, of the services provided or of the construction method; (b) the technical solutions chosen or any exceptionally favourable conditions available to the tenderer for the supply of the products or services or for the execution of the work; (c) the originality of the work, supplies or services proposed by the tenderer; (d) compliance with obligations referred to in Article 18(2);

13 Directive 2009/33/EC of the European Parliament and the Council of 23 April 2009 on the promotion of clean and energy-efficient road transport vehicles and Regulation 106/2008/EC of the European Parliament and the Council of 15 January 2008 on a Community energy-efficiency labelling programme for office equipment. 14 Regulation 106/2008/EC of the European Parliament and the Council of 15 January 2008 on a Community energy-efficiency labelling programme for office equipment.

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(e) compliance with obligations referred to in Article 71; (f) the possibility of the tenderer obtaining State aid. 3. The contracting authority shall assess the information provided by consulting the tenderer. It may only reject the tender where the evidence supplied does not satisfactorily account for the low level of price or costs proposed, taking into account the elements referred to in paragraph 2. Contracting authorities shall reject the tender, where they have established that the tender is abnormally low because it does not comply with applicable obligations referred to in Article 18(2). 4. Where a contracting authority establishes that a tender is abnormally low because the tenderer has obtained State aid, the tender may be rejected on that ground alone only after consultation with the tenderer where the latter is unable to prove, within a sufficient time limit fixed by the contracting authority, that the aid in question was compatible with the internal market within the meaning of Article 107 TFEU. Where the contracting authority rejects a tender in those circumstances, it shall inform the Commission thereof. 5. Upon request, Member States shall make available to other Member States by means of administrative cooperation any information at its disposal, such as laws, regulations, universally applicable collective agreements or national technical standards, relating to the evidence and documents produced in relation to details listed in paragraph 2. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 802 et seqq.; Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, chap. 8.4. 69.1. 69.2. 69.3. 69.4. 69.5.

Abnormally low tenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Explanations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Abnormally low tenders and State Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Making information available to other Member States. . . . . . . . . . . . . . . . . . . . .

5 11 24 30 35

Article 69, which regulates abnormally low tenders, is to a large extent a reproduction of a similar provision in Directive 2004/18/EC. The most obvious distinction compared to the former Directive consists in the fact that contracting authorities shall reject certain tenders, i.e. in cases where the contracting authority has established that the tender is abnormally low because it does not comply with applicable obligations referred to in Article 18 (2). These obligations constitute obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by certain international provisions, namely provisions listed in Annex X to the directive. 2 According to recital 42 of the Proposal for a new Public Sector Directive, the provision governing abnormally low tenders is motivated by the fact that tenders that appear to be abnormally low in relation to the works, products or services might be based on technically, economically or legally unsound assumptions or practices. In order to prevent possible disadvantages during contract performance, contracting authorities should be obliged to ask for an explanation of the price charged where a tender considerably undercuts the prices demanded by other tenderers. Where the tenderer cannot provide a sufficient explanation, the contracting authority should be entitled to reject the tender. Contracting authorities can therefore reject a tender in which the price is so low that one can presume that it is not composed in a way that makes it possible for the tenderer to fulfil the obligations according to the contract in question without risk of the econo1

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mic operator not living up to the requirements concerning quality etc. stipulated in the contract. The purpose of the provision is therefore primarily to protect contracting authorities,1 but the provision also contains an element of protection for the economic operators in the sense that the contracting authority cannot reject a tender without giving the tenderer a chance to explain why the tender is abnormally low.2 If the contract in question is to be awarded on the basis of price only, it ought to be 3 fairly uncomplicated to compare the different tenders with the aim of investigating whether a tender is abnormally low, since the price is the only criteria to take into consideration in such cases. If a contracting authority instead has chosen to use a cost-effectiveness approach, or the best price-quality ratio, as a basis for the award of a contract, it is far more complicated to decide whether the tender is abnormally low due to the fact that the price in such cases is only one of many criteria to take in consideration – a low price may very well be motivated by the fact that the tenderer offers a low quality-product. In cases such as these, one can expect a greater difference in prices between the tenders and consequently the demands on the assessment if a tender is abnormally low must be higher when the contract is to be awarded to the tenderer who submits the tender with the best price-quality ratio. Even though contracting authorities have the obligation to reject a tender which is 4 abnormally low under certain circumstances (see Article 69(3)), this does not mean that contracting authorities are free to decide by themselves if they are to reject abnormally low tenders in other cases. Application of the principle of equal treatment, however, means that it is a task for contracting authorities to reject tenders that are obviously so low that the requirements in the contract in question cannot be fulfilled on the terms accepted by the tender. If a contracting authority does not reject such a tender, the consequence would be that economic operators who have submitted reasonable tenders would have been unfairly treated in the competition. Consequently, a contracting authority have a duty to reject an abnormally low tenders if the tenderer in question can’t present a reasonable explanation to why the tender is as low as it is.

69.1. Abnormally low tenders Article 69(1) establishes that contracting authorities shall require economic operators 5 to explain the price or costs proposed in the tender in case tenders appear to be abnormally low in relation to the works, supplies or services. Accordingly, the first question occurring is which tenders are to be considered abnormally low. Such assessments can either be based on general conditions, for example the relationship between the price and the costs connected to the fulfilment of the contract, or more specific circumstances, for example the average profit margin in the trade in question. All conditions indicating that a tender is unreasonable can however be taken into account in the assessment to determine if a tender is abnormally low. It is not only when the price in a tender is low in relation to other submitted tenders in the procurement that it can be considered to be abnormally low in connection with the application of Article 69. The same can come into play after a valuation in which the price is compared to the costs that are connected with the fulfilment of the contract. 1

seq.

See S.T. Poulsen, P.S. Jakobsen and S.E. Kalsmose-Hjelmborg, EU Public Procurement Law, p. 506 et

2 See also Case 103/88, Fratelli Costanzo [1989], ECR 1839 para. 20 and Case C-295/89, Donà Alfonso & Figli [1991], ECR I-2967.

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The Directive does not define what constitutes an abnormally low tender, and there are no other rules or regulations outlining a method which can be applied in order to determine if a tender is abnormally low.3 The ECJ has however been forced to form an opinion of the legality of mathematic models or conditions defining whether a tender is abnormally low in relation to the former Public Sector Directive.4 In the joined cases C-285 and 286/99, Impresa Lombardini, the ECJ ruled on a condition stating that a contracting authority should consider a tender abnormally low, and therefore have to investigate it further, when the price offered in a tender differs in a certain way from the average price in the submitted tenders. “By ministerial decrees of 28 April 1997 (GURI No. 105 of 8 May 1997, p. 28) and 18 December 1997 (GURI No. 1 of 2 January 1998, p. 26), both issued under the first subparagraph of Article 21(1 a) of Law No 109/94, as amended, and determining the threshold at which tenders in tender notices were to be regarded as abnormal, the Minister of Public Works, having recognised the impossibility of setting a single threshold for the whole country and in view of the fact that the Osservatorio had not been established, decided that the percentage discount giving rise to the obligation on the contracting authority to undertake an examination of abnormal tenders would be fixed for 1997 and 1998 at a measure equal to the arithmetic mean of the discounts, in percentage terms, in the case of all tenders admitted, increased by the average arithmetic divergence of the discounts, in percentage terms, which exceed the said mean.”5

7

Tenders in which the “discount” was 28.004 per cent or more were considered to be abnormally low. The ECJ stated that the model as such appeared, at first sight, to be objective and non-discriminatory,6 and it also concluded that: “[…] provided all the requirements it imposes are otherwise complied with and the aims pursued by the Directive are not defeated, it does not in principle preclude a Member State's legislation and administrative practice which, in the matter of identifying and examining abnormally low tenders, first, require all tenderers, under threat of exclusion from participation in the contract, to accompany their tender with explanations of the prices proposed, covering at least 75% of the basic value of that contract, and, second, apply a method of calculating the anomaly threshold based on the average of all the tenders received for the tender procedure in question, so that tenderers are not in a position to know that threshold at the time they lodge their file; the result produced by applying that calculation method must, however, be capable of being reconsidered by the contracting authority.”7

8

A tender can only be rejected if it is abnormally low – therefore tenders that are only low cannot be rejected in accordance with the provision in Article 69. In this context a contracting authority can most likely only determine if a tender is abnormally low after a thorough examination. The assessment of whether a tender is abnormally low can be based on two different factors: the price in question in relation to other tenders submitted in the procurement procedure or the relation between the price and the costs associated with fulfilling the contract. It can also be assumed that contracting authorities can use their own control bid as a starting point when assessing whether a tender is abnormally low. In addition, it is uncertain if a contracting authority can consider a large part of the submitted tenders to be abnormally low. If a large part of the submitted tenders, according to the contracting authority, are very low, this indicates that the authority has not performed a correct valuation of the price or costs. See for instance Arrowsmith, The Law of Public and Utilities Procurement, p. 802. See for instance joined cases C-147/06 and C-148/06, SECAP and Santorso v Commune di Torini [2008], ECR I-3565, para. 35. 5 The joined cases C-285 and 286/99, Impresa Lombardini [2001], ECR I-9233, para. 8. 6 The joined cases C-285 and 286/99, Impresa Lombardini [2001], ECR I-9233, para. 69. 7 The joined cases C-285 and 286/99, Impresa Lombardini [2001], ECR I-9233, para. 86. 3

4

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The Directive does not provide contracting authorities with a method to apply when 9 assessing whether tenders are abnormally low, but at the same time, there is nothing to prevent the contracting authorities from applying a specific method when determining if a tender is too low.8 In any case, a tangible evaluation that is well-founded is sufficient in this context. The provision does not explicitly specify if it is only the overall price in a tender that 10 is of relevance when determining whether to reject the tender, or if the same can be the case if the price for a part of a tender is abnormally low. It may be argued that the price for a part of a tender should also lead to a possibility for contracting authorities to initiate an enquiry according to Article 69. This can be motivated by the fact that Article 69 to a large extent aims at protecting contracting authorities.

69.2. Explanations A contracting authority can only reject a tender if it does not receive a reasonable ex- 11 planation as to why a price or cost is set as low as it is. Hence, it follows from the provision in Article 69(1) that contracting authorities shall require economic operators to explain the price or costs proposed in the tender, and therefore a contracting authority can call for an economic operator to submit all types of information concerning the composition of a tender. In order for a contracting authority to be able to use certain information in the context of Article 69, the information must most likely, with reference to the wording of Article 69(1), be collected by the authority in its role as a contracting authority. If an authority obtains information when performing other tasks, for instance as a supervisory body, they can probably not use this information as a basis to reject a tender.9 When contracting authorities intend to collect information from tenderers, they must 12 give these a reasonable time to present the requested information.10 A request for certain information from an economic operator must be in written form, which includes electronic communications (see Article 2(18)). A contracting authority is therefore prevented from rejecting a tender if the economic operator has not followed a request to submit certain information if the request was not in writing. The provision states that contracting authorities can request information relating to 13 the composition of tenders, and this is also crucial when determining which information contracting authorities can call for. There is however information which can affect the evaluation of the tender, but without being directly attributable to the tender as such, for instance information concerning the economic and financial standing of an economic operator. Although contracting authorities already in the qualification phase of a procurement have to decide whether economic operators possess the qualifications necessary in order to perform in accordance with the contract, the question of whether the information obtained in that phase can be used to determine whether a tender shall be rejected according to Article 69 has been raised. The answer is most likely negative, not least since Article 69 explicitly states that the information that contracting authorities may require should relate to the tenders – and not to the economic operators. However, an exception is found in Article 69(4), which specifies that contracting authorities can reject tenders that are abnormally low due to Cf. the joined cases C-285 and 286/99, Impresa Lombardini [2001], ECR I-9233, para. 86. See also Steinicke & Groesmeyer, EU’s Udbudsdirektiver (EU’s Procurement Directives), pp. 1317-1319. 10 See case C-76/81, Transporoute, para. 18. 8

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the fact that the economic operator has received State Aid not compatible with the internal market. 14 Even though it follows from Article 69(4) that the abnormally low tender should be a result of State Aid for the contracting authority to be able to reject the tender, the provision focuses on the economic operator and not on the tender as such. This is obvious not least considering the fact that a contracting authority does not have to be able to demonstrate a connection between the aid in question and the abnormally low tender (see Article 69(4) below). 15 The explanations contracting authorities can, and sometimes must, require from economic operators if they suspect that a tender is abnormally low can, according to Article 69 (3), relate in particular to the: (a) economy of the manufacturing process, of the services provided or of the construction method; (b) technical solutions chosen or any exceptionally favourable conditions available to the tenderer for the supply of the goods or services or for the execution of the work; (c) originality of the work, supplies or services proposed by the tenderer; (d) compliance with obligations referred to in Article 18(2); (e) compliance with obligations referred to in Article 71; (f) possibility of the tenderer obtaining State Aid. In accordance with paragraph (a), contracting authorities can call for an economic operator to provide information regarding the economics of the manufacturing process, of the services provided or of the construction method, since an economic operator may have access to production methods, giving them special benefits in terms of low productions costs. In this context it is not crucial for an economic operator to argue that it has access to manufacturing methods different from other economic operators on the market, instead the focal argument is that it has access to methods of production which reduce its costs and therefore demonstrate that the tender is economically viable. 17 From Article 69(2)(b) follows that a tender can be abnormally low due to the fact that an economic operator has access to technical solutions or exceptionally favourable conditions for the supply of the goods or services, or for the execution of the work. For instance an economic operator may be in possession of technology which results in savings, and these savings may lead to a low price or a low cost in a tender. As an example of favourable conditions one can mention the situation when an offer is low due to the fact that the workforce has accepted conditions more favourable to the employer so that the employer does not have to be able to provide continued employment for them. 18 According to Article 69 (2)(c), explanations can also refer to the originality of the work, supplies or services proposed by the tenderer. Such explanations are a form of extension of the explanations referred to in litra (a) and (b), since they are also aimed at the structure of costs for the economic operator. If an economic operator suggests original ideas, this may have the effect that costs are not as high as they otherwise would have been. 19 The explanations referred to in litra (d) are to some extent new in relation to the former Public Sector Directive. The provision in Article 55 (1)(d) of the former Public Sector Directive only stipulated that a contracting authority could require information concerning compliance with the provisions relating to employment protection and working conditions in force at the place where the work, service or supply were to be performed. 16

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According to the new Public Sector Directive, contracting authorities may require information relating to whether the economic operator complies with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X of the directive (Article 18(2) of the Public Sector Directive). Therefore, it is legitimate to reject an abnormally low tender if the price or costs in the tender are low due to the fact that the economic operator is not complying with mandatory Union law or national law with which it is compatible in the fields of social, labour or environmental law or international labour law provisions. According to litra (e) contracting authorities may also require information from eco- 20 nomic operators relating to compliance with the obligations referred to in Article 71. Such information should usually aim at providing the contracting authority with the information required to ascertain whether the economic operator is fulfilling the obligations provided for in Article 18(2) of the Public Sector Directive. In situations where a contracting authority considers a tender to be abnormally low, it 21 may also request information concerning whether the economic operator has obtained State Aid, Article 69(2)(f). The enumeration of conditions which may be relevant when assessing whether an ab- 22 normally low tender should be rejected is most likely not exhaustive. In the joined Cases C-285 and 286/99, Impresa Lombardini, which concern the equivalent article in Directive 93/37/EEC concerning the coordination of procedures for the award of public works contracts (Article 30), the ECJ articulated that: “It follows that, having regard to both its wording and its purpose, the second subparagraph of Article 30(4) of the Directive does not establish an exhaustive catalogue of explanations that are capable of being submitted, but merely gives examples of explanations which the tenderer may provide in order to demonstrate the genuineness of the various price elements proposed. A fortiori, the provision in question does not authorise the exclusion of certain types of explanation.”11

Even though the list in Article 69(3) is most likely not exhaustive, it includes the (expected) most important conditions for deciding whether to reject an abnormally low tender. In Impresa Lombardini the ECJ also took a stand in connection with the question of 23 whether the provision governing abnormally low tenders affects the possibility for Member States to adopt national regulations or administrative provisions in the area: “It follows that Article 30(4) of the Directive precludes national legislation, such as that applicable in the main proceedings, which, first, requires the contracting authority, for the purposes of verifying abnormally low tenders, to take into account only certain explanations exhaustively listed, that listing omitting moreover explanations relating to the originality of the tenderer's proposed works, even though such explanations are expressly referred to in the second subparagraph of the above provision, and, second, expressly excludes certain types of explanation, such as those relating to any elements for which minimum values are laid down by law, regulation or administrative provision or for which minimum values can be ascertained from official data.”12 (italics added)

However, the Court concluded that: “[…] provided all the requirements it imposes are otherwise complied with and the aims pursued by the Directive are not defeated, it does not in principle preclude a Member State's legislation and administrative practice which, in the matter of identifying and examining abnormally low tenders, first, require all tenderers, under threat of exclusion from participation in the contract, to accompany their tender with explanations of the prices proposed, covering at least 75% of the basic value of that con11 12

The joined cases C-285 and 286/99, Impresa Lombardini [2001], ECR I-9233, p. 83. The joined cases C-285 and 286/99, Impresa Lombardini [2001], ECR I-9233, p. 85.

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tract, and, second, apply a method of calculating the anomaly threshold based on the average of all the tenders received for the tender procedure in question, so that tenderers are not in a position to know that threshold at the time they lodge their file; the result produced by applying that calculation method must, however, be capable of being reconsidered by the contracting authority.”13

It may therefore be supposed that a contracting authority when assessing an abnormally low tender can demand certain types of information which the contracting authority deems necessary to consider when determining whether to reject a tender. However, there is nothing preventing an economic operator from supplementing the required information with other facts that explain why the price or cost in its tender is as low as it is. The basis for this statement is found in the fact that Article 69 not only aims to protect contracting authorities, but also economic operators. A different interpretation would also make it possible for a contracting authority to sort out tenders which they consider to be abnormally low by requesting information which in reality would not explain how the tender was composited.

69.3. The procedure The procedure that contracting authorities have to follow before rejecting abnormally low tenders is found in Article 69(4). The content of the provision is mainly the same as in Article 55 of Directive 2004/18/EC, which in its turn in many ways is a codification of the judgements by the ECJ. The provision states that contracting authorities shall verify the information provided by the economic operator and that it may only reject tenders where the evidence does not justify the low level of price or costs charged, taking into account the elements referred to in paragraph 2. 25 If it is established that the tender is abnormally low because it does not comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X, the contracting authorities have an obligation to reject the tender. 26 Therefore, a contracting authority shall first identify which tender (or tenders), it considers abnormally low. Secondly, the contracting authority shall give the economic operator a chance to verify that the tender is realistically composed. This is done by requiring that the economic operator provide the contracting authority with information relevant to the case at hand. Thirdly, the contracting authority is obliged to evaluate the information provided by the economic operator, and fourthly, the contracting authority shall make a decision on whether to reject the tender or not. The above mentioned requirements are closely related to the contradictory character of the procedure relating to abnormally low tenders. In order for a contracting authority to fulfil the requirements in Article 69 (3) it is obliged to act in accordance with the four steps mentioned above.14 27 The assessment of whether a tender is abnormally low can be carried out before, during and after the tenders have been rated. In connection with electronic auctions, the preferred routine is not to initiate the procedure in accordance with Article 69 too early, even though it can be tempting for a contracting authority to initiate the procedure once it receives the first tenders, not least since the result of participation in the auction may be nothing but the price being reduced even further. But it cannot be ruled out that the tender in question is realistically composed, and if that is the case, the contracting au24

13 14

750

The joined cases C-285 and 286/99, Impresa Lombardini [2001], ECR I-9233, p. 86. The joined cases C-285 and 286/99, Impresa Lombardini [2001], ECR I-9233, para. 55.

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thority is not allowed to reject the tender. If a contracting authority initiates the procedure according to Article 69 in the initial phase of the electronic auction, this will usually result in the tender in question not being part of the following auction – and if the enquiry shows that the tender was realistically composed, a rejection of it would be contravening the principle of equal treatment. Even if a preliminary tender in an electronic auction is suspected to be abnormally 28 low, the right way to approach this is most likely to allow the tender to participate in the further process while at the same time calling for relevant information from the economic operator in question. The contracting authority should only reject the tender when it can determine with certainty that the composition of the tender is not realistic. It should also be mentioned that the burden of proof falls on the contracting authori- 29 ty – it is therefore a task for the contracting authority which claims that a tender is abnormally low to prove this fact. A contracting authority also has a duty to give an economic operator an appropriate deadline for it to collect and deliver the information the contracting authority requests them to provide. In addition to the above mentioned requirements, a contracting authority also has to act in accordance with the general principles – particularly the principle of equal treatment – when applying the provision in Article 69.

69.4. Abnormally low tenders and State Aid Article 69(4) specifies that a tender which is abnormally low because the tenderer has 30 obtained State Aid, may only be rejected for that reason alone if the tenderer is unable to prove that the aid in question was compatible with the internal market. This part of the provision governing abnormally low tenders was included in the regulatory framework with Directive 2004/18/EC and is to some extent a codification of rulings from the ECJ. In case C-94/99, Arge, the ECJ decided whether tenderers who had received State Aid should be allowed to participate in public procurements. The ECJ stated: “While it is not, therefore, contrary in itself to the principle of equal treatment of tenderers for public bodies to take part in a procedure for the award of public procurement contracts, even in circumstances such as those described in the first question, it is not excluded that, in certain specific circumstances, Directive 92/50 requires, or at the very least allows, the contracting authorities to take into account the existence of subsidies, and in particular of aid incompatible with the Treaty, in order, where appropriate, to exclude tenderers in receipt of such aid.”15

Article 69(4) gives contracting authorities the ability to reject abnormally low tenders 31 from economic operators who have received state aid. In contrast to the other grounds for rejecting abnormally low tenders stated in Article 69, a contracting authority does not have to prove that the composition of the abnormally low tender is unrealistic, it is merely enough for the contracting authority to prove that the economic operator has received a state aid, and that the aid is not compatible with the internal market. From the provision it follows, however, that there should be a link between the aid 32 and the abnormally low tender, and that the contracting authority should be able to prove this link. Due to the fact that it is exceptionally hard for a contracting authority to prove precisely how an economic operator made use of state aid, the assumption is that the burden of proof concerning this causation is relatively easy to fulfil. It should be observed that the provision states that a contracting authority can only 33 reject a tender after consulting the tenderer and allowing for a sufficient time limit for 15

Case C-94/99, ARGE Gewässerschutz [2000], ECR I-1037, para. 29.

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the tenderer to be able to prove that the aid in question is compatible with the internal market. If the aid is compatible with the internal market within the meaning of Article 107 TFEU, the contracting authority cannot reject the tender based on Article 69(4). With regard to the wording of the provision and the fact that the possibility of rejecting a tender is motivated by tenderer risking to have to reimburse the aid in question, the tenderer only has to prove that the aid in question is covered by one of the exceptions from the general prohibition in Article 107(1) TFEU such as one or more of the provisions of Commission Regulation (EC) No. 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Article 87 and 88 of the Treaty (General block exemption Regulation). 34 According to the last sentence in Article 69(4), a contracting authority which rejects an abnormally low tender on the grounds of an economic operator having received State aid is under an obligation to inform the Commission of its action.

69.5. Making information available to other Member States 35

An additional novelty in contrast to Directive 2004/18/EC is that the rules governing abnormally low tenders are supplemented by a provision stipulating that Member States, upon request, shall make any information relating to the evidence and documents produced in relation to details listed in Article 69(3) available to other Member States, in accordance with Article 88. This follows from Article 69(5).

Chapter IV Contract performance Article 70 Conditions for performance of contracts Contracting authorities may lay down special conditions relating to the performance of a contract, provided that they are linked to the subject-matter of the contract within the meaning of Article 67(3) and indicated in the call for competition or in the procurement documents. Those conditions may include economic, innovationrelated, environmental, social or employment-related considerations. Literature: Sune Troels Poulsen, Peter Stig Jakobsen and Simon Evers Kalsmose-Hjelmborg, EU Public Procurement Law, p. 278 et seq.

1

Article 70 is an additional provision in the new Public Sector Directive from which it follows that contracting authorities may use public procurement as an instrument to achieve other societal goals. The provision is to a large extent a reproduction of Article 26 in Directive 2004/18/EC. According to Article 70, contracting authorities may lay down special conditions relating to the performance of a contract. Such conditions may include economic, innovation-related, environmental, social or employment-related considerations. Contracting authorities may however only lay down such special conditions if they are linked to the subject-matter of the contract within the meaning of Article 67(3) and indicated in the call for competition or in the procurement documents. Article 70 can therefore be seen as a supplement to Article 42(1), which states that the technical specification shall lay down the characteristics required of works, services or supplies and that those characteristics may also refer to the specific process or method of production or provision of the requested works, supplies or services or to a specific pro752

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cess for another stage of its life cycle even where such factors do not form part of their material substance if they are linked to the subject-matter of the contract and proportionate to its value and objectives. In contrast to award criteria which serve as a basis for a comparison of the different 2 tenders, the conditions for the fulfilment of a contract are fixed objective requirements and they do not affect the evaluation of the tenders in the award phase of a public procurement. It is only tenders which fulfil the conditions in question that may be compared to each other. Special conditions relating to the performance of a contract are most likely in accordance with the provisions of the Public Sector Directive providing they are not directly or indirectly discriminatory towards foreign economic operators and linked to the subject-matter of the contract, which includes all factors directly relating to specific production methods, methods of distribution or the marketing process. As well as supplementing the provision of Article 42(1), Article 70 also supplements 3 Article 67 and the possibility of using environmental, social and other concerns as award criteria. Instead of applying such criteria as a means of determining which tender is the most economically advantageous contracting authorities can choose to make the same concerns mandatory in the sense that the economic operator who will be awarded the contract must fulfil the conditions when performing according to the contract.

70.1. Specific conditions In the procurement documents, the contracting authority can choose not only to de- 4 scribe exactly what kind of supply, service or work the contracting authority wishes to purchase in terms of construction or properties, for instance regarding function, but it can also, according to Article 70, lay down special conditions relating to the performance of a contract. In essence, a contracting authority can lay down the same conditions for the performance of a contract according to Article 70 as they otherwise could have applied as award criteria according to Article 67. Article 70 clarifies that conditions for the performance of a contract may include the requirement of a specific process of production or provision. These conditions may concern social and environmental considerations. Pursuant to Recital 97, conditions referring to a production or provision process may for example be that the manufacturing of the products does not involve toxic chemicals or that services are provided using energyefficient machines. In accordance with the case-law of the ECJ, this also includes contract performance conditions relating to the supply or utilisation of fair trade products in the course of the performance of the contract being awarded.1 Conditions relating to trading and the conditions thereof may for instance be that the product concerned must be of fair trade origin, including the requirement to pay a minimum price and price premium to producers. Contract performance conditions pertaining to environmental considerations might include, for example, the delivery, packaging and disposal of products, and in respect of works and services contracts, waste minimisation or resource efficiency. In Recital 43 of the proposal, it is stated that special conditions may in particular be intended to favour on-site vocational training, the employment of people experiencing particular difficulty in achieving integration, the fight against unemployment or the protection of the environment. They may, for instance, involve the obligation during performance of the contract to recruit long-term jobseekers,2 or to implement training mea1 2

Cf. Case C-368/10, Commission v Netherlands [2012]. Cf. Case 31/87, Beentjes [1988], ECR 4635.

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sures for the unemployed or young persons, to comply with fundamental International Labour Organization (ILO) conventions or to recruit more disadvantaged persons than required under national legislation. 5 In order for a contracting authority to be able to lay down special conditions relating to the performance of a contract, the conditions must be linked to the subject-matter of the contract in the same way as required according to Article 67. This is also the difference between the current provision and the provision in Article 26 in Directive 2004/18/EC. The latter provision didn´t contain a reference to the equivalent provision of Article 67 in order to define the meaning of the subject-matter of the contract. Examples of such conditions may for example include stating that the manufacturing of the purchased products does not involve toxic chemicals or that the services are provided using energy-efficient machines. Criteria relating to trading and the conditions thereof may for instance, as mentioned above, be that the product is of fair trade origin, including the requirement to pay a minimum price and price premium to producers. A condition stating that a supply should be manufactured by persons with disabilities is also a condition which can be considered to be linked to the subject-matter of the contract. However, the requirement that there must be a link between the condition in question and the subject-matter of the contract excludes conditions relating to general corporate policy, which cannot be considered as a factor characterising the specific process of production or provision of the purchased works, supplies or services. Contracting authorities are therefore not allowed to require tenderers to have a certain corporate social or environmental responsibility policy in place. Consequently, it is not in accordance with the regulation for a contracting authority to lay down special conditions such as gender equality in management or that a certain percentage of the general workforce should be disadvantaged persons. 6 It follows from the provision that contracting authorities are only allowed to lay down special conditions if this is indicated in the call for competition or in the procurement documents. This requirement can be seen as a result of the principle of transparency. 3 Tenderers must be given the opportunity to design their tenders with regard to what the contracting authority requests, regardless of whether the request relates to for instance function or whether it concerns other special conditions relating to the performance of the contract. 7 The special conditions laid down by the contracting authority must also be in accordance with the general procurement principles. Special conditions relating to the performance of a contract may therefore not be discriminatory in any sense and they may not benefit certain economic operators. Regardless of whether the intention of a special condition is noble, for instance a reduction of CO2 emissions, a contracting authority may not lay down a special condition stating that supplies cannot be transported more than a certain distance. Such a condition would discriminate against economic operators with their base outside a certain geographical area, not least economic operators from other Member States. In connection with different types of service procurements, contracting authorities sometimes require the economic operator to be located in the geographical area, which can be motivated by the fact that the contracting authority wants the service provider to have a relatively short response time in the event of certain needs such as the need to remedy a malfunction of an IT system. 3

seq.

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See S.T. Poulsen, P.S. Jakobsen and S.E. Kalsmose-Hjelmborg, EU Public Procurement Law, p. 269 et

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However, such a condition is not in accordance with the general procurement principles, since it discriminates against economic operators not yet active on the local market in question. If it is justified, which must be assessed in relation to the principle of proportionality, the contracting authority can instead lay down a condition stating that the maximum response time may not exceed a certain specified time limit. In Recital 98, it is specified that the possibility of laying down special conditions relating to the performance of a contract must also be applied in accordance with the requirements of Directive 96/71/EC as it is interpreted by the ECJ, and special conditions shall not be chosen or applied in a manner that directly or indirectly discriminates against economic operators from other Member States or from third countries parties to the GPA or to Free Trade Agreements to which the Union is party. Thus, requirements concerning the basic working conditions regulated in Directive 96/71/EC, such as minimum rates of pay, should remain at the level set by national legislation or by collective agreements applied in accordance with Union law in the context of that Directive.4 As regards types of evidence contracting authorities can request in order for tenderers 8 to prove that they live up to the special conditions laid down, it should be mentioned that contracting authorities should require information which can be effectively verified in order to assess how well the tenders meet the special conditions required. Regarding which information contracting authorities may require in that respect, see above Article 42(6) and Article 43-44.

Article 71 Subcontracting 1. Observance of the obligations referred to in Article 18(2) by subcontractors is ensured through appropriate action by the competent national authorities acting within the scope of their responsibility and remit. 2. In the procurement documents, the contracting authority may ask or may be required by a Member State to ask the tenderer to indicate in its tender any share of the contract it may intend to subcontract to third parties and any proposed subcontractors. 3. Member States may provide that at the request of the subcontractor and where the nature of the contract so allows, the contracting authority shall transfer due payments directly to the subcontractor for services, supplies or works provided to the economic operator to whom the public contract has been awarded (the main contractor). Such measures may include appropriate mechanisms permitting the main contractor to object to undue payments. The arrangements concerning that mode of payment shall be set out in the procurement documents. 4. Paragraphs 1 to 3 shall be without prejudice to the question of the main contractor’s liability. 5. In the case of works contracts and in respect of services to be provided at a facility under the direct oversight of the contracting authority, after the award of the contract and at the latest when the performance of the contract commences, the contracting authority shall require the main contractor to indicate to the contracting authority the name, contact details and legal representatives of its subcontractors, involved in such works or services, in so far as known at this point in time. The contracting authority shall require the main contractor to notify the contracting 4 Cf. Case C-549/13, Bundesdruckerei v Stadt Dortmund and Case C-115/14, RegioPost GmbH v Stadt Landau.

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authority of any changes to this information during the course of the contract as well as of the required information for any new subcontractors which it subsequently involves in such works or services. Notwithstanding the first subparagraph, Member States may impose the obligation to deliver the required information directly on the main contractor. Where necessary for the purposes of point (b) of paragraph 6 of this Article, the required information shall be accompanied by the subcontractors’ self-declarations as provided for in Article 59. The implementing measures pursuant to paragraph 8 of this Article may provide that subcontractors which are presented after the award of the contract shall provide the certificates and other supporting documents instead of the self-declaration. The first subparagraph shall not apply to suppliers. Contracting authorities may extend or may be required by Member States to extend the obligations provided for in the first subparagraph to for instance: (a) supply contracts, to services contracts other than those concerning services to be provided at the facilities under the direct oversight of the contracting authority or to suppliers involved in works or services contracts; (b) subcontractors of the main contractor’s subcontractors or further down the subcontracting chain. 6. With the aim of avoiding breaches of the obligations referred to in Article 18(2), appropriate measures may be taken, such as: (a) Where the national law of a Member State provides for a mechanism of joint liability between subcontractors and the main contractor, the Member State concerned shall ensure that the relevant rules are applied in compliance with the conditions set out in Article 18(2). (b) Contracting authorities may, in accordance with Articles 59, 60 and 61, verify or may be required by Member States to verify whether there are grounds for exclusion of subcontractors pursuant to Article 57. In such cases, the contracting authority shall require that the economic operator replaces a subcontractor in respect of which the verification has shown that there are compulsory grounds for exclusion. The contracting authority may require or may be required by a Member State to require that the economic operator replaces a subcontractor in respect of which the verification has shown that there are non-compulsory grounds for exclusion. 7. Member States may provide for more stringent liability rules under national law or to go further under national law on direct payments to subcontractors, for instance by providing for direct payments to subcontractors without it being necessary for them to request such direct payment. 8. Member States having chosen to provide for measures pursuant to paragraphs 3, 5 or 6 shall, by law, regulation or administrative provisions and having regard for Union law, specify the implementing conditions for those measures. In so doing, Member States may limit their applicability, for instance in respect of certain types of contracts, certain categories of contacting authorities or economic operators or as of certain amounts. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 1325 et seq.

1

The former public procurement directives have paid little attention to issues linked to subcontracting – which ought to be explained by the fact that the focus for the public procurement regulations has been on market integration. Since subcontracting is in line 756

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with the terms and conditions on the market, such contracts do not, from a public-procurement-law perspective, pose a threat to the realisation of the internal market. However, in cases where horizontal objectives are legitimately sought using public procurement, subcontracting can play a role in realising these goals, which is the case with the 2014 Public Sector Directive. Even though the major part of the provision in Article 71 is new, it also follows from 2 the Article that contracting authorities may ask or may be required by Member States to ask the tenderer to indicate in its tender any share of the contract it may intend to subcontract to third parties and any proposed subcontractors, as was provided by Article 25 in the 2004 Public Sector Directive. The purposes of Article 71 are threefold. First, it aims to create transparency for contracting authorities by giving them the possibility to get information concerning who is present at building sites on which works are being performed for them etc. Second, it gives contracting authorities greater possibility to make sure that a contract will be fulfilled according to the stipulated requirements. Third, the provisions to a certain extent also have the objective to contribute to the realisation of the Europe 2020 strategy, which has the objective to increase the efficiency of public spending, facilitating in particular the participation of small- and medium-sized enterprises (SME) in public procurement. Therefore Article 71 also contain provisions that can be used to protect SME when used as subcontractors. The provisions in Article 71 do not affect which conditions for the performance of a contract a contracting authority can require; this is instead something that is regulated for instance in Articles 70, 72 and Article 73. A condition for the performance of a contract that is not in accordance with the Public Sector Directive when a single contractor performs according to the contract is therefore not accepted when subcontractors perform according to the contract. Economic operators can decide by themselves how to organise their production capa- 3 bilities in connection with tendering for a public contract, for example if they should employ qualified personnel or if they instead should delegate part of the contract to other economic operators, i.e. subcontractors. According to the case law of the ECJ economic operators have a general right to use other undertakings in order to fulfil the requirements of a public contract.1 In Case C-94/12, Swm Costruzioni and Mannocchi Luigion, the court stated that: “[…] Directive 2004/18 permits the combining of the capacities of more than one economic operator for the purpose of satisfying the minimum capacity requirements set by the contracting authority, provided that the candidate or tenderer relying on the capacities of one or more other entities proves to that authority that it will actually have at its disposal the resources of those entities necessary for the execution of the contract. Such an interpretation is consistent with the objective pursued by the directives in this area of attaining the widest possible opening-up of public contracts to competition to the benefit not only of economic operators but also contracting authorities (see, to that effect, Case C-305/08 CoNISMa [2009] ECR I-12129, paragraph 37 and the case-law cited). In addition, as the Advocate General noted at points 33 and 37 of his Opinion, that interpretation also facilitates the involvement of small- and medium-sized undertakings in the contracts procurement market, an aim also pursued by Directive 2004/18, as stated in recital 32 thereof.”2

The provisions regarding subcontracting in Article 71 do not in any way restrict economic operators’ possibilities to use subcontractors when fulfilling requirements according to public contracts. In this sense the provisions in Article 71 do not constitute a change 1 2

See Case C-314/01, Siemens and Arge Telecom [2004], ECR I-2549, p. 42-43. Case C-94/12, Swm Costruzioni and Mannocchi Luigion [2004], ECR I-2549, p. 33-34.

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compared to the regulation under the 2004 Public Sector Directive. Article 71 aims primarily at giving contracting authorities better possibilities to make sure contractors, and subcontractors, act in accordance with the requirements stipulated in the contracts.

71.1. Subcontractors’ obligations 4

From Article 71(1) follows that observance of the obligations referred to in Article 18(2) by subcontractors should be ensured through appropriate action by competent national authorities acting within the scope of their responsibility. The provision indicates the obvious, namely that subcontractors have to act in accordance with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in the Public Sector Directive, provided that such rules, and their application, comply with Union law. In that sense, there should be no difference in applicable obligations in the fields of environmental, social and labour law when engaging a subcontractor compared to if the economic operator chooses not to use subcontractors. This should also be ensured through appropriate actions by the competent national authorities within the scope of their responsibilities, such as labour inspection agencies or environmental protection agencies, as follows from Recital 105 in the Public Sector Directive.

71.2. The share of subcontracting If the supply of goods, provision of services, or executions of works are based on a contract with a single economic operator, it will, as the named party to the contract, be responsible to the contracting authority for the performance of the contract even if parts or all of the contract are carried out by subcontractors. However since for example the quality of a service may be dependent on the undertaking that provides it, a contracting authority can have an interest in evaluating involvement by undertakings other than the party to the public contract. According to the provision in Article 72(2) of the 2014 Public Service Directive, a contracting authority can take the fact that a tenderer intends to use subcontractors, and the extent of this, into consideration in connection with the award of a contract. It follows from the provision that the contracting authority in the procurement documents may ask or may be required by a Member State to ask the tenderer to indicate in its tender any share of the contract it may intend to subcontract to third parties and any proposed subcontractors. The provision in Article 71(2) corresponds to Article 25 in the 2004 Public Sector Directive. 6 According to recital 105 the provision aims at creating some transparency in the subcontracting chain, as it gives contracting authorities information about who is present at building sites on which work is being performed, or on which undertakings are providing services, or at buildings, infrastructures or areas such as town halls, municipal schools, sports facilities, ports or motorways for which the contracting authorities are responsible or over which they have direct oversight. The provision also strengthens the possibility to, prior to the award of a contract, make certain that the party to the contract will use satisfactorily-qualified personnel when fulfilling the contract. 7 One question arising from the wording of the paragraph is how to define what is meant by “subcontractors,” i.e. whether the term also includes sub-subcontractors. Even if the wording of Article 71(2) does not explicitly limit the scope of the provision to sub5

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contractors, and thus also might include the full chain of subcontractors, such an understanding of the provision could be considered unreasonable. One reason for this is found in Article 71(5) which provides that contracting authorities may extend or may be required by Member States to extend the obligations provided for in Article 71(5), concerning certain information the main contractor should give to the contracting authority, to subcontractors of the main contractor's subcontractors or further down the subcontracting chain. The concept of subcontractor in connection with the provision in Article 71(2) therefore must be understood as the main subcontractor and not the entire chain of subcontractors. Regardless if it follows from national regulations or if the contracting authority itself 8 decides to ask for information concerning subcontractors, this should be done in the procurement documents. These include for example the contract notice, the prior information notice where such an information request is used as a means of calling for competition, the technical specifications, or the descriptive document. Concerning procurement documents, see above Section 2(13). A request from a contracting authority according to Article 71(2) must be substantial and the information the contracting authority asks the tenderer to deliver must have a connection to the subject matter of the contract. It should be mentioned that contracting authorities also in this context must act in accordance with certain general principles of law, such as the principle of proportionality. Therefore, for example, a contracting authority should not ask for more information than what is necessary, and it should reject any tenders that do not comply with the requirements stated in the procurement documents. Since the provision states that the contracting authority may ask the tenderer to indi- 9 cate in its tender any share of the contract it may intend to subcontract to third parties and any proposed subcontractors, the provision gives economic operators some flexibility. The provision seems to take aim at how an economic operator plans to fulfil its obligations according to the contract. This is because it follows from the provision that a contracting authority may ask or may be required by a Member State to ask the tenderer to indicate in its tender any share of the contract it may intend to subcontract to third parties and any proposed subcontractors. Therefore, economic operators do not seem to be bound by the information they have submitted, thus they most likely don´t have to use subcontractors to the same extent as indicated in the tender or use the same subcontractors as stated in the tender. It is somewhat unclear if a contracting authority can ask for precise and definite in- 10 formation about which parts of the contract the tenderers intend to subcontract and to which undertakings. In this context is should also be mentioned that the Commission, when working on the 2004 Public Sector Directive, stated that the final wording of Article 25 was intended to give economic operators more flexibility in the sense that one should not be excluded from participating in procurement procedures just because it could not yet precisely define the share of the contract it may subcontract to third parties and the proposed subcontractors.3 On the other hand, if it isn’t possible for a contracting authority to know in advance which subcontractors the economic operator intends to use, it is difficult for the contracting authority to take the use of subcontracting into account when awarding the contract, not least in cases where the quality of subcontractors is used as an award criteria. 3

SEK/2003/0366, section 3.3.1.

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If an economic operator doesn´t have the qualifications necessary according to the requirements laid down in the procurement documents it can rely on the qualifications of its subcontractors. In such cases it must be possible for a contracting authority to get definite information concerning which subcontractors the tenderer intends to use and which qualifications they have. If this information cannot be supplied, it is impossible to verify if the tender meets the requirements specified in the procurement documents. 12 Article 71(2) does not in any way restrict a contracting authority’s possibility to limit the use of subcontractors. As noted above it explicitly follows from the directive that in the case of works contracts, service contracts and siting or installation operations in the context of a supply contract, contracting authorities may require that certain critical tasks be performed directly by the tenderer itself or, where the tender is submitted by a group of economic operators as referred to in Article 19(2), by a participant in that group.4 13 According to Article 71(2) Member States can make it obligatory (instead of optional) for a contracting authority to ask tenderers to indicate in their tenders any share of the contract they intend to subcontract to third parties and any proposed subcontractors. When a Member State exercises this option, it must specify the implementing conditions for the various measures. Member States can also limit the scope of the requirements, for instance by providing that the requirement only applies to certain types of contracts, such as works contracts. 11

71.3. Direct payments One of the main differences between these subcontracting rules and those under the 2004 Public Sector Directive is that Member States, according to Article 71(3), may provide that, at the request of the subcontractor and where the nature of the contract so allows, the contracting authority shall transfer due payments directly to the subcontractor for services, supplies or works provided to the economic operator to whom the public contract has been awarded. The provision in Article 71(3) seems to be motivated by one of the more prominent aims with the 2014 Public Sector Directive, namely the aim to promote SMEs’ participation in public procurement procedures. Not least in connection with different types of construction contracts, there are indications that payments between general contractors and subcontractors in many cases are late or that the subcontractors don’t get paid at all. This can result in a worsening of the financial situations for many subcontractors involved in carrying out construction projects, which in turn can lead to a growing unwillingness to take on such work due to a high risk of loss of financial liquidity. Such a development can in the long run have the effect that small economic operators, which usually are dependent on subcontractors to a larger extent than are big companies, don´t get the possibility to participate in tendering procedures concerning construction contracts due to a lack of willing subcontractors. This, in turn, can have negative effects on competition resulting in disadvantages for public bodies.5 15 Lack of a specific provision for direct payment in a Member State’s regulations does not mean, and has never meant, that a contracting authority in a specific case is or has been hindered from including such a provision. Even prior to the 2014 Public Sector Directive it was possible for contracting authorities to make direct payments to subcon14

4 5

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See Case C-314/01, Siemens and Arge Telecom [2004], ECR I-2549, p. 45-47. See C. Bovis, Research Handbook on Public Procurement Law, p. 291.

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tractors, but only as a part of a special condition for the performance of the contract in question. However, with the 2014 Public Sector Directive there is an explicit provision giving Member States the possibility to implement rules concerning direct payments in their public procurement legislations. In order for a contracting authority to apply direct payments, this possibility must clearly be set out in the procurement documents. It should also be mentioned that Member States according to Article 71(3) may include appropriate mechanisms permitting the main contractor to object to undue payments when introducing such arrangements. Member States may even provide for more stringent liability rules on direct payments, e.g. by making it not necessary for subcontractors to have to request such direct payment. One way for Member States to implement a possibility for direct payments to subcon- 16 tractors is to require the contracting authority to pay the fee to the main contractor only after the main contractor presents proof of payment of the fees due to subcontractors taking part in the performance of the contract in question. Another alternative available to Member States if they intend to implement a possibility for direct payments to subcontractors, specifically one which could be used when the main contractor’s fee is payable in instalments, is to give the contracting authority the possibility to withhold a defined portion of the main contractor’s fee for the final instalment. In such a case, the contracting authority can guarantee that it has resources available to pay subcontractors if the main contractor has not fulfilled its obligations to do so.

71.4. Main contractor's liability Article 71(4) stipulates that paragraphs 1 to 3 shall be without prejudice to the 17 question of the main contractor's liability.

71.5. Information concerning subcontractors In contrast to the provision in Article 71(2) that stipulates that a contracting authori- 18 ty may ask or may be required by a Member State to ask the tenderer to indicate in its tender any share of the contract it may intend to subcontract to third parties and any proposed subcontractors, Article 71(5) imposes an obligation for contracting authorities to require such information from the main contractor after the award of the contract and at the latest when the performance of the contract commences. This information should also be a part of the written report a contracting authority is obliged to complete according to Article 84(1)(d). The obligation imposed on contracting authorities according to Article 71(5) only ap- 19 plies to works contracts and contracts concerning services to be provided at a facility under the direct oversight of the contracting authority. The aim with the provision, according to recital 105, is to make sure contracting authorities are informed about who is present at building sites on which work is being performed for them, or on which undertakings are providing services in or at buildings, infrastructures or areas, such as town halls, municipal schools, sports facilities, ports or motorways, for which the contracting authorities are responsible or over which they have a direct oversight. Subsequently, supply contracts fall outside the scope of the provision. It doesn´t follow explicitly from the provision how one should determine if a subcontractor is a supplier of goods. Since the distinction is of importance it seems rational to apply the definition of supply contracts from Article 2(1)(8) when determining if a subcontractor is a supplier of goods. If the procurement from the subcontractor is characterized as delivery

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20

21

22

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of goods as defined in Article 2(1)(8), the information concerning the subcontractor ought to fall outside the scope of Article 71(5). It follows from recital 105 that the obligation to deliver the required information falls upon the main contractor. Member States can however, place this requirement directly on the main contractor when implementing the directive. As a general rule, Article 71(5) applies only to subcontractors to the main contractor and not to for example sub-subcontractors. It is however optional for Member States or contracting authorities to extend the above-mentioned requirements to subcontractors or further down the contracting chain. Article 71(5) also places an obligation on the main contractor to inform the contracting authority about any changes concerning subcontractors during the course of the contract including by providing information on any new subcontractors that are later involved in the works or services. The provision is limited to specified information about the subcontractors: the contracting authority shall require the main contractor to indicate to the contracting authority the name, contact details and legal representatives of its subcontractors involved in such works or services. The provision also clarifies that, where necessary for the purposes of point (b) of paragraph 6 of this Article, the above-mentioned information shall be accompanied by the subcontractors' self-declarations as provided for in Article 59. These function as preliminary evidence, replacing certificates issued by public authorities or third parties, to confirm that: (1) the relevant economic operator is not in one of the situations referred to in Article 57, in which economic operators shall or may be excluded; (2) it meets the relevant selection criteria that have been set out pursuant to Article 58; and (3) it fulfils the objective rules and criteria that have been set out according to Article 65 in cases where this is relevant. Member States can, however, when taking implementing measures pursuant to Article 71(8), provide that subcontractors that are presented after the award of the contract shall provide the certificates and other supporting documents instead of the self-declaration. It should also be mentioned that contracting authorities may extend or may be required by Member States to extend the obligation to give certain subcontractor information to the contracting authority to additional types of contracts, for example to supply contracts, to services contracts other than those concerning services to be provided at the facilities under the direct oversight of the contracting authority, or to suppliers’s contracts where suppliers are involved in works or services contracts. Such an extension of obligations could also apply to information about subcontractors of the main contractor's subcontractors or further down the subcontracting chain.

71.6. Measures preventing breaches of the obligations referred to in Article 18(2) 24

Article 71(6) provides that appropriate measures may be taken in order to avoid breaches of the obligations referred to in Article 18(2). Such measures, according to the wording of the provision, could include, for instance: (a) Measures ensuring compliance with Article 18(2) in joint-liability situations. Where the national law of a Member State provides for a mechanism of joint liability between subcontractors and the main contractor, the Member State concerned shall ensure that the relevant rules are applied in compliance with the conditions set out in Article 18(2). 762

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(b) Measures regarding exclusion and replacement of subcontractors. Contracting authorities may, in accordance with Articles 59, 60 and 61, verify or be required by Member States to verify whether there are grounds for exclusion of subcontractors pursuant to Article 57. In such cases, the contracting authority shall require that the economic operator replaces a subcontractor with respect to which the verification has shown that there are compulsory grounds for exclusion. The contracting authority may require or may be required by a Member State to require that the economic operator replaces a subcontractor in respect of which the verification has shown that there are non-compulsory grounds for exclusion. Article 71(6)(b) stipulates that the grounds for exclusion in Article 57 can be relevant 25 also in connection with subcontractors in the sense that contracting authorities may verify, or may be required by Member States to verify, whether there are grounds for exclusion, in accordance with Articles 59, 60 and 61. If the grounds for exclusion are applied to subcontractors, whether or not it is due to the Member State requiring it, or it is under the contracting authority’s own discretion, and a subcontractor does not make it through this examination because it falls foul of a compulsory ground for exclusion, the main contractor will be required to replace the subcontractor in question. If the non-compulsory grounds for exclusion apply, the contracting authority as a general rule has some form of discretion over whether or not to replace the subcontractor. However, this rule only applies as long as the Member State has not made the exclusion in these cases mandatory. The grounds for exclusion of subcontractors should be applied in the same manner as they are applied to the main contractor. In this sense the rules also must be applied in accordance with the general public-procurement principles, such as the principle of proportionality, which is why there should be some room for subcontractors “self-cleaning” in accordance with Article 57(6).

71.7. National liability rules Member States may according to Article 71(7) provide for more stringent liability 26 rules under national law. Furthermore, it is possible for Member States to apply more stringent rules regarding direct payments to subcontractors, for instance by providing for direct payments to subcontractors without it being necessary for them to request such direct payments.

71.8. Member States obligations According to Article 71(8), Member States that have chosen to implement measures 27 pursuant to paragraphs 3, 5 or 6 shall, by law, regulation or administrative provisions and having regard for Union law, specify the implementing conditions for those measures. If and when implementing the measures pursuant to paragraphs 3, 5 or 6, Member States may limit their applicability. For instance, if a Member State decides to implement a system with direct payments to subcontractors, they can chose to limit the scope of the regulation to certain types of contracts or to set up some form of limit for the direct payments. In a case where a Member State decides to impose an obligation on main contractors to deliver certain information to the contracting authority pursuant to Article 71(5), they can limit the scope of this obligation, for instance to certain types of contracts, certain categories of contracting authorities or certain categories of economic operators. Tobias Indén

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If a Member State makes it compulsory for contracting authorities, by law, regulation or administrative provisions, to verify whether there are grounds for exclusion of subcontractors, pursuant to Article 71(6), there is nothing hindering the Member State from limiting the applicability of the regulation in question. Such a limitation could take the form of a provision stating that the provision only should be applied in connection with certain types of contracts.

Article 72 Modification of contracts during their term 1. Contracts and framework agreements may be modified without a new procurement procedure in accordance with this Directive in any of the following cases: (a) where the modifications, irrespective of their monetary value, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses, which may include price revision clauses, or options. Such clauses shall state the scope and nature of possible modifications or options as well as the conditions under which they may be used. They shall not provide for modifications or options that would alter the overall nature of the contract or the framework agreement; (b) for additional works, services or supplies by the original contractor that have become necessary and that were not included in the initial procurement where a change of contractor: (i) cannot be made for economic or technical reasons such as requirements of interchangeability or interoperability with existing equipment, services or installations procured under the initial procurement; and (ii) would cause significant inconvenience or substantial duplication of costs for the contracting authority. However, any increase in price shall not exceed 50 % of the value of the original contract. Where several successive modifications are made, that limitation shall apply to the value of each modification. Such consecutive modifications shall not be aimed at circumventing this Directive; (c) where all of the following conditions are fulfilled: (i) the need for modification has been brought about by circumstances which a diligent contracting authority could not foresee; (ii) the modification does not alter the overall nature of the contract; (iii) any increase in price is not higher than 50 % of the value of the original contract or framework agreement. Where several successive modifications are made, that limitation shall apply to the value of each modification. Such consecutive modifications shall not be aimed at circumventing this Directive; (d) where a new contractor replaces the one to which the contracting authority had initially awarded the contract as a consequence of either: (i) an unequivocal review clause or option in conformity with point (a); (ii) universal or partial succession into the position of the initial contractor, following corporate restructuring, including takeover, merger, acquisition or insolvency, of another economic operator that fulfils the criteria for qualitative selection initially established provided that this does not entail other substantial modifications to the contract and is not aimed at circumventing the application of this Directive; or

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2.

3. 4.

5.

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(iii) in the event that the contracting authority itself assumes the main contractor’s obligations towards its subcontractors where this possibility is provided for under national legislation pursuant to Article 71; (e) where the modifications, irrespective of their value, are not substantial within the meaning of paragraph 4. Contracting authorities having modified a contract in the cases set out under points (b) and (c) of this paragraph shall publish a notice to that effect in the Official Journal of the European Union. Such notice shall contain the information set out in Annex V part G and shall be published in accordance with Article 51. Furthermore, and without any need to verify whether the conditions set out under points (a) to (d) of paragraph 4 are met, contracts may equally be modified without a new procurement procedure in accordance with this Directive being necessary where the value of the modification is below both of the following values: (i) the thresholds set out in Article 4; and (ii) 10 % of the initial contract value for service and supply contracts and below 15 % of the initial contract value for works contracts. However, the modification may not alter the overall nature of the contract or framework agreement. Where several successive modifications are made, the value shall be assessed on the basis of the net cumulative value of the successive modifications. For the purpose of the calculation of the price mentioned in paragraph 2 and points (b) and (c) of paragraph 1, the updated price shall be the reference value when the contract includes an indexation clause. A modification of a contract or a framework agreement during its term shall be considered to be substantial within the meaning of point (e) of paragraph 1, where it renders the contract or the framework agreement materially different in character from the one initially concluded. In any event, without prejudice to paragraphs 1 and 2, a modification shall be considered to be substantial where one or more of the following conditions is met: (a) the modification introduces conditions which, had they been part of the initial procurement procedure, would have allowed for the admission of other candidates than those initially selected or for the acceptance of a tender other than that originally accepted or would have attracted additional participants in the procurement procedure; (b) the modification changes the economic balance of the contract or the framework agreement in favour of the contractor in a manner which was not provided for in the initial contract or framework agreement; (c) the modification extends the scope of the contract or framework agreement considerably; (d) where a new contractor replaces the one to which the contracting authority had initially awarded the contract in other cases than those provided for under point (d) of paragraph 1. A new procurement procedure in accordance with this Directive shall be required for other modifications of the provisions of a public contract or a framework agreement during its term than those provided for under paragraphs 1 and 2.

Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, 2014, p. 577; Treumer, ‘Contract changes and the duty to retender under the new EU public procurement Directive’, PPLR 2014; Hartlev and Wahl Liljenbøl, ‘Changes to existing contracts under the EU public procurement rules and the drafting of review clauses to avoid the need for a new tender’, PPLR 2013.

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PART I The Public Sector Directive 2014/24/EU 72.1. (a) Review clauses, additional works and unforeseen circumstances . . . . . . 72.1.1. Review clauses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.1. (b) Additional works, services or supplies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.1. (c) Unforeseen circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.1. (d) Replacement of a contractual partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.2. De minimis modifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.3. Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.4. Substantial changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.4.1. New conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.4.2. Changes in the economic balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.4.3. Extending the scope of the contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.4.4. New contractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.5. Other modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 4 6 10 12 18 20 21 24 26 28 30 31

Prior to the 2004 Public Sector Directive, changes to public contracts, and the extent to which such changes raised the question of whether the contracting authority should initiate a new public procurement, have only to some extent been of interest from an EU law perspective. In recent case law from the ECJ, the court has specified that substantial changes to a contract should not be made without a retender.1 However, in order to reduce legal uncertainty, the EU legislator has incorporated a new provision in the 2014 Public Sector Directive, which regulates which types of changes can be made to a public contract without the need to implement a retender, and this provision is found in Article 72. Article 72 gives contracting authorities a relatively flexible possibility of implementing changes to existing public contracts, and these possibilities are probably more extensive compared to the possibilities given according to the rulings from the ECJ. 2 The final version of Article 72 differs considerably from the draft. Article 72(1) and 72(2) namely include several important exceptions which clarify under which circumstances a contracting authority may make changes to an existing public contract without the need to initiate a new tendering procedure. Article 72(3) contains a provision supporting Article 72(1) and Article 72(2), regulating how the price of a change shall be calculated in certain cases. Article 72(4), on the other hand, determines what is meant by a substantial modification in the context of an application of Article 72. Article 72(5) establishes that a new procurement procedure in accordance with the Directive is required for other modifications to the provisions of a public contract or a framework agreement during its term than those provided for under paragraphs 1 and 2. With regard to the fact that the provision in Article 72 is new, it is hard to draw any certain conclusions about how it will be interpreted and applied. 1

72.1. (a) Review clauses, additional works and unforeseen circumstances 3

As mentioned above, Article 72(1) specifies some of the possibilities for a contracting authority to make changes to an existing public contract or framework agreement without the need to initiate a new public procurement procedure.

1 See in particular Case C-454/06, pressetext [2008], ECR I-4410. The same principles as established in pressetext should also be applied regarding changes to contracts that fall outside the scope of the Directive, but where the contract in question may be of interest to undertakings located in a Member State other than that in which the contract is awarded, see Case C-91/08, Wall AG [2010], ECR I-2815.

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72.1.1. Review clauses It follows from Article 72(1)(a) that it is possible to modify contracts and framework 4 agreements without a retender when the modification in question was provided for in the initial procurement documents in clear, precise and unequivocal review clauses. In the provision it is clarified that such clauses may include price revision clauses or options. According to the provision, such clauses shall state the scope and nature of possible modifications, changes or options as well as the conditions under which they may be used. An example is specified in Recital 111: “review or option clauses may for instance provide for price indexations or ensure that, for example, communications equipment to be delivered over a given period continues to be suitable, also in the case of changing communications protocols or other technological changes. It should also be possible under sufficiently clear clauses to provide for adaptations of the contract which are rendered necessary by technical difficulties which have appeared during operation or maintenance. It should also be recalled that contracts could, for instance, include both ordinary maintenance as well as provide for extraordinary maintenance interventions that might become necessary in order to ensure continuation of a public service.”

For a contracting authority to be able to benefit from the exemption in Article 72(1) 5 (a), the modification of the contract or the framework agreement must not be quantified in the sense that it is possible to state a precise value of a modification in monetary terms. In this respect, Article 72(1)(a) differs from most of the other exemptions in Article 72. The provision is applicable without restrictions concerning the value of changes – there are no thresholds determining that the contracting authority must initiate a retender if the value of the modification exceeds such a threshold. However, a contracting authority cannot benefit from the exemption from a duty to retender if the modification alters the overall nature of the contract or framework agreement.

72.1. (b) Additional works, services or supplies Recital 108 states that contracting authorities are sometimes faced with situations 6 where additional works, supplies or services become necessary, and in such cases a modification of the initial contract without a new procurement procedure may be justified, in particular where the additional deliveries are intended either as partial replacements or as the extension of existing services, supplies or installations where a change of supplier would oblige the contracting authority to acquire material, works or services with different technical characteristics, which would result in incompatibility or disproportionate technical difficulties in operation and maintenance. According to Article 72(1)(b), it is not necessary for a contracting authority to initiate a new public procurement in connection with changes to the original contract if they relate to additional works, services or supplies under certain circumstances. The exemption in Article 72(1)(b) is strongly influenced by, and in its construction 7 similar to, Article 32(3)(b) on additional supplies and Article 32(5) on repetitive works and services, which provides for the use of the negotiated procedure without a contract notice under certain circumstances. According to Article 72(1)(b), it is not necessary to initiate a new procurement proce- 8 dure in connection with modifications to contracts concerning additional works, services or supplies if a change of contractor cannot be made due to economic or technical reasons such as requirements of interchangeability or interoperationability with existing equipment, services or installations procured under the initial procurement. Similarly, a

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modification does not have to be preceded by a new public procurement procedure if a change of contractor would cause significant inconvenience or substantial duplication of costs for the contracting authority. 9 From the provision it follows that the exemption only applies when the increase in price does not exceed 50 per cent in relation to the price in the original contract. In cases where several modifications are made one after the other, the limitation applies to the value of each modification. Whether a modification can be done with reference to the percentage given in the provision should therefore not be assessed in relation to the cumulative value of all the modifications to the contract in question. A requirement in this context is, however, that consecutive modifications are not aimed at circumventing the Directive. An additional requirement on contracting authorities when modifying a contract without a prior procurement procedure with reference to Article 72(2)(b) is that they shall publish a notice to that effect in the Official Journal of the European Union. Such a notice shall contain the information set out in Annex V part G and shall be published in accordance with Article 51.

72.1. (c) Unforeseen circumstances The provision in Article 72(1)(c) is also inspired by the regulation in Article 32(2)(c). In contrast to the regulation in Article 72(1)(b), the provision in paragraph 1 (c) is aimed at all types of modifications of a contract and not just modifications concerning additional works, supplies or services. 11 In order for the exemption in Article 72(1)(c) to apply, the first requirement is that the need for a modification has been brought about by circumstances which a diligent contracting authority could not foresee. Regarding the requirement on contracting authorities in this context, it follows from Recital 109 that: 10

“The notion of unforeseeable circumstances refers to circumstances that could not have been predicted despite reasonably diligent preparation of the initial award by the contracting authority, taking into account its available means, the nature and characteristics of the specific project, good practice in the field in question and the need to ensure an appropriate relationship between the resources spent in preparing the award and its foreseeable value.”

A second requirement for contracting authorities to be able to modify public contracts without first initiating a procurement procedure is that the modification should not lead to an increase in price exceeding 50 per cent in relation to the price in the original contract. In cases where several modifications are made one after the other, the limitation applies to the value of each modification. Just as is the case with the exemption in Article 72(1) (b), consecutive modifications shall not be assessed by their cumulated value. However, such modifications cannot benefit from the exception if they are aimed at circumventing the Directive. A third prerequisite is that the modification, without regard to the fact that the price does not increase by more than 50 per cent, should not alter the overall nature of the contract. An additional requirement is that contracting authorities when modifying a contract without a prior procurement procedure with reference to Article 72(1)(c) should publish a notice to that effect in the Official Journal of the European Union. Such a notice shall contain the information set out in Annex V part G and shall be published in accordance with Article 51.

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72.1. (d) Replacement of a contractual partner Under certain circumstances contracting authorities can also change contractor with- 12 out opening a new procurement procedure, which follows from Article 72(1)(d). The general rule must however be that the replacement of a contractual partner is considered a substantial change to the contract, leading to a duty to initiate a new procurement procedure as established by the ECJ in case C-454/06, pressetext.2 Nevertheless, from the pressetext judgment it also follows that contract clauses can justify an exemption from the duty to initiate a new procurement procedure when replacing a contractor. In paragraph 40 of its ruling the ECJ specifies: “As a rule, the substitution of a new contractual partner instead of the one to which the contracting authority initially awarded the contract must be regarded as constituting a change to one of the essential terms of the public contract in question, unless that substitution was provided for in the terms of the initial contract, such as, by way of example, provision for sub-contracting.”

The EU legislator has chosen to use the opportunity deriving from the judgment to make it possible for contracting authorities to replace contractors without initiating a new procurement procedure. According to Article 72(1)(d)(i), contracting authorities can replace contractors with- 13 out a retender when it follows from an unequivocal review clause or option in conformity with point (a) of the paragraph. The provision in point (a) states as mentioned above that such clauses shall state the scope and nature of possible modifications, changes or options as well as the conditions under which they may be used. Another condition to be met is that the change should not alter the overall nature of the contract. From Article 72(1)(d)(ii) it follows that contracting authorities can also replace con- 14 tractors without initiating a new procurement procedure in cases of universal or partial succession into the position of the initial contractor following corporate restructuring including takeover, merger, acquisition or insolvency of another economic operator that fulfils the criteria for qualitative selection initially established. For such a replacement to fall inside the scope of the provision, it is a requirement that the change in question does not entail other substantial modifications to the contract and that it is not aimed at circumventing the application of the Directive. In point (ii), an important change to the procurement regulation is introduced, in the 15 sense that this provision creates the possibility of contracting authorities replacing a contractor without initiating a retender even in cases of insolvency. However, in the doctrine it has with reference to the judgement in pressetext been stated that such an exemption should be applied with caution, which, as mentioned above, is motivated by what follows from paragraph 40 in the pressetext judgment, namely that the substitution of a new contractual partner instead of the one to which the contracting authority had initially awarded the contract must be regarded as constituting a change to one of the essential terms of the public contract.3 The provision in point (ii) infers that an insolvent estate has the possibility of acquiring the rights and obligations following from the contract in question. The provision also implies that a trustee of an insolvent company can sell contracts that the economic operator won in a public procurement.

2 See also , ‘Contract changes and the duty to retender under the new EU public procurement Directive’, PPLR 2014, p. 152. 3 See Treumer, ‘Contract changes and the duty to retender under the new EU public procurement Directive’, PPLR 2014, p. 153.

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According to Treumer, the question as to in which cases the insolvency makes it acceptable for a contracting authority to change partner without a prior procurement procedure has been the subject of administrative practice at the Commission: “The Commission does not have a settled practice but its civil servants have accepted a sale in several cases where emphasis has been put on the fact that bankruptcy is an extraordinary event that follows from circumstances that can be objectively established and where a change of the contractual partner is natural in the context.”4

The provision in Article 72(1)(d)ii thus appears to be a codification of administrative practice established by the Commission.5 16 With reference to point (ii) it also ought to be possible to replace a contractor as a part of a consortium without initiating a new procurement procedure. In such cases it is most likely possible not only to replace the original contractor with a new economic operator, but also to let the remaining members of the consortium fulfil the requirements of the contract.6 However, it must be observed that the consortium must satisfy the requirements concerning for instance qualifications. If this is not the case the contracting authority should initiate a new procurement procedure. 17 According to Article 72(1)(d)(iii), a contracting authority does not have to initiate a new procurement procedure when the contracting authority assumes the main contractor's obligations towards its subcontractors and where this possibility is provided for under national legislation pursuant to Article 71. The provision, which was not included in the draft, is merely a clarification based on the principle that the EU public procurement regulation does not say that a contract must be tendered out. That is a decision left to each Member State to make. But the regulations of the directive do apply once a contracting authority covered by the rules decides that it will use an external contractor.

72.2. De minimis modifications In Article 72(2), the EU legislator has included a form of de minimis rule which stipulates that contracting authorities can modify contracts without initiating a new procurement procedure if the value of the modification is less than the thresholds set out in Article 4 and the value of the modification is below 10 per cent of the initial contract value for services and supply contracts and below 15 per cent of the initial contract value for works contracts. Where several successive modifications are made, the value shall be assessed on the basis of the net cumulative value of the successive modifications. A contracting authority should therefore not be able to circumvent the Directive by making small but consequent modifications to an original contract. 19 Even if the value of a modification does not exceed the above mentioned thresholds, such a modification must be not be made without a prior procurement procedure if it alters the overall nature of the contract. Thus in the event of a change of a contract which in itself is of no great value, such a change may not be made without a retender if the modification would have had great effect on the potential competition in the first place. If it can be assumed that other economic operators would have submitted tenders if the modification had been a part of 18

4 Treumer, ‘Contract changes and the duty to retender under the new EU public procurement Directive’, PPLR 2014, p. 153. 5 Treumer, ‘Contract changes and the duty to retender under the new EU public procurement Directive’, PPLR 2014, p. 153. 6 See also the Advocate General’s Opinion in Case C-396/14, MT Højgaard and Züblin, pp. 80-82.

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the original contract, it ought to be clear that the change in question is of such an importance that it may not be made without a prior retender. However, it should be observed that a contracting authority may implement changes to a contract, regardless of whether the value of the modification exceeds the stipulated thresholds, if instead the modification is covered by one of the other exemptions from the duty to initiate a new procurement procedure in Article 72 or by some other exemption in the Directive.

72.3. Calculation Paragraph 3 contains a rule stating that for the purpose of the calculation of the price 20 mentioned in paragraph 2 and points (b) and (c) of paragraph 1, the updated price shall be the reference value when the contract includes an indexation clause. The provision minimises the risk of doubt concerning which value should be the reference point when assessing the different values in connection with an application of Article 72(1)(a) and (b) as well as Article 72(2). The reference point should be the value of the contract after the outcome of potential indexation clauses has been taken into account.

72.4. Substantial changes A definition of the notion of substantial modifications can be found in Article 72(4). 21 This definition corresponds very well to how the ECJ have defined the notion in presstext.7 According to Article 72(4), a modification of a contract or a framework agreement during its term shall be considered to be substantial within the meaning of point (e) of paragraph 1, where it renders the contract or the framework agreement materially different in character from the one initially concluded. The notion of “substantial modification” is implicitly explained in Recital 107 as a change: ”[…] in particular to the scope and content of the mutual rights and obligations of the parties, including the distribution of intellectual property rights. Such changes demonstrate the parties' intention to renegotiate essential terms or conditions of that contract. This is the case in particular if the amended conditions would have had an influence on the outcome of the procedure had they been part of the initialprocedure.”

However, it is also specified in the provision that a modification shall be considered 22 to be substantial regardless of paragraphs 1 and 2 if one or more of the following conditions are met: (a) the modification introduces conditions which, had they been part of the initial procurement procedure, would have allowed for the admission of other candidates than those initially selected or for the acceptance of a tender other than that originally accepted or would have attracted additional participants in the procurement procedure; (b) the modification changes the economic balance of the contract or the framework agreement in favour of the contractor in a manner which was not provided for in the initial contract or framework agreement; (c) the modification extends the scope of the contract or framework agreement considerably; 7

See Case C-454/06, pressetext [2008], ECR I-4410, p. 35-37.

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(d) where a new contractor replaces the one to which the contracting authority had initially awarded the contract in other cases than those provided for under point (d) of paragraph 1. 23

It should also be observed that the concept of “substantial modifications” is not the only notion in Article 72 which expresses a situation where an exemption from the duty to retender cannot arise – the notion of “alters the overall nature of the contract” has the same effect. However, it does not follow from the article whether that concept is the same as the notion of “substantial modifications” or whether the interpretation of the concepts differs. It does not follow from the Directive how the notion of “alters the overall nature of the contract” should be interpreted, but the meaning of the similar concept “alters the overall nature of the procurement” is clarified in Recital 109 as: ”[…] a modification [that] results in an alteration of the nature of the overall procurement, for instance by replacing the works, supplies or services to be procured by something different or by fundamentally changing the type of procurement since, in such a situation, a hypothetical influence on the outcome may be assumed.”

72.4.1. New conditions In connection with the first of the above mentioned criteria, it must be evaluated whether the alteration would have had the effect that economic operators which were not capable of or did not participate in the original procurement procedure for other reasons, would have been capable of or able to participate if the modification had been part of the original invitation to tender. As an example of a modification which could have had this effect, Hartlev and Liljenbøl mention a case where it is specified in the tender documents that the supplier must provide a bank guarantee of 100 per cent of the value of the goods. If such a requirement is later reduced to 50 per cent of the value of the goods due to the fact that the chosen contractor is unable to arrange for a higher guarantee, it cannot be ruled out that the number of economic operators that would have submitted a tender would have been different if the new requirement of a bank guarantee had been specified in the original tender documents.8 As another example, Hartlev and Liljenbøl mention a situation where the contracting authority in a restricted procedure in the contract notice provides that members of a consortium are to be jointly liable. If such a requirement is afterwards set aside for the successful consortium, it is likely that an initial prerequisite that members of a consortium should only be accountable for their own part of the deliveries could have allowed for other consortiums to apply for participation in the procurement procedure. 9 25 To determine whether a modification shall be considered substantial, one must also assess whether another economic operator could have been successful in the original procurement procedure if the change had been included in the original procurement documents. In connection with such an assessment, one has to consider whether the change would have had any significant impact on the submitter of the most economically advantageous tender. If this is the case, the modification should be considered substantial. If the change would have had no influence on the selection of the most econom24

8 See Hartlev and Wahl Liljenbøl, ‘Changes to existing contracts under the EU public procurement rules and the drafting of review clauses to avoid the need for a new tender’, PPLR 2013, p. 54. 9 See Hartlev and Wahl Liljenbøl, ‘Changes to existing contracts under the EU public procurement rules and the drafting of review clauses to avoid the need for a new tender’, PPLR 2013, p. 54.

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ically advantageous tender, or would have had the same impact on all economic operators, then the change is most likely not substantial in the context of Article 72. Due to the fact that in practice it is difficult or even in many cases impossible to determine whether a modification would have had an influence on the award of a contract, as the alteration cannot be “tested” on the original tenders, the assessment easily becomes a theoretical experiment. However, in some cases, such as when the winning tender was far better than the other tenders, or if only one tender was submitted, the contracting authority most likely has a good case when claiming that the modification probably would not have resulted in another economic operator being awarded the contract. It might be otherwise if the modification was of such a nature that participation in the tender of economic operators other than those participating in the original tender if the modification had been part of the initial procurement procedure can be considered likely. 72.4.2. Changes in the economic balance If a modification of a contract alters the economic balance in favour of the contractor, 26 the change is considered substantial according to Article 72(4)(b). If a contract is modified in a way that affects the economic balance of the contract in favour of the contracting authority, it is, however, less likely that the change in question shall be considered a substantial modification. However, it has been stated that modifications which alter the economic balance in favour of a contracting authority can also have such consequences that it is likely that the modifications are substantial. An example could be a situation where the economic operator agrees to an adjustment of the price in favour of the contracting authority in an attempt to prevent the contracting authority from terminating the contract in accordance with a provision in the contract. 10 If such a modification of the contract would not have been accepted, the result might have been termination of the contract followed by a new procurement procedure, resulting in even greater savings for the contracting authority. A scenario similar to the above could cause difficulties in connection with the assessment of whether a modification is substantial or not. It is unclear whether all changes to the economic balance in favour of the contractor 27 without regard to the severity of the changes are substantial. From the presstext judgment it follows that: ”[…] the conversion of contract prices into euros during the course of the contract may be accompanied by an adjustment of their intrinsic amount without giving rise to a new award of a contract, provided the adjustment is minimal and objectively justified; this is so where it tends to facilitate the performance of the contract, for example, by simplifying billing procedures.”

With regard to the fact that Article 72(4) states that a modification which alters the economic balance in favour of the contractor is considered to be substantial, is it less likely that one has to show that the modification has a certain effect in order for the change to be substantial in the context of the provision. It should, however, be observed that certain smaller modifications to a contract can fulfil the requirements in Article 72(2), which is why such changes are not necessarily covered by the provision of Article 72(4)(b).

10 See Hartlev and Wahl Liljenbøl, ‘Changes to existing contracts under the EU public procurement rules and the drafting of review clauses to avoid the need for a new tender’, PPLR 2013, p. 56.

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72.4.3. Extending the scope of the contract If the modification extends the scope of the contract or framework agreement considerably, this change is considered substantial according to Article 72(4)(c). This provision has a clear connection to the provision of Article 72(1)(b), but also to the provision of Article 32, and in the pressetext judgement the ECJ also referred to the corresponding regulation in Directive 92/50/EC as grounds for considering the extension of the contract in question a material change.11 Modifications covered by the provision are both modifications relating to the fact that the contracting authority wants to purchase more of the subject-matter of the contract and modifications which stipulate that the contracting authority shall acquire supplies, services or works that are outside of the scope of the original contract. 29 An essential concept in the provision is “considerable”, since it only is considerable modifications that result in a requirement to initiate a new procurement procedure. However, if the value of a modification is very low, such a change to a contract is in most cases hardly a considerable change (cf. Article 72(2) above). It should also be observed that under certain circumstances it is possible to modify a contract without a retender even if the price increases by 50 per cent in relation to the price in the original contract. It is natural to assess which modifications constitute considerable changes with reference to the value of the contract – a small change to a contract worth a lot will most likely not affect other economic operators’ interest in the contract. The same modification to a minor contract may, however, affect other economic operators’ interest in the contract in question to a greater extent. The fact that the value of a modification is essential when assessing whether a change in a contract should result in a retender also follows from the ECJ judgment in Case C-423/07 Commission v. Spain.12 The ECJ had to make a decision on a change to a contract concerning the construction, maintenance and operation of several motorways in Spain for a period between 22 and 37 years. The modification was made through an extension of the contract which included the construction of more lanes and a tunnel, and the price for the additional works was approximately EUR 132 million, compared to the value of the original contract that was approximately EUR 152 million. The ECJ maintained that it was not in accordance with the former Works Directive 93/37/EC to award the supplementary works, which themselves constituted a public works contract, when the value of the additional works exceeded the then existing thresholds, without a new procurement procedure. In case C-160/08 Commission v. Germany, the ECJ concluded that a modification of a contract regarding ambulance transportation services worth approximately EUR 673,000, which also was higher than the threshold values, was not acceptable without a prior new procurement procedure. The value of the original contract was EUR 4.45 million.13 28

72.4.4. New contractor 30

It follows from Article 72(4)(d) that, where a new contractor replaces the one to which the contracting authority had initially awarded the contract in other cases than those provided for under point (d) of paragraph 1, this constitutes a substantial modification to the contract.

Case C-454/06, pressetext [2008], ECR I-4410, p. 36. Case C-423/07, Commission v. Spain [2010], ECR I-3429. 13 Case C-160/08, Commission v. Germany [2010], ECR I-3713.

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This provision is relatively undebatable, and it specifies that a contracting authority cannot change contractor without initiating a new procurement procedure if such a possibility does not follow from an unequivocal review clause or option in conformity with point (a) of Article 72(1). According to the provision of Article 72(1)(a), such clauses shall state the scope and nature of possible modifications, changes or options as well as the conditions under which they may be used (see Article 72(1) above). Article 72(1)(d) also provides for a contracting authority to replace a contractor without initiating a new procurement procedure in case of universal or partial succession into the position of the initial contractor following corporate restructuring, including takeover, merger, acquisition or insolvency of another economic operator that fulfils the criteria for qualitative selection initially established (see Article 72(1)(d)(ii) above). From Article 72(1)(d) it also follows that a contracting authority can replace a contractor in the event that the contracting authority itself assumes the main contractor's obligations towards its subcontractors where this possibility is provided for under national legislation pursuant to Article 71.

72.5. Other modifications According to Article 72(5), all modifications of contracts or framework agreements 31 which are not covered by the exemptions in Article 72(1) or 72(2) must not be made without the contracting authority first executing a new procurement procedure. The provision expresses a general principle rather than constituting an independent regulation. This is due to the fact that it is possible to envision modifications of contracts not covered by any of the exemptions in Article 72(1) or 72(2), although not considered to be substantial in a way that is required for a contracting authority to have to initiate a new procurement procedure.

Article 73 Termination of contracts Member States shall ensure that contracting authorities have the possibility, at least under the following circumstances and under the conditions determined by the applicable national law, to terminate a public contract during its term, where: (a) the contract has been subject to a substantial modification, which would have required a new procurement procedure pursuant to Article 72; (b) the contractor has, at the time of contract award, been in one of the situations referred to in Article 57(1) and should therefore have been excluded from the procurement procedure; (c) the contract should not have been awarded to the contractor in view of a serious infringement of the obligations under the Treaties and this Directive that has been declared by the Court of Justice of the European Union in a procedure pursuant to Article 258 TFEU. Article 73 addresses a matter that previously has not been regulated in the public pro- 1 curement directives – namely the fact that contracting authorities are sometimes faced with circumstances that require the early termination of public contracts in order to comply with obligations under Union law in the field of public procurement (Recital 112). According to Article 73, Member States should therefore make sure that contracting authorities have the option, under the conditions determined by national law, to terminate a public contract during its term if so required under Union law. Tobias Indén

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One reason why special provisions governing the termination of public contracts have not previously been found in the procurement directives is probably that the aim of the directives was to set out rules governing the award of public contracts, and this is to some extent contrary to the provision in Article 73. Since the contractual effects of public contracts were determined in accordance with the contract law of each Member State, it could be argued that there has not been a need for special rules governing the matter at EU level. However, the EU legislator has deemed it necessary in the Directive to explicitly specify the circumstances under which a contracting authority should terminate a contract during its term. 2 As mentioned, Article 73 states that Member States should ensure that contracting authorities are able to terminate a contract during its term, mainly in two different situations. The first basis on which a contract may be terminated pertains to situations in which changes to a public contract ought to have been the subject of a new public procurement procedure. The second basis pertains to situations in which errors during the procurement procedure have resulted in the contract being awarded to an economic operator who would not have been awarded the contract had the errors not occurred. This reason for termination may in itself be divided into two different subcategories; situations in which the economic operator should have been excluded from the procurement procedure with reference to Article 57(1) of the Directive and situations in which the contract should not have been awarded to the contractor in view of a serious infringement of the obligations under the Treaties or the Public Sector Directive. The provision cannot give rise to disputes from a procurement law perspective, but it can give rise to disputes based on contract law in the sense that a contractor who disagrees with the contracting authority’s decision to terminate the contract may take legal action to determine whether there was sufficient grounds to terminate the contract. However, termination of a contract during its term may oblige the contracting authority to initiate a new procurement procedure in order to replace the initial contractor. 3 The provision in Article 73 can also be considered an outcome of the principle of equal treatment in the sense that a contractor who does not have the right to a specific contract should not be able to obtain benefits from it merely because the contractor has succeeded, on unfair terms, in winning the contract in competition with other tenderers.

73.1. Termination of a contract during its term The provision states that Member States must ensure that contracting authorities have the option, at least under the circumstances specified in the provision and under the conditions determined by national law, to terminate a public contract during its term. Therefore, the provision requires Member States to address the matter and to include the option for contracting authorities to terminate contracts during their term. This may be done in different ways, for example by specifying in the national regulations that contracting authorities must include a condition in their contracts allowing them to terminate the contract in the event that any of the specified grounds apply. Another way to address the matter is by including a separate right of termination in the national regulations that exists outside of the public contract itself. 5 The provision states that Member States must ensure that contracting authorities have the option, at least under the circumstances specified in the provision, to terminate contracts during their term. The wording in the provision stipulates that there may be other legitimate motives for terminating a contract during its term, and therefore the enumeration in Article 73 must merely be considered to be examples of grounds for termination. In that sense, Article 73 does not impede Member States from implementing 4

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other conditions under which contracting authorities are able to terminate public contracts during their term, as long as these are in line with the general principles of the EU. Situations in which contracting authorities should have the option of terminating a 6 contract during its term relate, as mentioned, to three different conditions that can be divided into two different categories. Firstly, situations in which changes to a public contract should have been the subject of a new public procurement procedure, and secondly, situations in which errors during the procurement procedure have resulted in the contract being awarded to a contractor who would not have been awarded the contract had the errors not occurred. It follows from Article 73(1)(a) that contracting authorities should have the option of 7 terminating a contract that has been subject to a substantial modification that would have required a new procurement procedure pursuant to Article 72. It follows from Article 72(5), as mentioned, that a new procurement procedure in accordance with the Directive is required for other modifications to the provisions of a public contract or a framework agreement during its term than those provided for under paragraphs 1 and 2 of the Article. These paragraphs give contracting authorities relative flexibility when it comes to implementing changes to existing public contracts without a retender. Article 72(2) stipulates that a contracting authority may make changes to a contract without initiating a new procurement procedure when the modification in question has been provided for in the initial procurement documents in clear, precise and unequivocal review clauses (see Section 72.1.1 above); in connection with changes to the original contract if changes relate to additional works, services or supplies (see Section 72.1.2 above); if the need for a modification is a result of unforeseen circumstances (see Section 72.1.3 above) or; where a new contractor replaces the one to which the contracting authority had initially awarded the contract (see Section 72.1.4 above). As mentioned above, the EU legislator has in Article 72(2) included a form of de minimis rule that stipulates that contracting authorities may modify contracts without initiating a new procurement procedure if the value of the modification is less than the thresholds set out in Article 4 and the value of the modification is below 10 per cent of the initial contract value for services and supply contracts and below 15 per cent of the initial contract value for works contracts (see Section 72.2 above). If a contracting authority makes changes to a contract without a retender in conflict with the provisions of Article 72, the contracting authority should be able to terminate the contract during its term in order for the Member State to live up to its obligations following from the Public Sector Directive. The second situation in which contracting authorities should be able to terminate 8 contracts during their term is when the contractor was, at the time of the award of the contract, in one of the situations referred to in Article 57(1) (see Section 57.1 above). Article 57(1) stipulates that a contracting authority must exclude an economic operator from participation in a procurement procedure if the economic operator in question has been the subject of a conviction by final judgment for one of the following reasons; (a) participation in a criminal organisation,1 (b) corruption,2 (c) fraud,3 (d) terrorist of1 As defined in Article 2 of Council Framework Decision 2008/841/JHA on the fight against organised crime. 2 As defined in Article 3 of the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union (Official Journal C 195 of 25 June 1997) and Article 2 (1) of Council Framework Decision 2003/568/JHA on combating corruption in the private sector as well as according to the national law of the contracting authority or the economic operator. 3 As it is defined in Article 1 of the Convention on the protection of the European Communities’ financial interests (Official Journal C 316 of 27.11.1995).

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fences or offences linked to terrorist activities,4 (e) money laundering or terrorist financing,5 (f) child labour and other forms of human trafficking.6 The obligation to exclude an economic operator shall also apply where the person convicted by final judgment is a member of the administrative, management or supervisory body of that economic operator or has powers of representation, decision or control therein. Therefore, if an economic operator was not excluded from the procurement procedure although this should have been the case due to the fact that one or several grounds for exclusion according to Article 57(1) were satisfied, the contracting authority must have the option to terminate the contract during its term in order for the Member State to satisfy the requirement contained in Article 73. 9 The final situation in which a contracting authority should be able to terminate a contract during its term according to Article 73 (1)(c) is when the contract should not have been awarded to the contractor in view of a serious infringement of the obligations under the Treaties and this Directive that was declared by the Court of Justice of the European Union in a procedure pursuant to Article 258 of TFEU. In cases where the Commission considers a Member State to have failed to fulfil an obligation under the Treaties, it must deliver a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations, as follows from Article 258. This provision also gives the Commission the option of bringing the matter before the Court of Justice of the European Union if a Member State does not comply with the opinion given by the Commission.

4 As defined in Articles 1 and 3 of Council Framework Decision 2002/475/JHA on combating terrorism respectively, or inciting or aiding or abetting or attempting to commit an offence, as referred to in Article 4 of that Framework Decision. 5 As defined in Article 1 of Directive 2005/60/EC of the European Parliament and of the Council on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing. 6 As defined in Article 2 of Directive 2011/36/EU of the European Parliament and of the Council on preventing and combating trafficking in human beings and protecting its victims.

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TITLE III PARTICULAR PROCUREMENT REGIMES Chapter I Social and other specific services Article 74 Award of contracts for social and other specific services Public contracts for social and other specific services listed in Annex XIV shall be awarded in accordance with this Chapter, where the value of the contracts is equal to or greater than the threshold indicated in point (d) of Article 4. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 416 et seq.; Andrea Sundstrand, Public procurement: Primary Law regulating Public Contracts, Stockholm 2015; Carina Risvig Hansen, Contracts Not Covered, or Not Fully Covered, by the Public Sector Directive, Copenhagen 2012; Susie Smith, ‘Articles 74 to 76 of the 2014 Public Procurement Directive: the new “light regime” for social, health and other services and a new category of reserved contracts for certain social, health and cultural services contracts’, PPLR 2014, 4, 159-168.

In the earlier Public Sector Directive 2004/18 all services were divided into so called 1 Part A and Part B services.1 Part B services were only to a small part covered by the provisions of the Directive.2 The motives for excluding the procurement of contracts for Part B services were expressed in recital 19 in Directive 2004/18. According to the recital the full implementation of the provisions of the Directive was restricted during a transitional period, since the provisions should be fully applied only to contracts for services where it would be possible to exploit the full potential for increased cross-border trade. The provisions of the Directive were considered inappropriate to apply in full for services that did not have such cross-border interest.3 In June 2011 the European Commission pointed out in its Evaluation Report that 2 there were high levels of public expenditure but low levels of advertising and competition in the areas of health, social services and education.4 Even though these services were Part B services, the European Commission noted that of the 5 per cent of GDP spent by governments on health social security and education, only a marginal amount was subject to publication in the OJEU. This was of concern to the European Commission in terms of the impact on the internal market. However, it is also a politically sensitive area, touching on individual Member States’ rights to arrange for these types of services to be delivered to their citizens in a manner and using the structures which they deem appropriate.5 1 The lists of Part A and Part B services remained substantially unchanged since they were introduced in Directive 92/50/EC relating to the co-ordination of procedures for the award of public service contract [1992] OJ L209. 2 Part B services were only covered by the provisions of technical specifications in Article 23 and the provisions on publication of award notices in Article 35.4 in Directive 2004/18. 3 A. Sundstrand, Public procurement: Primary Law regulating Public Contracts, Stockholm, 2015, p. 104 and C. R. Hansen, Contracts Not Covered, or Not Fully Covered, by the Public Sector Directive, Copenhagen, 2012. 4 Commission Staff Working Paper: Evaluation Report Impact and Effectiveness of the EU Public Procurement Legislation SEC (2011) 853 final, June 27, 2011. 5 S. Smith, ‘Articles 74 to 76 of the 2014 Public Procurement Directive: the new “light regime” for social, health and other services and a new category of reserved contracts for certain social, health and cultural services contracts’, PPLR 2014, 4, 159-168.

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The legislative process for the Public Sector Directive was initiated 20 December 2011, when the European Commission presented the Proposal for a Directive of the European Parliament and of the Council on public procurement, COM(2011) 896 final. In the proposal a clear distinction was made between procurements of regular service contracts and of services contracts that included social services, health services and educational services. According to the proposal the division into Part A and Part B services would l be replaced by a new division into services and social and other specific services. The latter category consisted of services of different social dimensions and constituted, therefore, services to the relevant persons. These social and other specific services would be awarded in accordance with specific rules which were very general. They contained only a few concrete obligations and the system was therefore called “the light regime”. According to recital 118 “the light regime” also covers contracts that can be reserved for suppliers to participate in delivering services in the fields of health, social and cultural services which are based on employee ownership or active employee participation in their governance, and for existing organisations such as cooperatives. In “the light regime” it was left to Member States to select the appropriate procedures for the procurement of these types of services, provided those procedures were consistent with the principles of equal treatment and transparency.6 A new threshold value for these services was set at EUR 500.000. The proposal of Commission was processed by the Parliament and the Council. In this process, the liberalization proposed by the Commission with regard to the regulatory framework for the procurement of welfare services was further strengthened. In the final version the threshold value and thus the presumption of when an award of social services and other specific services will be interesting for cross border trading was increased to EUR 750.000. The Public Sector Directive abolishes the distinction between Part A and Part B services. Recitals 113 and 114 refer to the Commission´s Evaluation Report from 2011. With the support of this evaluation it is pronounced that the application of the Public Sector Directive should be extended to the full for a range of services. All contracts for services are therefore fully regulated under the Public Sector Directive unless they are either classified as services of a type which fall within ”the light regime”, or if they fall within one of the exclusions set out in Articles 7 to 12. At the same time it is emphasized that because of their very nature, social and other specific services have a limited cross-border interest. “The light regime” was therefore established for public contracts for services with a higher threshold than that which applies to other services, EUR 750.000. Services to a single person at values below that threshold will typically not be of interest to providers from other Member States, unless there are concrete indications to the contrary, such as Union financing for cross-border projects. Although the value of such social and other specific services exceeds the applicable threshold, the provisions of Directive 2014/24 do not apply in full. In view of the importance of the cultural context and the sensitivity of these services, Member States are, in the procurement of such services, given a wide discretion to organize the choice of service providers in the way that they consider appropriate. As a consequence, the Directive provides only that certain general principles of transparency and equal treatment should be respected and certain specific requirements for the selection of suppliers should be used.

6 Proposal for a Directive of the European Parliament and of the Council on public procurement, COM(2011) 896 final, article 76.1.

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Recital 114 stresses that Member States should strive to fulfil the goals of simplifying and easing the administrative burden for contracting authorities and suppliers when they adopt a regulation for social and other specific services. In this context is also made clear that it may be necessary to invoke other provisions applicable to service contracts in general when procuring contracts for social and other specific services. In Directive 2014/24 services covered only by “the light regime” are to be awarded in accordance with specific rules collected in a separate chapter called “Social and other specific services” covering Articles 74 to 77. The award of contracts for social and other specific services are regulated in Articles 75 and 76. These articles contain provisions on the publication of notices and concerning the principles for the award of contracts. The need for flexibility for the Member States mentioned in the recitals is met through the provisions concerning the principles for the award of contracts. These general terms set the framework for Member States’, implementation of the regulatory framework for the award of contracts awarded for social services and other special services. An important statement is made at the end of recital 114. Here it is stressed that Member States and public authorities remain free to provide social services and other special services themselves. They are also free to organise social services in a way that does not entail the conclusion of public contracts at all, for example through the mere financing of such services or by granting licences or authorisations to all economic operators meeting the conditions established beforehand by the contracting authority without any limits or quotas. The condition is that these systems ensure sufficient advertising and comply with the principles of transparency and non-discrimination. To sum up, it can be concluded that the new provisions leave a large amount of discretion for the Member States to elaborate their own systems for procuring contracts for social and other specific services. It is, however, unclear to which extent suppliers may be able to appeal against different kinds of procurement procedures for not being in conformity with the general principles. This will probably lead to unnecessary litigation in the Member States, which could have been avoided if the provisions had been clearer on this issue.

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74.1. Services in Annex XIV Article 74 provides that public contracts for social and other specific services are to 12 be awarded in accordance with Articles 75 to 77 of the Public Sector Directive. In recital 119 it is stated that the services covered by those articles should be identified by using the CPV nomenclature: “It is appropriate to identify those services by reference to specific positions of the Common Procurement Vocabulary (CPV) as adopted by Regulation (EC) No 2195/2002 of the European Parliament and of the Council (-), which is a hierarchically structured nomenclature, divided into divisions, groups, classes, categories and subcategories. In order to avoid legal uncertainty, it should be clarified that reference to a division does not implicitly entail a reference to subordinate subdivisions. Such comprehensive coverage should instead be set out explicitly by mentioning all the relevant positions, where appropriate as a range of codes.”

Article 74 states that public contracts for social and other specific services listed in 13 Annex XIV of the Public Sector Directive are covered by the provisions for the “light regime”. At first glance, these services are very similar to the ones listed as Part B services in Directive 2004/08. The listed services in Annex XIV are, however, not exactly the same as those previously stated as Part B services and it is therefore necessary to check if a relevant service is still considered to be of non-cross border interest to foreign suppliers and hence only covered by the “light regime” in Articles 74-77. The earlier Part B

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services concerning supply of office personnel are examples of services that will be fully covered by the provisions of the Public Sector Directive. On the other hand, legal services that in Directive 2004/18 were B services are excluded in Directive 2014/24 if the services are provided by lawyers in connection to a court proceeding or in advance, if there is a tangible indication and high probability that the matter to which the advice relates will become the subject of such proceedings, Article 10 (d).8. 14 The recitals provide explanations as to why specific services are considered to be of limited cross-border dimensions. Recital 115 mentions hotel and restaurant services, since they are typically offered only by operators located in the specific place of delivery. However, it points out the fact that large hotel and restaurant service contracts above the EUR 750.000 threshold could be of interest to various economic operators, such as travel agencies and other intermediaries, also on a cross-border basis. Recital 116 mentions certain legal services that only concern issues of purely national law which therefore shall only be covered by “the light regime” from a threshold of EUR 750.000. If they exceed the threshold, such large contracts could be of interest for various economic operators such as international law firms also on a cross-border basis. This is particularly true where these contracts involve legal issues arising from or having as their background Union or other international law or involving more than one country. Recital 117 goes on to mention services such as rescue services, firefighting services, prison, government services or the provision of services to the community. Such services, provided their provision is actually based on contracts, would normally only be likely to present a crossborder interest as from a threshold of EUR 750.000. 15 In Annex XIV the services are listed under 15 general headings: Health, social and related services, such as surgical and medical hospital services, pathology services, dental services, home help services; Administrative social, educational, healthcare and cultural services, such as tutorial services and the organisation of exhibitions, fairs and seminars; Compulsory social security services, such as sickness, maternity or unemployment benefits and family or child allowances; Benefit services; Other community, social and personal services including services furnished by trade unions, political organisations, youth associations and other membership organisation services; Religious services; Hotel and restaurant services; Legal services (to the extent not excluded elsewhere);7 Other administrative services and government services; Provision of services to the community; Prison related service, public security and rescue services (to the extend not excluded elsewhere); Investigation and security services; International services; Postal services; Miscellaneous services. 16 As a general conclusion, in Directive 2004/18 contracts for the above listed types of service are in general considered not to have a cross-border interest per se, thereby constituting Part B Services. In the Public Sector Directive, they are still considered to not typically create a cross-border interest below the threshold of EUR 750.000. However, they are considered to have a certain cross-border effect above that threshold. These services are, however, only covered by the provisions of “the light regime” if their value exceeds the threshold, since they are services to single persons and by their very nature have a limited cross-border dimension.

74.2. Threshold 17

Article 74 provides that public contracts for social and other specific services are to be awarded in accordance with Articles 74 to 77 if the value of the specific services ex7 The condition is that the advice is given by a lawyer within the meaning of Article 1 of Directive 77/249/EEC.

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ceed a threshold of EUR 750.000. The threshold is set out in Article 4(d) in the Public Sector Directive. The methods for calculating the threshold for services within “the light regime” are the same as for all other types of public service contracts. The exact methods are set out in Article 5 of the same directive. According to Article 6(3) the threshold is to be determined every two years, starting from 1 January 2014, in the national currencies of the Member States whose currency is not the Euro. Recitals 114 to 117 include references to a presumption that only contracts for ser- 18 vices listed in Annex XIV with a value above EUR 750.000 will be of cross-border interest. It is mentioned that these types of contracts would only become of interest to suppliers in other Member States if they acquire sufficient critical mass through a relatively high value. This could explain why the threshold for social and other specific services is set at a much higher level than that of all other service contracts. It also implies that contracts for social and other specific services below EUR 750.000 will not be of cross-border interest. This presumption could, however, be overturned if one of the criteria set by the ECJ 19 when it comes to establish if a cross-border interest for specific contract is met. If, for example, foreign suppliers notice a tender notice and show an interest in the award procedure, it can be difficult for a contracting authority or entity to claim that the procurement does not have a cross-border interest. In case C-226/09 Commission v. Ireland, the ECJ concluded that the contract in question was of interest to foreign tenderers, firstly because the contracting authority had published a tender notice in TED and, secondly, because three of the tenderers were established in other Member States than Ireland. 8 If the value of a contract for services covered by “the light regime” is below the thresh- 20 old, but has a cross-border interest, the procurement of the contract is covered by primary law and the general principles. This means, among other things, that the contract has to be put out to competition and that there are certain remedies in place.9

Article 75 Publication of notices 1. Contracting authorities intending to award a public contract for the services referred to in Article 74 shall make known their intention by any of the following means: (a) by means of a contract notice, which shall contain the information referred to in Annex V Part H, in accordance with the standard forms referred to in Article 51; or (b) by means of a prior information notice, which shall be published continuously and contain the information set out in Annex V Part I. The prior information notice shall refer specifically to the types of services that will be the subject of the contracts to be awarded. It shall indicate that the contracts will be awarded without further publication and invite interested economic operators to express their interest in writing. The first subparagraph shall, however, not apply where a negotiated procedure without prior publication could have been used in conformity with Article 32 for the award of a public service contract. 2. Contracting authorities that have awarded a public contract for the services referred to in Article 74 shall make known the results of the procurement procedure 8 9

Case C-226/09 Commission v. Ireland [2010] ECR I-11807, para. 33. A. Sundstrand, Public procurement: Primary Law regulating Public Contracts, Stockholm, 2015.

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by means of a contract award notice, which shall contain the information referred to in Annex V Part J, in accordance with the standard forms referred to in Article 51. They may, however, group such notices on a quarterly basis. In that case, they shall send the grouped notices within 30 days of the end of each quarter. 3. The Commission shall establish the standard forms referred to in paragraphs 1 and 2 of this Article by means of implementing acts. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 89(2). 4. The notices referred to in this Article shall be published in accordance with Article 51. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, chap. 6-45; Andrea Sundstrand, Public procurement: Primary Law regulating Public Contracts, Stockholm, 2015, Carina Risvig Hansen, Contracts Not Covered, or Not Fully Covered, by the Public Sector Directive, Copenhagen 2012; Susie Smith, ‘Articles 74 to 76 of the 2014 Public Procurement Directive: the new “light regime” for social, health and other services and a new category of reserved contracts for certain social, health and cultural services contracts’, PPLR 2014, 4, 159-168.

Many of the provisions in the Public Sector Directive are based on precedents from the ECJ. Regarding publication of notices for public procurements there are a number of significant judgments from the court. If all interested European suppliers shall have the same opportunity to bid in public procurements, they must be aware of their existence. ECJ ruled already in Case C-324/98 Telaustria that it is necessary for a contracting authority to publish information of a coming procurement to meet the principles of equal treatment and transparency. According to the Telaustria case the obligation to make information public requires “a degree of advertising sufficient to enable the services market to be opened up to competition” and also to ensure “impartiality of procurement procedures to be reviewed”. These requirements are referred to as the “Telaustria principles” and apply to all contracts which have a specific cross-border interest, in other words are of potential interest to economic operators in other Member States. In the Telaustria case the question was the application of the Utilities Directive 93/38/EEC on the award of service concessions in a time where there were no specific provisions on threshold values for service concessions. 2 Considering the Telaustria case it makes sense that even though a service is only covered by the light regime, the contracting authority needs to publish a notice of the procurement. The publication procedure itself is the same as for services covered by the full regime of the Public Sector Directive, even though there are some specific provisions on when publications of notices are required. 3 There are provisions in Article 75 that set out requirements relating to both the publication of notices at the start and after the conclusion of the procurement process. 1

75.1. Means of publication of notices 4

In Article 75(1) there are provisions stating that a contracting authority shall either publish a contract notice or a prior information notice (also called PIN) regarding the procurement of a light regime service. The contracting authority can choose between these two notices in order to fulfil its obligation to make the procurement known to interested suppliers.

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75.1.1. Contract notices Article 75(1)(a) states under what conditions a contracting authority can choose to 5 publish a contract notice for a service covered by the light regime. It refers to Article 51 which contains the forms and manners of publication of notices. For a commentary on the forms and manners of publication of notices, see Article 51. Article 75(1)(a) also refers to Annex V Part H, where the information to be included 6 in contract notices concerning contracts for social and other specific services is found. The information includes name and other details of the contracting authority, a description of the services and their place of performance, conditions for participation, timelimit(s) for contacting the contracting authority with a view to participation and a brief description of the main features of the award procedure to be applied. When the contracting authority has filled in the standard form, it will send the con- 7 tract notice electronically to the Publications Office of the European Union in Luxemburg for publication. 75.1.2. Prior information notices A contracting authority can also choose to publish a prior information notice as set out in Article 75(1)(b). In this case, the notice shall contain the information set out in Annex V Part I. The information is similar to that in a contract notice such as name and other details of the contracting authority, a description of the services and their place of performance and conditions for participation. In case of a prior information notice, the contracting authority needs to include a reference to the fact that interested economic operators shall advise the contracting authority of their interest in the contract or contracts and time limits for receipt of expressions of interest and address to which expressions of interest shall be transmitted. The prior information notice shall refer specifically to the types of services that will be the subject of the contracts to be awarded. It shall also indicate that the contracts will be awarded without further publication. A time period covered by a prior information notice is usually 12 months. However, prior information notices for services covered by the light regime may cover planned procurements over a longer period as is stated in Article 48. There is, however, no maximum period stated in that article. There are two ways to publish a prior information notice. A contracting authority can choose to send the prior information notice electronically to the Publications Office of the European Union. In that case the notice must be published no later than five days after it was sent, see Article 48 and article 51. According to Article 51, a contracting authority can also choose to publish the prior information notice on its buyer profile. In this case the contracting authority is required to send a notice of the publication to the Publications Office of the European Union. This notice must be published in the OJEU no later than five days after it was sent. There is no further requirement to publish a contract notice when the procurement process is commenced following publication of a prior information notice. There is, however, an on-going obligation to ensure that the prior information notice continues to be published until the end of the indicated period of validity or until receipt of a contract award notice indicating that no further contracts will be awarded, see Article 51(4)(a). This is to ensure that economic operators continue to be aware of the opportunities available. The commission is obliged to ensure that prior information notices for services covered by the light regime continue to be published until the end of the indicated period of validity in the original notice or until receipt of a contract award notice indi-

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cating that no further contracts will be awarded in the period covered by the prior information notice. 75.1.3. The negotiated procedure without prior publication 13

Where a contract legitimately can be awarded by using the negotiated procedure without prior publication in accordance with Article 32, there is no requirement to publish a call for competition. There is, however, a requirement to publish a contract award notice after a contract is awarded without alerting the competition according to the provision I Article 32.

75.2. Contract award notices 14

A contracting authority that has awarded a contract for services covered by the light regime is required to publish a contract award notice. The notice shall be published in a standard format specified in Annex V Part J. A contract award notice shall according to Article 50 be dispatched for publication within 30 days of the contract award decision. Contract award notices for services covered by the light regime may however according to Article 75(2) be grouped together on a quarterly basis and be dispatched for publication within 30 days of the end of each quarter.

75.3. Standard forms for notices 15

According to this provision the Commission shall establish the standard forms referred to in paragraphs 1 and 2 of Article 75 by means of implementing acts. The implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 89(2). For a commentary on the advisory procedure, see Article 89(2).

75.4. Form and manner of publication of notices 16

The notices referred to in Article 75 shall be published in accordance with Article 51 of the Public Sector Directive. Article 51 contains the forms and manners of publication of notices for all other procurements in the Directive. For a commentary, see Article 51.

Article 76 Principles of awarding contracts 1. Member States shall put in place national rules for the award of contracts subject to this Chapter in order to ensure contracting authorities comply with the principles of transparency and equal treatment of economic operators. Member States are free to determine the procedural rules applicable as long as such rules allow contracting authorities to take into account the specificities of the services in question. 2. Member States shall ensure that contracting authorities may take into account the need to ensure quality, continuity, accessibility, affordability, availability and comprehensiveness of the services, the specific needs of different categories of users, including disadvantaged and vulnerable groups, the involvement and empowerment of users and innovation. Member States may also provide that the choice of the service provider shall be made on the basis of the tender presenting the best price-quality ratio, taking into account quality and sustainability criteria for social services.

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Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, chap. 6-45; Andrea Sundstrand, Public procurement: Primary Law regulating Public Contracts, Stockholm 2015; Susie Smith, ‘Articles 74 to 76 of the 2014 Public Procurement Directive: the new “light regime” for social, health and other services and a new category of reserved contracts for certain social, health and cultural services contracts’, PPLR 2014, 4, 159-168; P. Bordalo-Faustino, ‘Award Criteria in the New EU Directive on Public Procurement’, PPLR 2014, 23, 124-133.

Recital 114 of the Public Sector Directive states that contracts for so called services to 1 the person (services covered by the light regime) above the threshold 750.000 EUR should be subject to Union-wide transparency. Member States are, however, given wide discretion to organize the choice of the service providers in the way they consider most appropriate due to the importance of the cultural context and the sensitivity of these services. The Directive therefore only imposes the observance of the basic principles of transparency and equal treatment. It aims at making sure that contracting authorities are able to apply specific quality criteria for the choice of service providers. Recital 114 of the Public Sector Directive also states that Member States should take 2 Article 14 TFEU and Protocol No 26 into account as well as the criteria set out in the voluntary European Quality Framework for Social Services published by the Social Protection Committee when determining the procedures to be used for the award of contracts for these types of services. Member States should also pursue the objectives of simplification and of alleviating the administrative burden for contracting authorities and economic operators. It is also made clear that Member States and public authorities remain free to provide 3 these services themselves or to organize social services in a way that does not entail the conclusion of public contracts. This could instead be done by the mere financing of such services or by granting licenses or authorizations to all economic operators meeting the conditions established beforehand by the contracting authority. The precondition is that such a system ensures sufficient advertising and complies with the basic principles of transparency and non-discrimination.

76.1. National rules for procuring social and other specific services According to Article 76(1) of the Public Sector Directive Member States shall estab- 4 lish national rules for the award of contracts for services covered by the light regime that exceeds the threshold value, which is 750.000 EUR. The reason is to ensure that contracting authorities respect the principles of transparency and equal treatment of economic operators. Member States may determine themselves which procedural rules to apply as long as these rules allow the contracting authorities to take into account the specific characteristics of the services in question. There are, therefore, no provisions on award procedures for services covered by the light regime in the Public Sector Directive. The lack of general procedural provisions for services covered by the light regime 5 may lead to new forms of award procedures being adopted in the Member States. Since there is no prior jurisprudence, this might lead to a rise in court proceedings looking into whether the contracting authorities have fulfilled their obligations when it comes to acting in accordance with the basic principles.

76.2. Special needs and award criteria As stated in Article 76(2), Member States shall ensure that contracting authorities 6 may take into account the need to ensure quality, continuity, accessibility, affordability, availability and comprehensiveness of the services, the specific needs of different categories of users, including disadvantaged and vulnerable groups, the involvement and

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empowerment of users and innovation. It is not clear whether this is an exhaustive list of considerations that contracting authorities may take into account. Since it is not obligatory, there is clearly room for Member states to add more considerations. As a basic premise, such requirements must be sufficiently connected with the subject-matter and be compatible with the general principles, including the principle of proportionality and the principle of non-discrimination. Otherwise, it would be a risk that such considerations would look into the possibility of favoring national and/or local suppliers. 7 Member States may also provide that the choice of the service in question shall be made on the basis of the tender that offers the best ratio of price/quality with regard to quality and sustainability criteria for social services. In the Public Sector Directive all contracts must be awarded on the basis of the most economically advantageous tender. 1 This is, however, not a substantive change to the prior provisions on award criteria. A contract can still be awarded based on most economically advantageous tender (now called the “best ratio between price and quality”) or lowest price. What is new is the codification of the case C-19/00, SIAC Construction 2 stating that a contracting authority can award a contract on the basis of a calculation of the Life Cycle Cost (LCC) of the products. 8 Which tender is the most economically advantageous will be evaluated on the basis of best ratio of price to quality, cost or price. Where a contracting authority assesses the tender on the basis of best ratio of price to quality, the tender must be assessed on the basis of the award criteria linked to the subject of the contract, such as quality aspects, environmental aspects and social aspects. It should be a matter for the contracting authority to determine the award criteria best suited to the individual.

Article 77 Reserved contracts for certain services 1. Member States may provide that contracting authorities may reserve the right for organisations to participate in procedures for the award of public contracts exclusively for those health, social and cultural services referred to in Article 74, which are covered by CPV codes 75121000-0, 75122000-7, 75123000-4, 79622000-0, 79624000-4, 79625000-1, 80110000-8, 80300000-7, 80420000-4, 80430000-7, 80511000-9, 80520000-5, 80590000-6, from 85000000-9 to 85323000-9, 92500000-6, 92600000-7, 98133000-4, 98133110-8. 2. An organisation referred to in paragraph 1 shall fulfil all of the following conditions: (a) its objective is the pursuit of a public service mission linked to the delivery of the services referred to in paragraph 1; (b) profits are reinvested with a view to achieving the organisation’s objective. Where profits are distributed or redistributed, this should be based on participatory considerations; (c) the structures of management or ownership of the organisation performing the contract are based on employee ownership or participatory principles, or require the active participation of employees, users or stakeholders; and

1 P. Bordalo-Faustino, ‘Award Criteria in the New EU Directive on Public Procurement’, PPLR 2014, 23, 124-133. 2 Case C-19/00, SIAC Construction, ECR 2001, p. I-7725.

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(d) the organisation has not been awarded a contract for the services concerned by the contracting authority concerned pursuant to this Article within the past three years. 3. The maximum duration of the contract shall not be longer than three years. 4. The call for competition shall make reference to this Article. 5. Notwithstanding Article 92, the Commission shall assess the effects of this Article and report to the European Parliament and the Council by 18 April 2019. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, chap. 6-45; Susie Smith, ‘Articles 74 to 76 of the 2014 Public Procurement Directive: the new “light regime” for social, health and other services and a new category of reserved contracts for certain social, health and cultural services contracts’, PPLR 2014, 4, 159-168.

When awarding contracts for services covered by the light regime there is a system to 1 which only a limited number of rules apply. Under this system the Public Sector Directive also provides an opportunity to reserve participation in a procurement to certain organisations. Member States may provide that contracting authorities may reserve the right of a specific organisation to participate in the procurement exclusively for certain specified services. However, it is not compulsory to implement the provisions of Article 77. Recital 118 explains that the reservation of participation in procurement procedures 2 for certain services to specific types of organisation has been provided for “in order to ensure continuity of public services”. Such organisations would be based on employee ownership or active employee participation in their governance. The recital also states that the provision is limited in scope exclusively to certain 3 health, social and related services, certain education and training services, library, archive, museum and other cultural services, sporting services and services for private households. The provision is not intended to cover any of the exclusions otherwise provided for by the Public Sector Directive.

77.1. Reservation of certain services Member States have according to Article 77(1) the possibility to allow contracting au- 4 thorities to reserve participation in an award proceeding for a public contract for the health, social and cultural services referred to in Article 74, which are covered by certain given CPV codes. These codes cover health, social and related services and certain education and training services, library, archive, museum and other cultural services, sporting services and services for private households. These services are, however, a lot less numerous than those services covered by the light regime in Articles 74-76. Even though participation in the procurement process is reserved for non-profit or- 5 ganisations, the provisions of the light regime must be followed when advertising for and running the procedure for awarding reserved contracts over the light regime threshold of 750.000 EUR.

77.2. Reservation concerning the organisations Article 77(2) of the Public Sector Directive contains provisions concerning the orga- 6 nisations for which participation in a procurement under this article may be reserved. An organisation must fulfil all of the four given conditions to be allowed to participate in the tender proceedings. The first three conditions relate to the nature of the organisation itself, while the last conditions relate to previous contracts given by the same contracting authority. Andrea Sundstrand

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77.2.1. The organisation’s objective 7

The first condition an organisation must fulfil in order to participate in a tender proceeding for a reserved contract is that its objective is the pursuit of a public service mission linked to the delivery of the services referred to in the first paragraph. The actual doings of the organisation may be something else, but the purpose of the actions must be as said. If the Red Cross collects give-aways, sell them and use the money to buy food for poor people, it would fulfil the given criteria. 77.2.2. The allocation of profits

8

The second condition is that profits made by the organisation will be reinvested in order to achieve the aims of the organisation. At any rate dividend or redistribution should be allocated on the basis of participation by those involved in the activities in question. 77.2.3. The structures of management or ownership

9

The third condition is that the management and ownership structure of the organisation must be based on employee ownership or participatory principles, or require the active participation of employees, users or stakeholders. These terms are not explained and there is no stated definition as to their meaning. This is unfortunate, as it might lead to unnecessary litigation proceedings. 77.2.4. Previous contracts for the same services

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The fourth condition is that the organisation has not been awarded a contract for the services concerned by the specific contracting authority pursuant to Article 77 within the past three years. This is a very strange condition. If these organisations cannot get a renewed contract after three years, they could loose a large part of their revenues. It is almost impossible for any organisation to bear the costs of buying necessary equipment for fulfilling a contract, and then having the risk of not being able to use that equipment again for another three years.

77.3. The maximum duration of the contract 11

The maximum duration of a contract awarded according to Article 77 is three years. This provision is just not compatible with the reason given in recital 118, where it is stated that Article 77 is adopted to ensure continuity. The provisions do not seem to make any sense and it is therefore clear that this is a political consideration. This means that the final interpretation of the provision is left to the ECR.

77.4. Information in the call for competition 12

The call for competition shall make reference to Article 77, so that potentially interested suppliers are made aware that the participation is reserved to specific organisations. This is necessary to fulfil the principle of transparency and make sure suppliers do not invest a lot of effort in a tender in vain. The obligation to inform of the specific procedure covers most probably the contract notice and the prior information notice as well as the notification of the publication of a prior information notice if a contracting authority publishes the notice on its buyer profile.

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77.5. Assessment by the Commission The Commission shall assess the effects of Article 77 and report to the European Par- 13 liament and the Council by 18 April 2019. This is three years after the end of the implementation period for the Public Sector Directive, which was by 18 April 2016.

Chapter II Rules governing design contests Article 78 Scope This Chapter shall apply to: (a) design contests organised as part of a procedure leading to the award of a public service contract; (b) design contests with prizes or payments to participants. In the cases referred to in point (a) of the first paragraph of this Article, the threshold referred to in Article 4 is calculated on the basis of the estimated value net of VAT of the public service contract, including any possible prizes or payments to participants. In the cases referred to in point (b) of the first paragraph of this Article, the threshold refers to the total amount of the prizes and payments, including the estimated value net of VAT of the public services contract which might subsequently be concluded under Article 32(4) if the contracting authority has announced its intention to award such contract in the contest notice. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 829 et seq.; Christopher Bovis, The Law of EU Public Procurement, p. 134 et seq.; Poulsen, Jakobsen and Kalsmose-Hjelmborg, EU Public Procurement Law, p. 384.

The rules on design contests are to be found in Articles 78-82 of the Public Sector 1 Directive 2014/24/EU and in Articles 95-98 of Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors (the ‘Utilities Directive’). These provisions are largely the same. Directive 2014/23/EU on the award of concession contracts (the ‘Concessions Directive’) and Directive 2009/81/EC on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security (the ‘Defence and Security Directive’) do not contain detailed rules on design contests. There are presumably different reasons why there are no express rules for design contests in these areas. In relation to the Defence and Security Directive this presumably means there is no right to use design contests within the scope of the Directive. The Defence and Security Directive is very clear about what procurement procedures may be used for, so the absence of a reference to design contests must be assumed to mean that they cannot be used. Article 25 of the Directive allows the use of the restricted procedure or the negotiated procedure with publication of a contract notice, and in special circumstances there is a right to use competitive dialogue or negotiated procedure without publication of a contract notice. The situation is a little different in the Concessions Directive, where Article 30 states that: ‘The contracting authority or contracting entity shall have the freedom to organise the procedure leading to the choice of concessionaire subject to compliance with this Directive.’ The flexibility allowed by the Concessions DirecMichael Steinicke

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tive presumably means that a procedure can be used that is identical to or very similar to the procedure that is characteristic for design contests under the 2014 Public Sector Directive and the Utilities Directive. 2 No great changes have been made to the provisions in Articles 66-74 of Directive 2004/18/EC on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts, the rules of which are largely retained. The changes that have been made mainly concern the specific rules that were previously in the provisions on design contests (for example rules on threshold values, rules distinguishing it from the Utilities Directive, and rules on means of communication) have now been removed. However, their content largely remains in Article 80 of the Public Sector Directive which refers to the corresponding general rules on procurement in Title I of the Directive. This means that the rules on threshold values, scope of application, general principles, conflicts of interest etc. also apply to design contests. It is unsurprising that some of these provisions apply. Hitherto this has probably been implicit, whereas some of the other provisions mentioned are either unlikely to be used or would be inappropriate in the special circumstances of design contests. Also, a few provisions have been removed from Title I and are now in other parts of the Directive. See, for example, the provision on voluntary publication in Article 51(6). Similarly the provisions are mostly retained In the Utilities Directive. 3 While there has been no great change to the substantive provisions of the Directive, the legislator has found it important for to emphasise the potential for design contests. Thus, recital 120 of the Directive states: Design contests have traditionally mostly been used in the fields of town and country planning, architecture and engineering or data processing, It should, however, be recalled that these flexible instruments could be used also for other purposes, such as to obtain plans for financial engineering that would optimise SME support in the context of the Joint European Resources for Micro to Medium Enterprises (JEREMIE) or other Union SME support programmes in a given Member State. The design contest used to acquire the plans for such financial engineering could also stipulate that the subsequent service contracts for the realisation of this financial engineering would be awarded to the winner or one of the winners of the design contest by a negotiated procedure without publication. It appears from this that design contests can be used to support the political goal of improving the opportunities of small and medium-sized enterprises (SMEs) to tender for procurement contracts. Design contests also appear to support the desire to increase innovation through procurement. One of the most important characteristics of design contests is that this form of contest can facilitate the drawing up of proposals for solutions to complex problems, which typically involves a strong element of innovation. For example, as alternatives to pre-commercial procurement (PCP) design contests can be attractive because of the prospect of subsequently entering into contracts for the supply of the innovative product. In this context design contests suffer from the same weakness as pre-commercial procurements. In contrast to innovation partnerships (see Article 31), there should be further tendering procedures between the development of an idea (via a design contest) and the actual supply of the product or construction (in the same way as with pre-commercial procurement).

78.1. Estimated value 4 5

This provision carries forward Article 67(2) in the 2004 Procurement Directive. A design contest will not necessarily be followed by the award of a contract; see the commentary on Article 2(21). The conclusion of a design contest can be followed by the 792

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award of one or more prizes to the undertaking or undertakings that have submitted the best project. In order to ensure that such contests have a sufficient degree of equal treatment and transparency, design contests in which prizes are awarded but contracts are not awarded must follow the procedure for design contests set out in the Directive. In both cases the contest will be covered by the rules if the threshold values are exceeded. The threshold values are the same for contracts and prize awards. The threshold refers to the total amount of the prizes and payments. The estimated 6 contract value must be included. This estimation must comply with the general rules for determining estimated contract values; see the commentary on Article 5 of the Public Sector Directive. Prizes awarded in contests should also be included. This includes not only the amount expected to be given to the tenderer who wins the contest but the total value of all the prizes, and the full amount of any payment must be included if payment is given for participating in a design contest. The wording of the provision presumably means that if the contracting authority arranging the contest has not excluded the possibility of entering into a contract, then the value of the contract should be included even if this is not regarded as likely at the time of publication of the contest. In Article 32(4) there is a possibility for entering into an agreement on extensions of a design contest. It is debatable whether the contracting authority is bound to include the value of the contract if, at the time of publishing the design contest, it already knows that at some later point but not immediately following the design contest, an agreement will be entered into with the winner of the contest by an open or restricted procedure, i.e. not pursuant to Article 32(4). The estimated value of the contract should presumably not be included if a contract is entered into following an open or restricted procedure. In this connection see Case C-340/02, Commission v France, where part of the contract was not covered by the design contest, so a contract could not be entered into directly by a negotiated procedure. See further on this in section 80 and in the commentary on Article 32(4). However, the situation will presumably be different if the contracting authority uses an open or restricted procedure, but where the contracting authority can use Article 32(4).1

Article 79 Notices 1. Contracting authorities that intend to carry out a design contest shall make known their intention by means of a contest notice. Where they intend to award a subsequent service contract pursuant to Article 32(4), this shall be indicated in the contest notice. 2. Contracting authorities that have held a design contest shall send a notice of the results of the contest in accordance with Article 51 and shall be able to prove the date of dispatch. Where the release of information on the outcome of the contest would impede law enforcement, would be contrary to the public interest or would prejudice the legitimate commercial interests of a particular enterprise, whether public or pri-

1 However, in this situation the harm to competition will be limited since the use of an open or restricted procedure will establish a competitive situation.

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vate, or might prejudice fair competition between service providers, such information may be withheld from publication. 3. The notices referred to in paragraphs 1 and 2 of this Article shall be published in accordance with Article 51(2) to (6) and Article 52. They shall include the information set out respectively in Annex V parts E and F in the format of the standard forms. The Commission shall establish the standard forms by means of implementing acts. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 89(2).1

79.1. Notice of a design contest Where a contracting authority wishes to hold a design contest, notice of this must be published in the Official Journal of the European Union. The requirements for the content and form of such notices are set out in Annex V, Part E of the Procurement Directive and Annex XIX of the Utilities Directive. These requirements are set out in more detail in Regulation (EU) No 842/2011 establishing standard forms for the publication of notices in the field of public procurement. 2 There are no specific rules on deadlines in Article 79, so contracting authorities are in principle free to set their own deadlines without being bound by the minimum deadlines laid down for general procurement procedures. However, when a contracting authority does set a deadline for the conduct of a contest, it should follow the rules for the calculation of deadlines set out in Regulation (EEC, Euratom) No 1182/71 determining the rules applicable to periods, dates and time limits (see recital 106 of the Procurement Directive); see the commentary on Article 47. The only restrictions on a contracting authority’s scope for setting deadlines are the general principles on equal treatment, transparency and allowing reasonable time to submit a tender. Thus deadlines should be reasonable in relation to the nature of the task (see Article 47(1)), and they must be the same for all participants. Thus deadlines should be set with reference to the extent and nature of the task to be procured. On factor that can be relevant in this is whether a design contest will involve cooperation between two or more professional groups (e.g. architects and engineers). It must be assumed that a deadline that is unreasonably short or which favours a specific tenderer can be referred to the courts. 1

79.2. Notice of the results of a design contest According to Article 79(2), after holding a design contest the contracting authority must send notice of the result to the EU Official Journal. The rules on such notices are given in Article 51 (see the commentary on this). Where there is a design contest with a subsequent award of a contract, it must be assumed that the contracting authority must publish both the result of the contest and the award of the contract. This should be done in two separate notices; see Annex V, Part D (on the award of contracts) and Part F (on the results of design contests). 4 According to Article 79(3), publication must be in accordance with Articles 51(2) and 52. Among other things, this requires notices which a contracting authority sends to the Commission to be sent in electronic format, pursuant to Article 51(2); see the commentary on this. 3

1 On design contests in general, see Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 829 et seq.

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Depending on the form in which notice is sent, the Publications Office of the European Union must publish a notice within 5 days of it being sent; see Article 51(2). The general restrictions on national publication of notices also apply to design contests (see Article 52). This means there may not be national publication before the date on which the notice is sent to the EU Publications Office. However, there may be national publication if the contracting authorities have not been notified of publication within 48 hours following confirmation of receipt of the notice in accordance with Article 51. National publication may not contain other information than that contained in the notice sent to the Commission or that published on the buyer’s profile.2

Article 80 Rules on the organisation of design contests and the selection of participants 1. When organising design contests, contracting authorities shall apply procedures which are adapted to the provisions of Title I and this Chapter. 2. The admission of participants to design contests shall not be limited: (a) by reference to the territory or part of the territory of a Member State; (b) on the grounds that, under the law of the Member State in which the contest is organised, they would be required to be either natural or legal persons. 3. Where design contests are restricted to a limited number of participants, the contracting authorities shall lay down clear and non-discriminatory selection criteria. In any event, the number of candidates invited to participate shall be sufficient to ensure genuine competition.1 A ‘design contest’ means ‘those procedures which enable the contracting authority to 1 acquire, mainly in the fields of town and country planning, architecture and engineering or data processing, a plan or design selected by a jury after being put out to competition with or without the award of prizes’.2 See the commentary on Article 2(21). In Case C-340/02 Commission v France, the Court of Justice of the European Union (CJEU) referred to the ‘plan or design’. In this case the contracting authority had divided the task into three parts. The first phase involved a feasibility study for a water treatment network with a view to making a sewage treatment plant comply with European environmental laws. The second phase consisted of drawing up a draft contract to help the contracting authority draw up detailed technical specifications on the basis of the solution chosen in the first phase, to draw up an impact assessment analysing all the effects of the works on the environment, and to help the contracting authority appraise the offers submitted with a view to carrying out the third phase. In paragraph 39 of its judgment the CJEU pointed out that some of the services in the second phase were not covered by the term ‘design contest’ as defined in the Directive, where there is a reference to ‘a plan or design’. The CJEU found that: ‘While the first part of the second phase (assistance to the responsible contracting authority in drawing up detailed technical specifications on the basis of the solution chosen in the first phase) could perhaps be regarded as a plan or design within the meaning of Article 1(g) of the Directive, the third part of the Article 52(2). On design contests in general, see Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 829 et seqq. 2 In the following the term ‘contracting authority’ is used even though there might not necessarily be an award of a contract in connection with the competition. 2

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second phase could not. The provision of assistance to the maître d’ouvrage in appraising offers submitted in relation to the procedure planned for the third phase clearly does not constitute a plan or design within the meaning of Article 1(g) of the Directive.’3 Design contests can be held either solely to find the winner of the contest or with the aim of entering into a contract to carry out the planned or designed task which the contest concerns. While design contests should be adapted to the provisions in Title I, on several points they differ from the other forms of contests or procurement procedures. The most important differences are that the selection or award criteria are not the same as those used for ordinary public contracts, that a contest does not necessarily result in the award of a contract, and that the assessment is made by a special jury appointed for the purpose. 2 A design contest can be used as the basis for entering into a subsequent procurement contract. This can be by means of a separate negotiated procedure without prior publication pursuant to Article 32(4). On the conditions and procedures for such a negotiated procedure without prior publication, see the commentary on Article 32(4) in section 32.4. It is also possible to award a contract based on the result of a design contest by using open or restricted procedures. 3 The fact that a contracting authority states, in the contract notice in connection with a design contest, that it expects to award a contract subsequently does not prevent it from refraining from entering into such a contract. This must be a consequence of the general right to cancel a procurement contest. It must be assumed that the need to cancel will arise more often in connection with design contests (i.e. that a contracting authority will refrain from entering into a contract on the basis of a design contest). This is because of the way in which the service is specified, as the contracting authority will not have specified in advance the nature of the procurement in the same way as with a normal procurement. This means that the contracting authority must have greater scope to decide whether the winning design is suitable for forming the basis of a contract. The primary purpose of a design contest is to obtain designs for a specific task, and in principle it is only a subordinate objective to enter into a contract. In this context the position of the contracting authority with regard to the formation of a contract must be clear to tenderers in advance.

80.1. Rules for design contests 4

Article 80(1) requires contracting authorities to follow procedures that are adapted to the provisions in Title I of the 2014 Public Sector Directive. When organising design contests, contracting authorities must follow procedures that are adapted to the provisions of Title I and Title III, Chapter II. This wording is new and it strengthens the connection between design contests and the rest of the Public Sector Directive. In the 2004 Public Sector Directive there was a requirement that more detailed rules should be drawn up for design contests. The provisions in Articles 78-82 of the 2014 Public Sector Directive are not a complete basis for holding contests, so contracting authorities have to supplement these provisions both with regard to the task and the procedure. The current wording provides that rules must be used that are adapted to the provisions in Title I of the Public Sector Directive. Among other things this means that the procedure must comply with the principles of equal treatment and transparency, as laid down in Article 18. The more detailed provisions on the selection and award criteria are discussed below. 3

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As described above in the commentary on Article 78, a number of changes have been 5 made to the former rules on design contests. The changes primarily consist of omitting several general provisions from the capital on design contests. This is not very significant in principle. Article 80(1) states that the contracting authority must use procedures that are adapted to the provisions in Title I. This means that, as a starting point, all the provisions in Articles 1-24 can be relevant to design contests. However, there are big differences in the extent to which design contests are covered by the wording of the provisions. This can mean different things, including that: (1) the legislator has focused on when and how design contests are covered by the provisions; or (2) in certain provisions, where it has seemed relevant/obvious, that the legislator has included or expressly named design contests. Where there is doubt as to whether a provision in Title I covers design contests, it is clear that not all the provisions in Title I have equal relevance for design contests. Title I lays down rules on the Public Sector Directive’s subject-matter and scope, definitions and that these are general provisions for which contracting authorities must have special regard. The wording in Article 80(1), requiring contracting authorities to ‘apply procedures which are adapted to the provisions of Title I’, does not seem equally appropriate to all the provisions in Title I. The wording must mean that the procedures must be in accordance with the thresholds and definitions and that exclusions pursuant to Articles 7 to 12 and the special situations referred to in Articles 13 to 17 also apply to design contests. Design contests are likewise covered by the general principles, such as the rules on communications and conflicts of interest. On the other hand, Title I does not contain any provisions on selection and award procedures, including the applicable criteria, or the actual procurement procedures, so there is no (express) requirement for a contracting authority to adapt the conditions for design contests to these provisions. The Public Sector Directive’s new provisions on conflicts of interest in its Article 24 6 concern the situation where a contracting authority’s personal or financial interest can lead to a decision being based on an improper consideration. The nature of a design contest is such that a key concern is to reduce the risk that a conflict of interests may arise from a contracting authority’s acquaintance with a participant which can have a decisive influence on the result of the contest, and that a ‘well-known’ undertaking may thereby be awarded a task or win a contest. This risk is reduced by the fact that assessment of projects by a jury (see below in the commentary on Article 82) means that decisions will to some extent be distanced from the contracting authority and by ensuring the anonymity of tenderers. The other kinds of conflict of interest, where candidates or tenderers have had prior involvement in the project as consultants, are governed by Articles 40 and 41. These provisions are not included in the provisions referred to in Article 80(1). However, such problems exist. Obtaining prior knowledge or even helping to define the framework for designs that are to be submitted can still occur in connection with design contests. In this case a general assessment of conflicts of interest could be made in connection with a preliminary handling of the proposals received by the contracting authority, i.e. before the projects submitted are forwarded to the jury or in connection with a prequalification system. Even though the relevant provisions are not in Title I, it can still be argued that Arti- 7 cles 40 and 41 should be seen as a special expression of the principle of equal treatment and that the disqualification of those who have been consulted at an earlier stage of the process should nevertheless be covered by Article 18 on the principles of procurement. According to Article 66(1) of the 2004 Public Sector Directive, the rules for organising design contests ‘shall be communicated to those interested in participating in the con-

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test’. This wording is no longer included in the equivalent provisions. However, it must be assumed that the content of this statement still applies, if only as the application of the general principles to the transparency of a procurement procedure. If the general principles in Title I apply there will not necessarily be a need to set them out in detail, as they are implicitly part of the basic rules for design contests. On the other hand there will still be a need to describe the parts of the procedure that are determined by the contracting authority. It must still be essential that the contracting authority makes it possible for interested undertakings to find out about the rules applicable to the contest, i.e. to ensure transparency.

80.2. On restrictions on the right to take part in a contest 8

Article 80(2) sets out the rules on restricting the right to take part in a design contest. The right to participate in a design contest may not be restricted by reference to the territory or part of the territory of a Member State. This means that the right to take part may not be restricted to undertakings from a particular Member State or from a specified part of that Member State. This is in accordance with the non-discrimination principle in the Treaty on the Functioning of the European Union (TFEU) and with the principles of freedom of movement. These principles apply to the whole of a Member State’s territory and to a part of its territory.4 Similarly, the right to take part in a contest may not be restricted because the law of the Member State where the contest is held requires participants to be natural persons or, conversely, to be legal persons. Thus an undertaking from other Member States may not be excluded from taking part in a contest regardless of whether it fulfils the requirements for organisational or corporate form in the contracting authority’s Member State. However if, after the design contest, a contract is awarded on the basis of a negotiated procedure, a tenderer may have to adopt some specified legal form in order to fulfil the contract. This will comply with Article 19(3).5

80.3. Restricted design contests As part of a restricted procedure, a design contest can be conducted in such a way that the contracting authority selects the undertakings that will be invited to take part in the contest in a separate phase of the procedure. Article 80(3) lays down rules on the selection criteria and on the number of undertakings that must or ought to be invited to take part in the contest. 10 The provision stipulates that the contracting authority must lay down clear and nondiscriminatory selection criteria when design contests are restricted to a limited number of participants. The provision gives the impression that it is not possible to make an assessment of the general circumstances of participants in connection with an open design contest. However, the fact that the provision refers to design contests with a limited number of participants (but not to open design contests) may be because in such contests there must be some form of selection. If the provision is read in this way, then it is possible that there can also be a need to assess the participants’ financial and professional standing in connection with an open design contest. A contracting authority may need to ensure that participants in a contest who submit proposals have the necessary professional qualifications to draw up a suitable proposal or the authority may not wish to be bound to work on a project with a participant who is not financially sound. The 9

4 5

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See Case 21/88, Du Pont de Nemours. See the commentary on Article 19(3).

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contracting authority thus has a legitimate interest in ensuring that it does not waste its resources assessing design proposals which they know in advance will not be of interest because of the participant’s lack of capacity. However, it must be assumed that there is not a right to have regard to participants’ financial or professional standing in connection with open design contests. What a contracting authority should do instead is to hold a restricted design contest for which participants must demonstrate that they have adequate financial or professional capacities. If a contracting authority holds a design contest which falls outside the scope of the provisions on this in the Public Sector Directive or the Utilities Directive, it can ask participants to demonstrate that they have adequate financial or professional capacities, even if the contracting authority uses an open design contest. There is greater freedom to lay down selection criteria in connection with design 11 contests than in connection with restricted procedures, competitive procedures with negotiation, competitive dialogue or innovation partnerships, since Article 80(3) does not refer to the traditional selection criteria in Article 58 in connection with restricted procedures, competitive procedures with negotiation and competitive dialogue. Several questions arise in this connection. First, it is not clear from Article 80 whether the criteria must be of the same kind as those laid down for the other forms of procurement (i.e. in relation to professional, technical, economic and financial standing). The wording of Article 80(3) differs slightly form that of Article 58. Article 80(3) states that the criteria must be ‘clear and non-discriminatory’, as distinct from ‘objective and non-discriminatory’. The difference in the wording is not so great or substantive as to require a different interpretation, though this might be possible to some extent. On the one hand there is a general assumption that an assessment of an undertaking’s suitability for carrying out a specific task must be made on the basis of the factors referred to above, since these cover all an undertaking’s relevant capacities. On the other hand the contract notice for a design contest must include information about the relevant capacities; see the heading to the notice for design contest Section III: Legal, economic, financial and technical information. The freedom given to a contracting authority by Article 80(3) must mainly consist of identifying the special qualifications that are relevant to the contest in question and to the documentation required. At the same time it must also be assumed that if a contracting authority wants to make a selection on the basis of factors that do not relate to technical, economic or financial capacities, Article 80(3) will prevent this. It must also be assumed that the possibility of using, as selection criteria, factors that have no relevance to the task (such as environmental factors) must be limited in the same way as with selection when using the ordinary forms of procurement procedure.6 Article 78(1) of the Utilities Directive provides that objective criteria must be used for selecting tenderers or candidates. It must be assumed that the criteria that may be used pursuant to the Utilities Directive and the criteria that may be used for design contests largely agree. Objective criteria are those that are not arbitrary or irrational. According to Article 78(1) of the Utilities Directive it must be assumed that both general commercial circumstances and non-commercial circumstances can be used. Circumstances such as the future prospects of working together and the probability of getting best value for money may also be permissible factors in design contests. Such selection criteria would not be obvious in connection with design contests, given their special nature. It must thus be assumed that such criteria will seldom be included in connection with design 6 On the possibility of taking non-commercial considerations into account when making selections under the ordinary forms of procurement procedure, see the commentary on Articles 57 and 58 and Interpretative communication of the Commission on the Community law applicable to public procurement and the possibilities for integrating social considerations into public procurement (COM(2001) 566 final).

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contests. On the general selection criteria, see the commentary on Article 58 of the Public Sector Directive. 12 When there is a design contest with a limited number of participants, the selection will basically be made in the same way as with restricted procedures, competitive procedures with negotiation, competitive dialogue and innovation partnerships. It is not clear from the provisions what restrictions there are on how quantitative selections should be made (i.e. reducing the number of qualified participants to a predetermined number), or by what criteria this selection can or must be made.7 It must be assumed that a contracting authority has broad scope for determining a quantitative selection, as long as: (a) the original selection criteria are included in the assessment, (b) the criteria are clear and non-discriminatory, and (c) the requirement for a genuine contest is respected. 8 According to the procedure for design contests with prior publication of a notice, a contracting authority may predetermine that a specified number of undertakings will be selected to take part, or it may predetermine a range of the number of undertakings to be selected, for example between 5 and 7. However, the number must be such as to ensure a genuine contest; see the last sentence in Article 80(3). In connection with selections for a design contest, it must be assumed that a contracting authority may exclude undertakings that do not fulfil requirements that can be made for their personal qualifications as listed in Article 57 (i.e. undertakings that are insolvent, have been penalised for certain conduct, have failed to pay taxes or social security contributions etc.). The procedure for design contests with prior publication of a notice also refers to these factors as lawful consideration. 13 While the choice or nomination of the winner of a contest is made by a jury (see Article 82), the rules on design contests do not stipulate who shall decide on the preliminary selection. However, it must be assumed that the contracting authority makes the selection. First, a jury can only be appointed once the preliminary selection has been made, since it is not possible to ensure that the jury is impartial because it is not known which undertakings will participate. Second, in this procedure it is only possible to make what is effectively a prequalifying selection since, if it results in the award of a contract, the design contest goes directly to a negotiated procedure; see Article 32(4) of the Public Sector Directive. Contracting authorities should have the opportunity to ensure that participating undertakings have the required qualifications. Third, Article 82(2) states that the plans and projects of candidates must be examined anonymously, not that their applications to take part should be anonymous (i.e. not the selection process).9 It is possible to nominate in advance one or more undertakings to participate in a contest. This is not laid down in Articles 78 to 82, but in the standard form, point IV.1. There is no statement as to how many undertakings can be invited in advance, or whether other undertakings must be accepted as participants. Also, there is no statement of a minimum requirement as to how many undertakings must take part in a design contest, as in the case of restricted procedures, competitive procedures with negotiation, competitive dialogue and innovation partnerships; see Article 65. It must be assumed that contracting authorities cannot conduct a design contest solely with participants who have been directly invited. There is a requirement to ensure effective competition.

On quantitative selection, see on Article 65 in section 65. The CJEU has ruled that, if a model is used in connection with an extraordinary prequalification, and if the model is decided on in advance, the contracting authority must make it public, at least if it concerns a weighting of the selection criteria; see Case C-470/99, Universale-Bau. 9 It can also be pointed out that a jury often does not have the competence to assess the financial capacities of candidates, if the contracting authority requests evidence of this. 7

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Where a number of invited participants is supplemented by undertakings that apply 14 to take part on the basis of a notice published in the EU Official Journal, the principle of equal treatment means that both kinds of participants must fulfill the same selection criteria. This applies to both quantitative and qualitative criteria.

Article 81 Composition of the jury The jury shall be composed exclusively of natural persons who are independent of participants in the contest. Where a particular professional qualification is required from participants in a contest, at least a third of the members of the jury shall have that qualification or an equivalent qualification.1 There is a general requirement for a jury to consist of natural persons who are inde- 1 pendent of the participants in the contest. On assessments of independence, see below in the commentary on Article 82. The requirement for independence must mean that, in composing a jury, potential members must be disregarded if they have some connection with one or more of the participants. However, a contracting authority can also fail to be impartial if it decides to set aside the jury’s decision and substitute its own decision (see the standard form for design contests, point IV.5.4). Where this happens, the persons in the contracting authority who take part in the award decision may not have any dual role with regard to the tenderer. If those taking part in a contest are required to have particular professional qualifica- 2 tions, there will be a requirement for the jury to have corresponding competences. The Directive does not state what is meant by ‘particular professional qualifications’. This might concern architectural services or IT services, for example. Thus the requirement for the jury to have corresponding competences must mean that corresponding competences are considered necessary in order for a jury to be able to assess the designs submitted for the contest. On this basis, particular professional qualifications must be assumed to be the qualifications needed to assess matters that cannot be assessed by a non-professional. Thus a qualification in computer technology may be required in order to assess data programs, and qualification as an engineer may be required to assess proposed solutions for building and construction works. On the other hand, the same level of qualification may not be required for assessing designs with a significant aesthetic element, since such elements can better be assessed by persons without particular professional qualifications than can technical matters. While technical qualifications may be required in order to take part in a design contest, there may not be a need for quite the same level of technical qualification in order to assess the contest. If a particular professional qualification is required in order to take part in a contest, at least a third of the members of the jury must have that qualification. The provision might mean that each required professional qualification must be represented on the jury. However, it is doubtful that this provision should be understood in this way. There would be a problem if three particular professional qualifications were required, as this would leave no room for jury members who do not possess the special qualification. There would also be a problem if more than three particular professional qualifications

1 On design contests in general, see Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 829 et seqq.

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were required, as they could not all be represented by having one third of the members of the jury. The question of the composition of the jury was raised by the Danish Complaints Board for Public Procurement (Klagenævnet for Udbud) in its ruling of 9 March 1998 FRI and its ruling of 6 September 1999 FRI. In the first case a design contest was put out to tender, concerning a consultancy task involving architectural, engineering and landscape architectural services. The jury consisted of 9 members, 7 members of the municipal planning committee and two professional assessors nominated by Danske Arkitekters Landsforbund/Akademisk Arkitektforening (Danish professional bodies). The Complaints Board found that this composition did not comply with the requirement of Article 13(6) of the former Public Service Contracts Directive (92/50/EEC), since only two members of the jury had the required professional qualifications, whereas the former Directive required that at least one third of the jury should have such qualifications. The appellant also claimed that, since engineering aspects of the design were to be judged, engineering skills should also have been represented on the jury. The Complaints Board upheld this claim and stated that at least one member of the jury should have qualifications equivalent to those of the tenderers who were consulting engineers. In the ruling of 6 September 1999 FRI, on a design contest for the State Archive that was planned to be located in the Ørestad development near Copenhagen, the appellant claimed that the Danish Ministry of Culture was in breach of Article 13(6) of the former Public Service Contracts Directive in composing a jury for assessing the task which, in the view of the appellant, covered both architectural and engineering services, as the jury did not have any members with engineering qualifications. The Complaints Board ruled that there was no requirement for engineering expertise to be represented on the jury. Thus it must be required that the proportion of the professionally expert members of a jury should reflect the professional qualifications required to assess tenders and designs. Where four different professional qualifications are required for taking part in a design contest, there must also be at least four members of the jury representing these specific qualifications. If the contracting authority wants to restrict the proportion of members of a jury with special qualifications to one third of its members, then the authority should increase the total number of the jury accordingly. Alternatively, the contracting authority may decide that the jury shall consist solely of members with the special qualifications. 3 Where special professional qualifications are required in order to take part in a contest, then in respect of foreign undertakings the contracting authority must recognise foreign qualifications that are equivalent to those of the Member State where the contracting authority is situated; see the principle of mutual recognition.2

Article 82 Decisions of the jury 1. The jury shall be autonomous in its decisions or opinions. 2. The jury shall examine the plans and projects submitted by the candidates anonymously and solely on the basis of the criteria indicated in the contest notice. 3. The jury shall record its ranking of projects in a report, signed by its members, made according to the merits of each project, together with its remarks and any points that may need clarification. 4. Anonymity shall be observed until the jury has reached its opinion or decision. 2

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See the introductory chapter on the principle of mutual recognition.

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5. Candidates may be invited, if need be, to answer questions that the jury has recorded in the minutes to clarify any aspect of the projects. 6. Complete minutes shall be drawn up of the dialogue between jury members and candidates.1

82.1. Autonomous decisions According to Article 81(1) of the Public Sector Directive, a jury must be autonomous 1 in its decisions or opinions. This must be established by means of general autonomy. This autonomy must relate to some extent to the contracting authority and to an even greater extent to the participants in the contest. The contracting authority will always have contact with the jury since, among other things, the authority is responsible for the conduct of the contest and will have a coordinating role necessitating some contact with the jury. Moreover, a contracting authority will often appoint several members of the jury from among its own employees. This will not be contrary to the requirement for autonomy. It must be assumed that the issue of autonomy should be assessed on the basis of the 2 same considerations as apply to conflicts of interest; see the commentary on Article 24. It is not clear whether the degree of independence sought under the rules on conflicts of interest is the same as that which applies to the assessment of autonomy pursuant to Article 82(1). However, it is reasonable to assume that, while a connection between an undertaking and a contracting authority may not be sufficient to constitute a breach of Article 24, it could nevertheless constitute a breach of Article 82(1). There will probably be a stricter requirement for autonomy pursuant to Article 82(1) than for independence pursuant to Article 24.

82.2. The examination of the plans and projects According to Article 82(2), the jury must examine the plans and projects submitted 3 by the candidates anonymously and solely on the basis of the criteria stated in the contest notice. As the contracting authority has greater freedom to determine the selection criteria in 4 design contests than ordinary procurement procedures, it has more extensive scope for choosing which factors are to form the basis for deciding the contest than with ordinary procurement procedures. The contracting authority is not obliged to choose between the lowest cost tender and the most economically advantageous tender. This allows an authority much greater flexibility. The flexibility to choose the criteria for deciding a contest has great significance to the award of a contract when the contract is awarded directly following the contest by competitive procedure with negotiation. This is because the winner of the contest will be awarded the subsequent contract. The criteria for deciding a design contest thus effectively function as award criteria. However, this only applies where a contracting authority decides on a winner of a design contest and the winner must be awarded the contract. Where a contracting authority chooses more than one winner of a contest, the authority must lay down criteria for the award of the contract. The award criteria laid down in these situations must be in accordance with Article 67, and must thus be either the lowest cost tender or the most economically advantageous tender.2 1 On design contests in general, see Sue Arrowsmith, The Law of Public and Utilities Procurement, p. 829 et seqq. 2 On the award criteria, see the commentary on Article 67.

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Where the award of a contract is separate from the design contest, the contracting authority must use either open or restricted procedures. In these cases the contracting authority must use the award criterion of either the lowest cost tender or the most economically advantageous tender. 5 There is a question about which legal framework applies to a contracting authority’s award criteria or decision-making criteria in relation to a design contest. The starting point is that the contracting authority is free to determine precisely what factors it will consider important when deciding the contest. At the same time, it must be assumed that this freedom should be limited by certain requirements for objectivity. It must be expected that a contracting authority may not reasonably decide the contest on the basis of factors that have nothing to do with the task that is the subject of the procurement. 3 The factors that can be included as award criteria will often be those that can be difficult to quantify, such as aesthetic qualities (in connection with deciding an architectural contest). An assessment will often be highly subjective and a matter of judgement. This must be one of the reasons why contracting authorities are given such wide scope to lay down the award criteria. At the same time the structure of a design contest means that the factor that usually plays the biggest role in ordinary procurements, namely price, does not play such a big role in design contests. Thus a design contest can be decided on the basis of factors other than price. It must be assumed that only the factors listed in the contract notice can form a basis for the decision of a jury. This is in line with the practice on ordinary procurements. 6 With design contests the contracting authority does not have to weight or prioritise any sub-criteria, though it would naturally increase the transparency of a design contest if there were such weighting or prioritising. Also, design proposals might be more in line with the contracting authorities’ wishes if the criteria were prioritised, since prioritising will make it clearer to participants and to the jury which factors are important for the contracting authority. However, giving weightings and priorities will bind the jury and limit its discretion. If, after a design contest, there is a procurement procedure with a view to awarding a contract, the procedure must be based on the ordinary award criteria; see Article 67. This will require weightings and priorities to be given where possible; see Article 67(5). It appears from the standard contract notice that a contracting authority can reject the award decision of the jury. However, this must presumably be based on proper grounds. Among other things it means that any rejection must be in line with the award criteria.

82.3. Documentation of the jury’s assessment 7

Article 82(3) requires the jury to record its ranking of projects and its comments on the qualities of each project. The jury must also record any points that may need clarification in a report signed by its members.

82.4. Requirement for anonymity 8

Article 82(4) states that anonymity must be observed until the jury has reached its opinion or made its decision. An opinion can be assumed to cover cases where the con3 On the other hand, it can be argued that the tendency to use the criterion of the most economically advantageous tender suggests that contracting authorities have increasing scope for determining the criteria; see e.g. Case C-513/99, Concordia. If this is the tendency in connection with the ordinary procurement procedures, it must apply with even greater strength to design contests, where the degree of freedom for contracting authorities is generally greater.

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Art. 82

tracting authority can overrule the jury’s decision (so the authority makes the final decision). However, where the jury makes a decision, its conclusion is final. It must be assumed that there is no obligation for a contracting authority to ensure that a jury publishes reasons for its assessments of every single proposal in relation to every single assessment criterion when assessing the proposals. On the other hand, the general obligation to give reasons (see Article 55) also applies to design contests, and an unsuccessful participant in a design contest can make a written request for information about the successful bid and its advantages, as well as the name of the tenderer whose bid has been accepted.

82.5. Questions about the projects This part of the rules on design contests is new. Under Article 82(5), if necessary, can- 9 didates for design projects can be invited to answer questions that the jury has recorded in the minutes referred to in Article 82(3) to clarify any aspect of the projects. It must be assumed that the jury has competence to assess whether it is necessary to get answers to the questions. It must also be assumed that the jury has wide discretion to assess such need. According to Article 82(5), the purpose of such an invitation is to clarify aspects of projects. It is not clear what this involves. According to the ordinary meaning of the word, it refers to clarification of a situation or an idea or a thing. As for the possibility of negotiation etc., does ‘clarification’ include the possibility of amending a proposal or offer? It must be assumed that this is not the case, both on the basis of the meaning of the word, on the basis of the context, the limited scope for communication, and because the provision itself refers to the possibility of asking questions. This indicates that questions may be asked which may be answered or clarification given. Questions do not usually prompt amendments, but rather clarifying answers. It cannot be assumed that candidates have an obligation to answer these questions, but the failure to do so will naturally have weight and possibly a decisive negative influence since the clarification of a proposal, which is the purpose of the question, will not be obtained, and this can affect the jury’s possibility of assessing it.

82.6. Report of dialogue This provision is new. It provides that complete minutes must be made of any dia- 10 logue between the jury and the candidates. It must be assumed that ‘complete minutes’ will contain all the matters relevant to the contest and the decision of the contest.

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TITLE IV GOVERNANCE Article 83 Enforcement 1. In order to effectively ensure correct and efficient implementation, Member States shall ensure that at least the tasks set out in this Article are performed by one or more authorities, bodies or structures. They shall indicate to the Commission all authorities, bodies or structures competent for those tasks. 2. Member States shall ensure that the application of public procurement rules is monitored. Where monitoring authorities or structures identify by their own initiative or upon the receipt of information specific violations or systemic problems, they shall be empowered to indicate those problems to national auditing authorities, courts or tribunals or other appropriate authorities or structures, such as the ombudsman, national parliaments or committees thereof. 3. The results of the monitoring activities pursuant to paragraph 2 shall be made available to the public through appropriate means of information. These results shall also be made available to the Commission. For instance, they may be integrated in the monitoring reports referred to in the second subparagraph of this paragraph. By 18 April 2017 and every three years thereafter Member States shall submit to the Commission a monitoring report covering, where applicable, information on the most frequent sources of wrong application or of legal uncertainty, including possible structural or recurring problems in the application of the rules, on the level of SME participation in public procurement and about prevention, detection and adequate reporting of cases of procurement fraud, corruption, conflict of interest and other serious irregularities. The Commission may, not more than every three years, request Member States to provide information on the practical implementation of national strategic procurement policies. For the purposes of this paragraph and paragraph 4 of this Article, ‘SME’ shall be understood as defined in Commission Recommendation 2003/361/EC.1 On the basis of the data received under this paragraph, the Commission shall regularly issue a report on the implementation and best practices of national procurement policies in the internal market. 4. Member States shall ensure that: (a) information and guidance on the interpretation and application of the Union public procurement law is available free of charge to assist contracting authorities and economic operators, in particular SMEs, in correctly applying the Union public procurement rules; and (b) support is available to contracting authorities with regard to planning and carrying out procurement procedures. 5. Member States shall, without prejudice to the general procedures and working methods established by the Commission for its communications and contacts 1 Commission Recommendation of 6 May 2003 concerning the definition of micro, small and mediumsized enterprises, (OJ L 124, 20.5.2003, p. 36).

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with Member States, designate a point of reference for cooperation with the Commission as regards the application of public procurement legislation. 6. Contracting authorities shall, at least for the duration of the contract, keep copies of all concluded contracts with a value equal to or greater than: (a) 1 000 000 EUR in the case of public supply contracts or public service contracts; (b) 10 000 000 EUR in the case of public works contracts. Contracting authorities shall grant access to those contracts; however, access to specific documents or items of information may be denied to the extent and on the conditions provided for in the applicable Union or national rules on access to documents and data protection. In Article 83 it is established that Member States are subject to a number of obliga- 1 tions in order to ensure a correct and efficient implementation of the Public Sector Directive. Among other requirements these obligations cover monitoring, providing information and guidance. The background for the provision is presented in the preamble to the Public Sector Directive, recital 121: “The evaluation has shown that there is still considerable room for improvement in the application of the Union public procurement rules. With a view to a more efficient and consistent application of the rules, it is essential to get a good overview on possible structural problems and general patterns in national procurement policies, in order to address possible problems in a more targeted way. That overview should be gained through appropriate monitoring, the results of which should be regularly published, in order to allow an informed debate on possible improvements of procurement rules and practice. Acquiring such a good overview could also allow insights on the application of public procurement rules in the context of the implementation of projects co-financed by the Union. Member States should remain free to decide how and by whom this monitoring should be carried out in practice; in so doing, they should also remain free to decide whether the monitoring should be based on a sample-based expost control or on a systematic, ex-ante control of public procurement procedures covered by this Directive. It should be possible to bring potential problems to the attention of the proper bodies; this should not necessarily require that those having performed the monitoring have standing before courts and tribunals. Better guidance, information and support to contracting authorities and economic operators could also greatly contribute to enhancing the efficiency of public procurement, through better knowledge, increased legal certainty and professionalisation of procurement practices. Such guidance should be made available to contracting authorities and economic operators wherever it appears necessary to improve correct application of the rules. The guidance to be provided could cover all matters relevant to public procurement, such as acquisition planning, procedures, choice of techniques and instruments and good practices in the conduct of the procedures. With regard to legal questions, guidance should not necessarily amount to a complete legal analysis of the issues concerned; it could be limited to a general indication of the elements that should be taken into consideration for the subsequent detailed analysis of the questions, for instance by pointing to case-law that could be relevant or to guidance notes or other sources having examined the specific question concerned.” One of the most important issues in the newest procurement rules is the promotion 2 of opportunities for SMEs in contests for public contracts. The connection between the rules on enforcement in Article 83 and SMEs is presented in the preamble to the Public Sector Directive, recital 124: “Given the potential of SMEs for job creation, growth and

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innovation it is important to encourage their participation in public procurement, both through appropriate provisions in this Directive as well as through initiatives at the national level. The new provisions provided for in this Directive should contribute towards an improvement of the level of success, by which is understood the share of SMEs in the total value of contracts awarded. It is not appropriate to impose obligatory shares of success, however, the national initiatives to enhance SME participation should be closely monitored given its importance.” 3 Additionally, the preamble sheds some light on the background of the context of establishing one single point of reference: “A series of procedures and working methods have already been established in respect of the Commission’s communications and contacts with Member States, such as communications and contacts relating to the procedures provided for under Articles 258 and 260 TFEU, the Internal Market Problem Solving Network (SOLVIT) and EU Pilot, which are not modified by this Directive. They should, however, be complemented by the designation of one single point of reference in each Member State for the cooperation with the Commission, which would function as sole entry point for matters concerning public procurement in the Member State concerned. This function may be performed by persons or structures which are already regularly in contact with the Commission on issues relating to public procurement, such as national contact points, members of the Advisory Committee on Public Procurement, Members of the Procurement Network or national coordinating instances.”2

Article 84 Individual reports on procedures for the award of contracts 1. For every contract or framework agreement covered by this Directive, and every time a dynamic purchasing system is established, contracting authorities shall draw up a written report which shall include at least the following: (a) the name and address of the contracting authority, the subject-matter and value of the contract, framework agreement or dynamic purchasing system; (b) where applicable, the results of the qualitative selection and/or reduction of numbers pursuant to Articles 65 and 66, namely: (i) the names of the selected candidates or tenderers and the reasons for their selection; (ii) the names of the candidates or tenderers rejected and the reasons for their rejection; (c) the reasons for the rejection of tenders found to be abnormally low; (d) the name of the successful tenderer and the reasons why its tender was selected and, where known, the share of the contract or framework agreement which the successful tenderer intends to subcontract to third parties; and, where known at this point in time, the names of the main contractor’s subcontractors, if any; (e) for competitive procedures with negotiations and competitive dialogues, the circumstances as laid down in Article 26 which justify the use of those procedures; (f) for negotiated procedures without prior publication, the circumstances referred to in Article 32 which justify the use of this procedure;

2

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The preamble to the Public Sector Directive, recital 125.

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(g) where applicable, the reasons why the contracting authority has decided not to award a contract or framework agreement or to establish a dynamic purchasing system; (h) where applicable, the reasons why other means of communication than electronic means have been used for the submission of tenders; (i) where applicable, conflicts of interests detected and subsequent measures taken. This report shall not be required in respect of contracts based on framework agreements where these are concluded in accordance with Article 33(3) or point (a) of Article 33(4). To the extent that the contract award notice drawn up pursuant to Article 50 or Article 75(2) contains the information required in this paragraph, contracting authorities may refer to that notice. 2. Contracting authorities shall document the progress of all procurement procedures, whether or not those are conducted by electronic means. To that end, they shall ensure that they keep sufficient documentation to justify decisions taken in all stages of the procurement procedure, such as documentation on communications with economic operators and internal deliberations, preparation of the procurement documents, dialogue or negotiation if any, selection and award of the contract. The documentation shall be kept for a period of at least three years from the date of award of the contract. 3. The report, or its main elements, shall be communicated to the Commission or the competent authorities, bodies or structures referred to in Article 83 where they so request. Article 84 contains a detailed description of the content of the individual reports on 1 procedures for the award of contracts. The background is laid out in the preamble to the Public Sector Directive, recital 126: “The traceability and transparency of decision-making in procurement procedures is essential for ensuring sound procedures, including efficiently fighting corruption and fraud. Contracting authorities should therefore keep copies of concluded high-value contracts, in order to be able to provide access to those documents to interested parties in accordance with applicable rules on access to documents. Furthermore, the essential elements and decisions of individual procurement procedures should be documented in a procurement report. To avoid administrative burdens wherever possible, it should be permitted for the procurement report to refer to information already contained in the relevant contract award notice. The electronic systems for publication of those notices, managed by the Commission, should also be improved with a view to facilitating the entry of data while making it easier to extract global reports and exchange data between systems.”

Article 85 National reporting and statistical information 1. The Commission shall review the quality and completeness of data that can be extracted from the notices, referred to in Articles 48, 49, 50, 75 and 79, which are published in accordance with Annex VIII. Where the quality and completeness of the data referred to in the first subparagraph of this paragraph is not compliant with the obligations stipulated in Article 48(1), Article 49, Article 50(1), Article 75(2) and Article 79(3), the Commission shall request complementary information from the Member State concerned. Michael Steinicke

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Art. 86

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Within a reasonable time, the Member State concerned shall supply the missing statistical information requested by the Commission. 2. By 18 April 2017 and every three years thereafter, Member States shall forward to the Commission a statistical report for procurement which would have been covered by this Directive if its value had exceeded the relevant threshold laid down in Article 4, indicating an estimation of the aggregated total value of such procurement during the period concerned. That estimation may in particular be based on data available under national publication requirements or on sample-based estimates. That report may be included in the report referred to in Article 83(3). 3. Member States shall make available to the Commission information on their institutional organisation related to the implementation, monitoring and enforcement of this Directive, as well as on national initiatives taken to provide guidance on or assist in implementation of Union rules on public procurement, or to respond to challenges confronting the implementation of those rules. That information may be included in the report referred to in Article 83(3).

Article 86 Administrative cooperation 1. Member States shall provide mutual assistance to each other, and shall put in place measures for effective cooperation with one another, in order to ensure exchange of information on issues referred to in Articles 42, 43, 44, 57, 59, 60, 62, 64 and 69. They shall ensure the confidentiality of the information which they exchange. 2. The competent authorities of all Member States concerned shall exchange information in compliance with personal data protection rules provided for in Directive 95/46/EC of the European Parliament and of the Council1 and Directive 2002/58/EC of the European Parliament and of the Council.2 3. To test the suitability of using the Internal Market Information System (IMI) established by Regulation (EU) No 1024/2012 for the purpose of exchanging information covered by this Directive, a pilot project shall be launched by 18 April 2015. 1

Article 86 provides for the framework for the administrative cooperation between Member States and the intention is described in the preamble to the Public Sector Directive, recital 128: “Effective administrative cooperation is necessary for the exchange of information needed for conducting award procedures in cross-border situations, in particular with regard to the verification of the grounds for exclusion and the selection criteria, the application of quality and environmental standards and of lists of approved economic operators. The exchange of information is subject to national laws on confidentiality. Hence, this Directive does not entail any obligation for Member States to exchange information that goes beyond what national contracting authorities can access. The Internal Market Information System (IMI) established by Regulation (EU) No 1024/2012 of the Euro-

1 Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (OJ L 281, 23.11.1995, p. 31). 2 Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications) (OJ L 201, 31.7.2002, p. 37).

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pean Parliament and of the Council could provide a useful electronic means to facilitate and enhance administrative cooperation managing the exchange of information on the basis of simple and unified procedures overcoming language barriers. A pilot project should consequently be launched as soon as possible to test the suitability of an expansion of IMI to cover the exchange of information under this Directive.”

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TITLE V DELEGATED POWERS, IMPLEMENTING POWERS AND FINAL PROVISIONS Article 87 Exercise of the delegation 1. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article. 2. The power to adopt delegated acts referred to in Articles 6, 22, 23, 56 and 68 shall be conferred on the Commission for an indeterminate period of time from 17 April 2014. 3. The delegation of power referred to in Articles 6, 22, 23, 56 and 68 may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force. 4. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council. 5. A delegated act adopted pursuant to Articles 6, 22, 23, 56 and 68 shall enter into force only where no objection has been expressed either by the European Parliament or by the Council within a period of two months of notification of the act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or of the Council. 1

The background for the provision on delegation is explained in the preamble to the Public Sector Directive, recital 129: “In order to adapt to rapid technical, economic and regulatory developments, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of a number of non-essential elements of this Directive. Due to the need to comply with international agreements, the Commission should be empowered to modify the technical procedures for the calculation methods concerning thresholds as well as to periodically revise the thresholds themselves and to adapt Annex X; the lists of central government authorities are subject to variations due to administrative changes at national level. These are notified to the Commission, which should be empowered to adapt Annex I; references to the CPV nomenclature may undergo regulatory changes at Union level and it is necessary to reflect those changes into the text of this Directive; the technical details and characteristics of the devices for electronic receipt should be kept up to date with technological developments; it is also necessary to empower the Commission to make mandatory technical standards for electronic communication to ensure the interoperability of technical formats, processes and messaging in procurement procedures conducted using electronic means of communication taking into account technological developments; the list of legal acts of the Union establishing common methodologies for the calculation of life-cycle costs should be quickly adapted to incorporate the measures adopted on a sectoral basis. In order to satisfy those needs, the Commission should be empowered to keep the list of legal acts including life-cycle costing methodologies up-to date. It is of particular 812

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TITLE V IMPLEMENTING POWERS; FINAL PROVISIONS

Art. 89

importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level. When preparing and drawing up delegated acts, the Commission should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.

Article 88 Urgency procedure 1. Delegated acts adopted under this Article shall enter into force without delay and shall apply as long as no objection is expressed in accordance with paragraph 2. The notification of a delegated act to the European Parliament and to the Council shall state the reasons for the use of the urgency procedure. 2. Either the European Parliament or the Council may object to a delegated act in accordance with the procedure referred to in Article 87(5). In such a case, the Commission shall repeal the act without delay following the notification of the decision to object by the European Parliament or by the Council.

Article 89 Committee procedure 1. The Commission shall be assisted by the Advisory Committee on Public Procurement established by Council Decision 71/306/EEC.1 That committee shall be a committee within the meaning of Regulation (EU) No 182/2011. 2. Where reference is made to this paragraph, Article 4 of Regulation (EU) No 182/2011 shall apply. 3. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply. The basis for this provision has been presented in the preamble to the Public Sector 1 Directive, recital 131: “In order to ensure uniform conditions for the implementation of this Directive, as for the drawing up of the standard forms for the publication of notices and a standard form for self-declarations, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council.”

Article 89, para. 2 refers to Article 4 of Regulation 182/2011 Article 4 on the advisory 2 procedure and Article 8, para. 3 refers to regulation 182/2011 Article 5 on the examination proceure. In recital 132 of the preamble to the Public Sector Directive it is stated that “The advisory procedure should be used for the adoption of the implementing acts concerning standard forms for the publication of notices, which do not have any impact either from the financial point of view or on the nature and scope of obligations stemming from this Directive. On the contrary, those acts are characterised by a mere administrative purpose and serve to facilitate the application of the rules set out in this Directive.” In regard to the examination procedure this one is explained in recital 133 of the preamble, where it is stated that the “examination procedure should be used for the adoption of the standard form for self-declarations, due to the impact of those self-dec-

1 Council Decision 71/306/EEC of 26 July 1971 setting up an Advisory Committee for Public Works Contracts (OJ L 185, 16.8.1971, p. 15).

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larations on procurement and because they play a central role in the simplification of the documentation requirements in the procurement procedures.”

Article 90 Transposition and transitional provisions 1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 18 April 2016. They shall forthwith communicate to the Commission the text of those measures. 2. Notwithstanding paragraph 1 of this Article, Member States may postpone the application of Article 22(1) until 18 October 2018, except where use of electronic means is mandatory pursuant to Articles 34, 35 or 36, Article 37(3), Article 51(2) or Article 53. Notwithstanding paragraph 1 of this Article, Member States may postpone the application of Article 22(1) for central purchasing bodies until 18 April 2017. Where a Member State chooses to postpone the application of Article 22(1), that Member State shall provide that contracting authorities may choose between the following means of communication for all communication and information exchange: (a) electronic means in accordance with Article 22; (b) post or other suitable carrier; (c) fax; (d) a combination of those means. 3. Notwithstanding paragraph 1 of this Article, Member States may postpone the application of the second subparagraph of Article 59(2) until 18 April 2018. 4. Notwithstanding paragraph 1 of this Article, Member States may postpone the application of the second subparagraph of Article 59(5) until 18 October 2018. 5. Notwithstanding paragraph 1 of this Article, Member States may postpone the application of Article 61(2) until 18 October 2018. 6. When Member States adopt the measures referred to in paragraphs 1 to 5, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made. 7. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 91 Repeals Directive 2004/18/EC is repealed with effect from 18 April 2016. References to the repealed Directive shall be construed as references to this Directive and shall be read in accordance with the correlation table in Annex XV.

Article 92 Review The Commission shall review the economic effects on the internal market, in particular in terms of factors such as the cross-border award of contracts and transaction costs, resulting from the application of the thresholds set in Article 4 and report thereon to the European Parliament and the Council by 18 April 2019. 814

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TITLE V IMPLEMENTING POWERS; FINAL PROVISIONS

Art. 94

The Commission shall, where possible and appropriate, consider suggesting an increase of the threshold amounts applicable under the GPA during the next round of negotiations. In the event of any change to the threshold amounts applicable under the GPA, the report shall, where appropriate, be followed by a proposal for a legal act amending the thresholds set out in this Directive. The provision sets the framework for the Commission’s obligations in regard to re- 1 view of some key elements of public contracts such as (but apparently not exclusively) the cross-border award of contracts and transaction costs.

Article 93 Entry into force This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 94 Addressees This Directive is addressed to the Member States.

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PART II The Utilities Directive 2014/25/EU DIRECTIVE 2014/25/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 53(1) and Article 62 and Article 114 thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Economic and Social Committee,1 Having regard to the opinion of the Committee of the Regions,2 Acting in accordance with the ordinary legislative procedure,3 Whereas: (1) In the light of the results of the Commission staff working paper of 27 June 2011 entitled ‘Evaluation Report – Impact and Effectiveness of EU Public Procurement Legislation’, it appears appropriate to maintain rules on procurement by entities operating in the water, energy, transport and postal services sectors, since national authorities continue to be able to influence the behaviour of those entities, including participation in their capital and representation in the entities’ administrative, managerial or supervisory bodies. Another reason to continue to regulate procurement in those sectors is the closed nature of the markets in which the entities in those sectors operate, due to the existence of special or exclusive rights granted by the Member States concerning the supply to, provi-

(2)

(3)

(4)

sion or operation of networks for providing the service concerned. In order to ensure the opening up to competition of procurement by entities operating in the water, energy, transport and postal services sectors, provisions should be drawn up coordinating procurement procedures in respect of contracts above a certain value. Such coordination is needed to ensure the effect of the principles of the Treaty on the Functioning of the European Union (TFEU) and in particular the free movement of goods, the freedom of establishment and the freedom to provide services as well as the principles deriving therefrom, such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency. In view of the nature of the sectors affected, the coordination of procurement procedures at the level of the Union should, while safeguarding the application of those principles, establish a framework for sound commercial practice and should allow maximum flexibility. For procurement the value of which is lower than the thresholds triggering the application of the provisions of Union coordination, it is advisable to recall the case-law of the Court of Justice of the European Union regarding the proper application of the rules and principles of the TFEU. Public procurement plays a key role in the Europe 2020 strategy, set out in the Commission Communication of 3 March 2010 entitled ‘Europe 2020, a

OJ C 191, 29.6.2012, p. 84. OJ C 391, 18.12.2012, p. 49. 3 Position of the European Parliament of 15 January 2014 (not yet published in the Official Journal), and decision of the Council of 11 February 2014. 1

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DIRECTIVE 2014/25/EU

(5)

(6)

(7)

strategy for smart, sustainable and inclusive growth’ (‘Europe 2020 strategy for smart, sustainable and inclusive growth’), as one of the market-based instruments to be used to achieve smart, sustainable and inclusive growth while ensuring the most efficient use of public funds. For that purpose, the public procurement rules adopted pursuant to Directive 2004/17/EC of the European Parliament and of the Council4 and Directive 2004/18/EC of the European Parliament and of the Council5 should be revised and modernised in order to increase the efficiency of public spending, facilitating in particular the participation of small and medium-sized enterprises (SMEs) in public procurement and to enable procurers to make better use of public procurement in support of common societal goals. There is also a need to clarify basic notions and concepts to ensure better legal certainty and to incorporate certain aspects of related well-established case-law of the Court of Justice of the European Union. When implementing this Directive, the United Nations Convention on the Rights of Persons with Disabilities6 should be taken into account, in particular in connection with the choice of means of communications, technical specifications, award criteria and contract performance conditions. It is appropriate that the notion of procurement is as close as possible to that applied pursuant to Directive 2014/24/EU of the European Parliament of the Council,7 having due regard to the specificities of the sectors covered by this Directive. It should be recalled that nothing in this Directive obliges Member States to contract out or externalise the provision of services that they wish to pro-

PART II The Utilities Directive 2014/25/EU

(8)

(9)

vide themselves or to organise by means other than procurement within the meaning of this Directive. The provision of services based on laws, regulations or employment contracts, should not be covered. In some Member States, this might for example be the case for the provision of certain services to the community, such as the supply of drinking water. It is also appropriate to recall that this Directive should not affect the social security legislation of the Member States. Nor should it deal with the liberalisation of services of general economic interest, reserved to public or private entities, or with the privatisation of public entities providing services. It should equally be recalled that Member States are free to organise the provision of compulsory social services or of other services such as postal services either as services of general economic interest or as non-economic services of general interest or as a mixture thereof. It is appropriate to clarify that non-economic services of general interest should not fall within the scope of this Directive. It should finally be recalled that this Directive is without prejudice to the freedom of national, regional and local authorities to define, in conformity with Union law, services of general economic interest, their scope and the characteristics of the service to be provided, including any conditions regarding the quality of the service, in order to pursue their public policy objectives. This Directive should also be without prejudice to the power of national, regional and local authorities to provide, commission and finance services of general economic interest in accordance with Article 14 TFEU and Proto-

4 Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors (OJ L 134, 30.4.2004, p. 1). 5 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 (OJ L 134, 30.4.2004, p. 114). 6 Approved by Council Decision 2010/48/EC of 26 November 2009 concerning the conclusion, by the European Community, of the United Nations Convention on the Rights of Persons with Disabilities (OJ L 23, 27.1.2010, p. 35). 7 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement (see page 65 of this Official Journal).

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PART II The Utilities Directive 2014/25/EU col No 26 on Services of General Interest annexed to the TFEU and to the Treaty on European Union (TEU). In addition, this Directive does not deal with the funding of services of general economic interest or with systems of aids granted by Member States, in particular in the social field, in accordance with Union rules on competition. (10) A contract should be deemed to be a works contract only if its subject-matter specifically covers the execution of activities listed in Annex I, even if the contract covers the provision of other services necessary for the execution of such activities. Service contracts, in particular in the sphere of property management services, may, in certain circumstances, include works. However, in so far as such works are incidental to the principal subject-matter of the contract, and are a possible consequence thereof or a complement thereto, the fact that such works are included in the contract does not justify the qualification of the service contract as a works contract. However, in view of the diversity of works contracts, contracting entities should be able to make provision for contracts for the design and execution of work to be awarded either separately or jointly. This Directive is not intended to prescribe either joint or separate contract awards. (11) The realisation of a work corresponding to the requirements specified by a contracting entity requires that the entity in question must have taken measures to define the type of the work or, at the very least, have had a decisive influence on its design. Whether the contractor realises all or part of the work by his own means or ensures their realisation by other means should not change the classification of the contract as a works contract, as long as the contractor assumes a direct or indirect obligation that is legally enforceable to ensure that the works will be realised. (12) The notion of ‘contracting authorities’ and in particular that of ‘bodies governed by public law’ have been examined repeatedly in the case-law of the Court of Justice of the European Union. To clarify that the scope of this Direc-

DIRECTIVE 2014/25/EU tive ratione personae should remain unaltered, it is appropriate to maintain the definitions on which the Court based itself and to incorporate a certain number of clarifications given by that case-law as a key to the understanding of the definitions themselves, without the intention of altering the understanding of the concept as elaborated by the case-law. For that purpose, it should be clarified that a body which operates in normal market conditions, aims to make a profit, and bears the losses resulting from the exercise of its activity should not be considered as being a ‘body governed by public law’ since the needs in the general interest, that it has been set up to meet or been given the task of meeting, can be deemed to have an industrial or commercial character. Similarly, the condition relating to the origin of the funding of the body considered, has also been examined in the case-law, which has clarified, inter alia, that being financed for ‘the most part’ means for more than half, and that such financing may include payments from users which are imposed, calculated and collected in accordance with rules of public law. (13) In the case of mixed contracts, the applicable rules should be determined with respect to the main subject of the contract where the different parts which constitute the contract are objectively not separable. It should therefore be clarified how contracting entities should determine whether the different parts are separable or not. Such clarification should be based on the relevant case-law of the Court of Justice of the European Union. The determination should be carried out on a case-by-case basis, in which the expressed or presumed intentions of the contracting entity to regard the various aspects making up a mixed contract as indivisible should not be sufficient, but should be supported by objective evidence capable of justifying them and of establishing the need to conclude a single contract. Such a justified need to conclude a single contract could for instance be present in the case of the construction of one single building, a part of which

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DIRECTIVE 2014/25/EU is to be used directly by the contracting entity concerned and another part to be operated on a concessions basis, for instance to provide parking facilities to the public. It should be clarified that the need to conclude a single contract may be due to reasons both of a technical nature and of an economic nature. (14) In the case of mixed contracts, which can be separated, contracting entities are always free to award separate contracts for the separate parts of the mixed contract, in which case the provisions applicable to each separate part should be determined exclusively with respect to the characteristics of that specific contract. On the other hand, where contracting entities choose to include other elements in the procurement, whatever their value and whatever the legal regime the added elements would otherwise have been subject to, the main principle should be that, where a contract should be awarded pursuant to the provisions of this Directive, if awarded on its own, then this Directive should continue to apply to the entire mixed contract. (15) However, special provision should be made for mixed contracts involving defence or security aspects or parts not falling within the scope of the TFEU. In such cases, non-application of this Directive should be possible provided that the award of a single contract is justified for objective reasons and that the decision to award a single contract is not taken for the purpose of excluding contracts from the application of this Directive or of Directive 2009/81/EC of the European Parliament and of the Council.8 It should be clarified that contracting entities should not be prevented from choosing to apply this Directive to certain mixed contracts instead of applying Directive 2009/81/EC. (16) Furthermore, contracts might be awarded for the purpose of meeting the requirements of several activities, possibly subject to different legal regimes. It should be clarified that the legal

PART II The Utilities Directive 2014/25/EU regime applicable to a single contract intended to cover several activities should be subject to the rules applicable to the activity for which it is principally intended. Determination of the activity for which the contract is principally intended can be based on an analysis of the requirements which the specific contract must meet, carried out by the contracting entity for the purposes of estimating the contract value and drawing up the procurement documents. In certain cases, such as the purchase of a single piece of equipment for the pursuit of activities for which information allowing an estimation of the respective rates of use would be unavailable, it might be objectively impossible to determine for which activity the contract is principally intended. The rules applicable to such cases should be indicated. (17) It should be clarified that the notion of ‘economic operators’ should be interpreted in a broad manner so as to include any persons and/or entities which offer the execution of works, the supply of products or the provision of services on the market, irrespective of the legal form under which they have chosen to operate. Thus, firms, branches, subsidiaries, partnerships, cooperative societies, limited companies, universities, public or private, and other forms of entities than natural persons should all fall within the notion of economic operator, whether or not they are ‘legal persons’ in all circumstances. (18) It should be clarified that groups of economic operators, including where they have come together in the form of a temporary association, may participate in award procedures without it being necessary for them to take on a specific legal form. To the extent this is necessary, for instance where joint and several liability is required, a specific form may be required when such groups are awarded the contract. It should also be clarified that contracting entities should be able to set out ex-

8 Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC (OJ L 216, 20.8.2009, p. 76).

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PART II The Utilities Directive 2014/25/EU plicitly how groups of economic operators are to meet the criteria and requirements for qualification and qualitative selection set out in this Directive, which are required of economic operators participating on their own. The performance of contracts by groups of economic operators may necessitate setting conditions which are not imposed on individual participants. Such conditions, which should be justified by objective reasons and be proportionate, could for instance include requiring the appointment of a joint representation or a lead partner for the purposes of the procurement procedure or requiring information on their constitution. (19) To ensure a real opening up of the market and a fair balance in the application of procurement rules in the water, energy, transport and postal services sectors it is necessary for the entities covered to be identified on a basis other than their legal status. It should be ensured, therefore, that the equal treatment of contracting entities operating in the public sector and those operating in the private sector is not prejudiced. It is also necessary to ensure, in keeping with Article 345 TFEU, that the rules governing the system of property ownership in Member States are not prejudiced. (20) The notion of special or exclusive rights is central to the definition of the scope of this Directive, since entities which are neither contracting authorities nor public undertakings within the meaning of this Directive are subject to its provisions only to the extent that they

DIRECTIVE 2014/25/EU exercise one of the activities covered on the basis of such rights. It is therefore appropriate to clarify that rights which have been granted by means of a procedure based on objective criteria, in particular pursuant to Union legislation, and for which adequate publicity has been ensured do not constitute special or exclusive rights for the purposes of this Directive. That legislation should include Directive 2009/73/EC of the European Parliament and of the Council,9 Directive 2009/72/EC of the European Parliament and of the Council,10 Directive 97/67/EC of the European Parliament and of the Council,11 Directive 94/22/EC of the European Parliament and of the Council12 and Regulation (EC) No 1370/2007 of the European Parliament and of the Council.13 It should also be clarified that that listing of legislation is not exhaustive and that rights in any form, including by way of acts of concession, which have been granted by means of other procedures based on objective criteria and for which adequate publicity has been ensured do not constitute special or exclusive rights for the purposes of defining the scope of this Directive ratione personae. The concept of exclusive rights should also be used in the context of determining whether use of a negotiated procedure without prior call for competition would be justified because the works, supplies or services can be supplied only by a particular economic operator because of the protection of certain exclusive rights.

9 Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (OJ L 211, 14.8.2009, p. 94). 10 Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (OJ L 211, 14.8.2009, p. 55). 11 Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the development of the internal market of Community postal services and the improvement of quality of service (OJ L 15, 21.1.1998, p. 14). 12 Directive 94/22/EC of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons (OJ L 164, 30.6.1994, p. 3). 13 Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70 (OJ L 315, 3.12.2007, p. 1).

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DIRECTIVE 2014/25/EU However, bearing in mind the different ratio legis behind these provisions, it should be clarified that the notion of exclusive rights does not need to have the same meaning in the two contexts. It should thus be clarified that an entity, which has won the exclusive right to provide a given service in a given geographic area following a procedure based on objective criteria for which adequate transparency has been ensured would not, if a private body, be a contracting entity itself, but would, nevertheless, be the only entity that could provide the service concerned in that area. (21) Certain entities are active in the fields of production, transmission or distribution of both heat and cooling. There may be some uncertainty as to which rules apply to respectively heat and cooling related activities. It should therefore be clarified that contracting authorities, public undertakings and private companies, which are active in the heating sector are subject to this Directive, however, in the case of private undertakings, on the additional condition of operating on the basis of special or exclusive rights. On the other hand, contracting authorities operating in the cooling field are subject to the rules of Directive 2014/24/EU, whereas public undertakings and private undertakings, irrespectively of whether these latter operate on the basis of special or exclusive rights, are not subject to procurement rules. It should finally be clarified that contracts awarded for the pursuit of both heating and cooling contracts should be examined under the provisions on contracts for the pursuit of several activities to determine which procurement rules, if any, will govern their award. (22) Before envisaging any change to the scope of this Directive and Directive 2014/24/EU for this sector, the situation of the cooling sector should be examined in order to obtain sufficient information, in particular in respect of the competitive situation, the degree of cross-border procurement and the

PART II The Utilities Directive 2014/25/EU views of stakeholders. Given that the application of Directive 2014/23/EU of the European Parliament and the Council14 to this sector could have a substantial impact in terms of marketopening, it would be appropriate to conduct the examination when assessing the impact of Directive 2014/23/EU. (23) Without in any way extending the scope of this Directive, it should be clarified that production, wholesale and retail sale of electricity are covered when this Directive refers to the supply of electricity. (24) Contracting entities that operate in the drinking water sector may also deal with other activities relating to water, such as projects in the field of hydraulic engineering, irrigation, land drainage or the disposal and treatment of sewage. In such case, contracting entities should be able to apply the procurement procedures provided for in this Directive in respect of all their activities relating to water, whichever part of the water cycle is concerned. However, procurement rules of the type proposed for supplies of products are inappropriate for purchases of water, given the need to procure water from sources near the area in which it will be used. (25) It is appropriate to exclude procurement made for the purpose of exploring for oil and gas as that sector has consistently been found to be subject to such competitive pressure that the procurement discipline brought about by the Union procurement rules is no longer needed. As extraction of oil and gas continues to fall within the scope of this Directive, there might be a need to distinguish between exploration and extraction. In doing so, ‘exploration’ should be considered to include the activities that are undertaken in order to verify whether oil and gas is present in a given zone, and, if so, whether it is commercially exploitable, whereas ‘extraction’ should be considered as the ‘production’ of oil and gas. In line with established practice in merger cases, ‘production’ should be considered also to include ‘development’, i.e. the setting

14 Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts (see page 1 of this Official Journal).

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PART II The Utilities Directive 2014/25/EU up of adequate infrastructure for future production (oil platforms, pipelines, terminals, etc.). (26) Contracting authorities should make use of all possible means at their disposal under national law in order to prevent distortions in procurement procedures stemming from conflicts of interest. This could include procedures in order to identify, prevent and remedy conflicts of interests. (27) Council Decision 94/800/EC,15 approved in particular the World Trade Organisation Agreement on Government Procurement, (the ‘GPA’). The aim of the GPA is to establish a multilateral framework of balanced rights and obligations relating to public contracts with a view to achieving the liberalisation and expansion of world trade. For contracts covered by Annexes 3, 4 and 5 and the General Notes to the European Union’s Appendix I to the GPA, as well as by other relevant international agreements by which the Union is bound, contracting entities should fulfil the obligations under those agreements by applying this Directive to economic operators of third countries that are signatories to the agreements. (28) The GPA applies to contracts above certain thresholds, set in the GPA and expressed as special drawing rights. The thresholds laid down by this Directive should be aligned to ensure that they correspond to the euro equivalents of the thresholds of the GPA. Provision should also be made for periodic reviews of the thresholds expressed in euro so as to adjust them, by means of a purely mathematical operation, to possible variations in the value of the euro in relation to those special drawing rights. Apart from those periodic mathematical adjustments, an increase in the thresholds set in the GPA should be explored during the next round of negotiations thereof. To avoid a multiplication of thresholds it is furthermore appropriate, without

DIRECTIVE 2014/25/EU prejudice to the international commitments of the Union, to continue to apply the same thresholds to all contracting entities, regardless of the sector in which they operate. (29) It should be clarified that, for the estimation of the value of a contract, all revenues have to be taken into account, whether received from the contracting entity or from third parties. It should also be clarified that, for the purpose of estimating the thresholds, the notion of similar supplies should be understood as products which are intended for identical or similar uses, such as supplies of a range of foods or of various items of office furniture. Typically, an economic operator active in the field concerned would be likely to carry such supplies as part of his normal product range. (30) For the purposes of estimating the value of a given procurement, it should be clarified that it should be allowed to base the estimation of the value on a subdivision of the procurement only where this is justified by objective reasons. For instance, it could be justified to estimate contract values at the level of a separate operational unit of the contracting entity provided that the unit in question is independently responsible for its procurement. This can be assumed where the separate operational unit independently runs the procurement procedures and makes the buying decisions, has a separate budget line at its disposal for the procurements concerned, concludes the contract independently and finances it from a budget which it has at its disposal. A subdivision is not justified where the contracting entity merely organises a procurement in a decentralised way. (31) Being addressed to Member States, this Directive does not apply to procurement carried out by international organisations on their own behalf and for their own account. There is, however, a need to clarify to what extent this Directive should be applied to procure-

15 Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the Agreements reached in the Uruguay Round multilateral negotiations (1986 to 1994) (OJ L 336, 23.12.1994, p. 1).

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(32)

(33)

(34)

(35)

ment governed by specific international rules. It should be recalled that arbitration and conciliation services and other similar forms of alternative dispute resolution are usually provided by bodies or individuals which are agreed on, or selected, in a manner which cannot be governed by procurement rules. It should be clarified that this Directive does not apply to service contracts for the provision of such services, whatever their denomination under national law. A certain number of legal services are rendered by service providers that are designated by a court or tribunal of a Member State, involve representation of clients in judicial proceedings by lawyers, must be provided by notaries or are connected with the exercise of official authority. Such legal services are usually provided by bodies or individuals designated or selected in a manner which cannot be governed by procurement rules, such as for instance the designation of State Attorneys in certain Member States. Those legal services should therefore be excluded from the scope of this Directive. It is appropriate to specify that the notion of financial instruments as referred to in this Directive is given the same meaning as in other internal market legislation and, in view of the recent creation of the European Financial Stability Facility and the European Stability Mechanism, it should be stipulated that operations conducted with that Facility and that Mechanism should be excluded from the scope of this Directive. It should finally be clarified that loans, whether or not they are in connection with the issuing of securities or other financial instruments or other operations therewith, should be excluded from the scope of this Directive. It should be recalled that Article 5(1) of Regulation (EC) No 1370/2007 of the European Parliament and of the Council16 explicitly provides that Directives 2004/17/EC and 2004/18/EC apply, respectively, to service contracts and pub-

PART II The Utilities Directive 2014/25/EU lic service contracts for public passenger transport services by bus or tramway, whereas Regulation (EC) No 1370/2007 applies to service concessions for public passenger transport by bus or tramway. It should furthermore be recalled that that Regulation continues to apply to public service contracts as well as to service concessions for public passenger transport by rail or metro. To clarify the relationship between this Directive and Regulation (EC) No 1370/2007, it should be provided explicitly that this Directive should not be applicable to service contracts for the provision of public passenger transport services by rail or metro, the award of which should continue to be subject to that Regulation. In so far as Regulation (EC) No 1370/2007 leaves it to national law to depart from the rules laid down in that Regulation, Member States should be able to continue to provide in their national law that service contracts for public passenger transport services by rail or metro are to be awarded by a contract award procedure following their general public procurement rules. (36) This Directive should not apply to certain emergency services where they are performed by non-profit organisations or associations, since the particular nature of those organisations would be difficult to preserve if the service providers had to be chosen in accordance with the procedures set out in this Directive. However, the exclusion should not be extended beyond that strictly necessary. It should therefore be set out explicitly that patient transport ambulance services should not be excluded. In that context it is furthermore necessary to clarify that CPV Group 601 ‘Land Transport Services’ does not cover ambulance services, to be found in CPV class 8514. It should therefore be clarified that services, which are covered by CPV code 85143000-3, consisting exclusively of patient transport ambulance services should be subject to the special regime set out for social and

16 Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70 (OJ L 315, 3.12.2007, p. 1).

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PART II The Utilities Directive 2014/25/EU other specific services (the ‘light regime’); Consequently, mixed contracts for the provision of ambulance services in general would also be subject to the light regime if the value of the patient transport ambulance services were greater than the value of other ambulance services. (37) In certain cases, a contracting authority or an association of contracting authorities may be the sole source for a particular service, in respect of the provision of which it enjoys an exclusive right pursuant to laws, regulations or published administrative provisions which are compatible with the TFEU. It should be clarified that this Directive need not apply to the award of service contracts to that contracting authority or association. (38) There is considerable legal uncertainty as to how far contracts concluded between contracting authorities should be covered by public procurement rules. The relevant case-law of the Court of Justice of the European Union is interpreted differently between Member States and even between contracting authorities. As that case-law would be equally applicable to public authorities when operating in the sectors covered by this directive, it is appropriate to ensure that the same rules apply and are interpreted in the same way in both this Directive and Directive 2014/24/EU. (39) Many contracting entities are organised as an economic group which may comprise a series of separate undertakings; often each of these undertakings has a specialised role in the overall context of the economic group. It is therefore appropriate to exclude certain service, supply and works contracts awarded to an affiliated undertaking having as its principal activity the provision of such services, supply or works to the group of which it is part, rather than offering them on the market. It is also appropriate to exclude certain service, supply and works contracts awarded by a contracting entity to a joint venture which

DIRECTIVE 2014/25/EU is formed by a number of contracting entities for the purpose of carrying out activities covered by this Directive and of which that entity is part. However, it is appropriate to ensure that this exclusion does not give rise to distortions of competition to the benefit of the undertakings or joint ventures that are affiliated with the contracting entities; it is appropriate to provide a suitable set of rules, in particular as regards the maximum limits within which the undertakings may obtain a part of their turnover from the market and above which they would lose the possibility of being awarded contracts without calls for competition, the composition of joint ventures and the stability of links between those joint ventures and the contracting entities of which they are composed. (40) It is also appropriate to clarify interaction of the provisions on cooperation between public authorities and the provisions on the award of contracts to affiliated undertakings or in the context of joint ventures. (41) Undertakings should be considered to be affiliated where a direct or indirect dominant influence exists between the contracting entity and the undertaking concerned or where both are subject to the dominant influence of another undertaking; in this context, private participation should, per se, not be relevant. The verification of whether an undertaking is affiliated to a given contracting entity should be as easy to perform as possible. Consequently, and given that the possible existence of such direct or indirect dominant influence would already have had to be verified for the purposes of deciding whether the annual accounts of the undertakings and entities concerned should be consolidated, undertakings should be considered to be affiliated where their annual accounts are consolidated, However, Union rules on consolidated accounts are not applicable in a certain number of cases, for instance because

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DIRECTIVE 2014/25/EU of the size of the undertakings involved or because certain conditions relating to their legal form are not met. In such cases, where Directive 2013/34/EU of the European Parliament and of the Council17 is not applicable, it will be necessary to examine whether a direct or indirect dominant influence is present taking into account ownership, financial participation or the rules governing the undertakings. (42) The co-financing of research and development (R & D) programmes by industry sources should be encouraged. It should consequently be clarified that this Directive applies only where there is no such co-financing and where the outcome of the R & D activities go to the contracting entity concerned. This should not exclude the possibility that the service provider, having carried out those activities, could publish an account thereof as long as the contracting entity retains the exclusive right to use the outcome of the R & D in the conduct of its own affairs. However fictitious sharing of the results of the R & D or purely symbolic participation in the remuneration of the service provider should not prevent the application of this Directive. (43) This Directive should apply neither to contracts intended to permit the performance of an activity that is subject to this Directive nor to design contests organised for the pursuit of such an activity if, in the Member State in which this activity is carried out, it is directly exposed to competition on markets to which access is not limited. It is therefore appropriate to maintain the procedure, applicable to all sectors, or parts thereof, covered by this Directive that will enable the effects of current or future opening up to competition to be taken into account. Such a procedure should provide legal certainty for the entities concerned, as well as an appropriate decision-making process, ensuring, within short time limits, uniform application of Union law in this area.

PART II The Utilities Directive 2014/25/EU For the sake of legal certainty it should be clarified that all Decisions adopted prior to the entry into force of this Directive concerning the applicability of the corresponding provisions set out in Article 30 of Directive 2004/17/EC continue to be applicable. (44) Direct exposure to competition should be assessed on the basis of objective criteria, taking account of the specific characteristics of the sector of parts thereof concerned. This assessment is, however, limited by the short deadlines applicable and by the need to rely on the information available to the Commission – either from already available sources or from the information obtained in the context of the application pursuant to Article 35 – which can not be supplemented by more time consuming methods, including, in particular, public inquiries addressed to the economic operators concerned. The assessment of direct exposure to competition that can be carried out in the context of this Directive is consequently without prejudice to the full-fledged application of competition law. (45) Assessing whether a given sector, or parts thereof, is directly exposed to competition should be examined in respect of the specific area in which the activity, or the parts thereof concerned, are carried out by the relevant economic operators, the so-called ‘relevant geographical market’. As that notion is crucial for the assessment, it should be given an appropriate definition, based on existing notions in Union law. It should also be clarified that the relevant geographical market might not coincide with the territory of the Member State concerned; consequently, it should be possible to limit decisions concerning the applicability of the exemption to parts of the territory of the Member State concerned. (46) The implementation and application of appropriate Union legislation opening a given sector, or a part thereof, should be considered to provide sufficient

17 Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).

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PART II The Utilities Directive 2014/25/EU grounds for assuming that there is free access to the market in question. Such appropriate legislation should be identified in an annex which can be updated by the Commission. When updating that annex, the Commission should in particular take into account the possible adoption of measures entailing a genuine opening-up to competition of sectors other than those for which legislation is already referred to in that annex, such as that of national rail passenger transport. (47) Where free access to a given market is not presumed on the basis of the implementation of appropriate Union legislation, it should be demonstrated that, de jure and de facto, such access is free. Where a Member State extends the application of a Union legal act opening up a given sector to competition to situations falling outside the scope of that legal act, for instance by applying Directive 94/22/EC to the coal sector or Directive 2012/34/EU of the European Parliament and of the Council18 to passenger service at the national level, that circumstance should be taken into account when assessing whether access to the sector concerned is free. (48) Independent national authorities, such as sectoral regulators or competition authorities, normally possess specialised know-how, information and knowledge that would be pertinent when assessing whether a given activity or parts thereof are directly exposed to competition on markets to which access is not limited. Requests for exemption should therefore where appropriate be accompanied by, or incorporate, a recent position on the competitive situation in the sector concerned, adopted by an independent national authority that is competent in relation to the activity concerned. In the absence of a reasoned and substantiated position adopted by an independent national authority that is competent in relation to the activity concerned, more time would be needed for the assessment of a request for exemption. The periods within which the

DIRECTIVE 2014/25/EU Commission must carry out its assessments of such requests should therefore be modified accordingly. (49) The Commission should always be obliged to examine requests, which are in conformity with the detailed rules for the application of the procedures for establishing whether a given activity, or parts thereof, is directly exposed to competition on markets to which access is not restricted. It should, however, also be clarified that the complexity of such requests may be such that it might not always be possible to ensure the adoption, within the applicable deadlines, of implementing acts establishing whether a given activity or parts thereof is directly exposed to competition on markets to which access is not restricted. (50) It should be clarified that the Commission should have the possibility to require Member States or contracting entities to provide or to supplement or clarify information. The Commission should set an appropriate time limit for so doing which, having due regard also to the need to meet the deadlines set for the Commission’s adoption of its implementing act, should take into account factors such as the complexity of the information requested and whether the information is readily accessible. (51) Employment and occupation contribute to integration in society and are key elements in guaranteeing equal opportunities for all. In this context, sheltered workshops can play a significant role. The same is true for other social businesses whose main aim is to support the social and professional integration or reintegration of disabled and disadvantaged persons, such as the unemployed, members of disadvantaged minorities or otherwise socially marginalised groups. However, such workshops or businesses might not be able to obtain contracts under normal conditions of competition. Consequently, it is appropriate to provide that Member States should be able to reserve the right to participate in award procedures for public contracts or for

18 Directive 2012/34/EU of the European Parliament and of the Council of 21 November 2012 establishing a single European railway area (OJ L 343, 14.12.2012, p. 32).

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DIRECTIVE 2014/25/EU certain lots thereof to such workshops or businesses or reserve performance of contracts to the context of sheltered employment programmes. (52) With a view to an appropriate integration of environmental, social and labour requirements into public procurement procedures it is of particular importance that Member States and contracting entities take relevant measures to ensure compliance with obligations in the fields of environmental, social and labour law that apply at the place where the works are executed or the services provided and result from laws, regulations, decrees and decisions, at both national and Union level, as well as from collective agreements, provided that such rules, and their application, comply with Union law. Equally, obligations stemming from international agreements ratified by all Member States and listed in Annex XIV should apply during contract performance. However, this should in no way prevent the application of terms and conditions of employment which are more favourable to workers. The relevant measures should be applied in conformity with the basic principles of Union law, in particular with a view to ensuring equal treatment. Such relevant measures should be applied in accordance with Directive 96/71/EC of the European Parliament and of the Council19 and in a way that ensures equal treatment and does not discriminate directly or indirectly against economic operators and workers from other Member States. (53) Services should be considered to be provided at the place at which the characteristic performances are executed. When services are provided at a distance, for example services provided by call centres, those services should be considered to be provided at the place where the services are executed, irrespective of the places and Member States to which the services are directed. (54) The relevant obligations could be mirrored in contract clauses. It should also

PART II The Utilities Directive 2014/25/EU be possible to include clauses ensuring compliance with collective agreements in compliance with Union law in public contracts. Non-compliance with the relevant obligations could be considered to be grave misconduct on the part of the economic operator concerned, liable to exclusion of that economic operator from the procedure for the award of a public contract. (55) Control of the observance of the environmental, social and labour law provisions should be performed at the relevant stages of the procurement procedure, when applying the general principles governing the choice of participants and the award of contracts, when applying the exclusion criteria and when applying the provisions concerning abnormally low tenders. The necessary verification for that purpose should be carried out in accordance with the relevant provisions of this Directive, in particular those governing means of proof and self-declarations. (56) Nothing in this Directive should prevent the imposition or enforcement of measures necessary to protect public policy, public morality, public security, health, human and animal life, the preservation of plant life or other environmental measures, in particular with a view to sustainable development, provided that those measures are in conformity with the TFEU. (57) Research and innovation, including eco-innovation and social innovation, are among the main drivers of future growth and have been put at the centre of the Europe 2020 strategy for smart, sustainable and inclusive growth. Contracting entities should make the best strategic use of public procurement to spur innovation. Buying innovative products, works and services plays a key role in improving the efficiency and quality of public services while addressing major societal challenges. It contributes to achieving best value for money as well as wider economic, environmental and societal benefits in terms of generating new ideas, translating them into innovative products and

19 Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services (OJ L 18, 21.1.1997, p. 1).

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PART II The Utilities Directive 2014/25/EU services and thus promoting sustainable economic growth. It should be recalled that a series of procurement models have been outlined in the Commission’s communication of 14 December 2007 entitled ‘Precommercial procurement: Driving innovation to ensure sustainable high quality public services in Europe’, which deals with the procurement of those R & D services not falling within the scope of this Directive. Those models would continue to be available, but this Directive should also contribute to facilitating procurement of innovation and help Member States in achieving the Innovation Union targets. (58) Because of the importance of innovation, contracting entities should be encouraged to allow variants as often as possible. The attention of those entities should consequently be drawn to the need of to define the minimum requirements to be met by variants before indicating that variants may be submitted. (59) Where a need for the development of an innovative product or service or innovative works and the subsequent purchase of the resulting supplies, services or works cannot be met by solutions already available on the market, contracting entities should have access to a specific procurement procedure in respect of contracts falling within the scope of this Directive. This specific procedure should allow contracting entities to establish a long-term innovation partnership for the development and subsequent purchase of a new, innovative product, service or works provided that such innovative product or service or innovative works can be delivered to agreed performance levels and costs, without the need for a separate procurement procedure for the purchase. The innovation partnership should be based on the procedural rules that apply to negotiated procedures with prior call for competition and contracts should be awarded on the sole basis of the best price-quality ratio, which is most suitable for comparing tenders for innovative solutions. Whether in respect of very large projects or smaller innovative projects,

DIRECTIVE 2014/25/EU the innovation partnership should be structured in such a way that it can provide the necessary ‘market-pull’ incentivising the development of an innovative solution without foreclosing the market. Contracting entities should therefore not use innovation partnerships in such a way as to prevent, restrict or distort competition. In certain cases, setting up innovation partnerships with several partners could contribute to avoiding such effects. (60) Experience has shown that the competitive dialogue, which is provided for under Directive 2014/24/EU, has been of use in cases where contracting authorities are unable to define the means of satisfying their needs or of assessing what the market can offer in terms of technical, financial or legal solutions. This situation may arise in particular with innovative projects, the implementation of major integrated transport infrastructure projects, large computer networks or projects involving complex and structured financing. Member States should therefore be allowed to place this tool at the disposal of contracting entities. Where relevant, contracting authorities should be encouraged to appoint a project leader to ensure good cooperation between the economic operators and the contracting authority during the award procedure. (61) In view of the detrimental effects on competition, negotiated procedures without a prior call for competition should be used only in very exceptional circumstances. This exception should be limited to cases where publication is either not possible, for reasons of extreme urgency brought about by events unforeseeable for and not attributable to the contracting entity, or where it is clear from the outset that publication would not trigger more competition or better procurement outcomes, not least because there is objectively only one economic operator that can perform the contract. This is the case for works of art, where the identity of the artist intrinsically determines the unique character and value of the art object itself. Exclusivity can also arise from other reasons, but only situations of objec-

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DIRECTIVE 2014/25/EU tive exclusivity can justify the use of the negotiated procedure without a prior call for competition, where the situation of exclusivity has not been created by the contracting entity itself with a view to the future procurement procedure. Contracting entities relying on this exception should provide reasons why there are no reasonable alternatives or substitutes such as using alternative distribution channels including outside the Member State of the contracting entity or considering functionally comparable works, supplies and services. Where the situation of exclusivity is due to technical reasons, they should be rigorously defined and justified on a case-by-case basis. They could include, for instance, near technical impossibility for another economic operator to achieve the required performance or the necessity to use specific know-how, tools or means which only one economic operator has at its disposal. Technical reasons may also derive from specific interoperability requirements which must be fulfilled in order to ensure the functioning of the works, supplies or services to be procured. Finally, a procurement procedure is not useful where supplies are purchased directly on a commodity market, including trading platforms for commodities such as agricultural products, raw materials and energy exchanges, where the regulated and supervised multilateral trading structure naturally guarantees market prices. (62) It should be clarified that the provisions concerning protection of confidential information do not in any way prevent public disclosure of non-confidential parts of concluded contracts, including any subsequent changes. (63) Electronic means of information and communication can greatly simplify the publication of contracts and increase the efficiency and transparency of procurement processes. They should become the standard means of communication and information exchange in procurement procedures, as they greatly enhance the possibilities of economic operators to participate in procurement procedures across the internal

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PART II The Utilities Directive 2014/25/EU market. For that purpose, transmission of notices in electronic form, electronic availability of the procurement documents and – after a transition period of 30 months – fully electronic communication, meaning communication by electronic means at all stages of the procedure, including the transmission of requests for participation and, in particular, the transmission of the tenders (electronic submission) should be made mandatory. Member States and contracting entities should remain free to go further if they so wish. It should also be clarified that mandatory use of electronic means of communications pursuant to this Directive should not, however, oblige contracting entities to carry out electronic processing of tenders, nor should it mandate electronic evaluation or automatic processing. Furthermore, pursuant to this Directive, no elements of the public procurement process after the award of the contract should be covered by the obligation to use electronic means of communication, nor should internal communication within the contracting entity. (64) Contracting entities should, except in certain specific situations, use electronic means of communication which are non-discriminatory, generally available and interoperable with the information and communication technology (ICT) products in general use and which do not restrict economic operators’ access to the procurement procedure. The use of such means of communication should also take accessibility for persons with disabilities into due account. It should be clarified that the obligation to use electronic means at all stages of the procurement procedure would be appropriate neither where the use of electronic means would require specialised tools or file formats that are not generally available nor where the communications concerned could only be handled using specialised office equipment. Contracting entities should therefore not be obliged to require the use of electronic means of communication in the submission process in certain cases, which should be listed exhaustively. This Directive stipulates

PART II The Utilities Directive 2014/25/EU that such cases should include situations which would require the use of specialised office equipment not generally available to the contracting entities such as wide-format printers. In some procurement procedures the procurement documents might require the submission of a physical or scale model which cannot be submitted to the contracting entities using electronic means. In such situations, the model should be transmitted to the contracting entities by post or other suitable carrier. It should however be clarified that the use of other means of communication should be limited to those elements of the tender for which electronic means of communications are not required. It is appropriate to clarify that, where necessary for technical reasons, contracting entities should be able to set a maximum limit to the size of the files that may be submitted. (65) There can be exceptional cases in which contracting entities should be allowed not to use electronic means of communication where not using such means of communication is necessary in order to protect the particularly sensitive nature of information. It should be clarified that, where the use of electronic tools which are not generally available can offer the necessary level of protection, such electronic tools should be used. Such might for instance be the case where contracting entities require the use of dedicated secure means of communication to which they offer access. (66) Differing technical formats or processes and messaging standards could potentially create obstacles to interoperability, not only within each Member State but also and especially between the Member States. For example, in order to participate in a procurement procedure in which use of electronic catalogues, which is a format for the presentation and organisation of infor-

DIRECTIVE 2014/25/EU mation in a manner that is common to all the participating bidders and which lends itself to electronic treatment, is permitted or required, economic operators would, in the absence of standardisation, be required to customise their own catalogues to each procurement procedure, which would entail providing very similar information in different formats depending on the specifications of the contracting entities concerned. Standardising the catalogue formats would thus improve the level of interoperability, enhance efficiency and would also reduce the effort required of economic operators. (67) When considering whether there is a need to ensure or enhance interoperability between differing technical formats or process and messaging standards by rendering the use of specific standards mandatory, and if so which standards to impose, the Commission should take the utmost account of the opinions of the stakeholders concerned. It should also consider the extent to which a given standard has already been used in practice by economic operators and contracting entities and how well it has worked. Before making the use of any particular standard mandatory, the Commission should also carefully consider the costs that this might entail, in particular in terms of adaptations to existing e-procurement solutions, including infrastructure, processes or software. Where the standards concerned are not developed by an international, European or national standardisation organisation, they should meet the requirements applicable to ICT standards as set out in Regulation (EU) No 1025/2012 of the European Parliament and of the Council.20 (68) Before specifying the level of security required for the electronic means of communications to be used at the various stages of the award procedure,

20 Regulation (EU) No 1025/2012 of the European Parliament and of the Council of 25 October 2012 on European standardisation, amending Council Directives 89/686/EEC and 93/15/EEC and Directives 94/9/EC, 94/25/EC, 95/16/EC, 97/23/EC, 98/34/EC, 2004/22/EC, 2007/23/EC, 2009/23/EC and 2009/105/EC of the European Parliament and of the Council and repealing Council Decision 87/95/EEC and Decision No 1673/2006/EC of the European Parliament and of the Council (OJ L 316, 14.11.2012, p. 12).

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DIRECTIVE 2014/25/EU Member States and contracting entities should evaluate the proportionality between on the one hand the requirements aimed at ensuring correct and reliable identification of the senders of the communication concerned as well as the integrity of its content and on the other hand the risk of problems such as in situations where messages are sent by a different sender than that indicated. All other things being equal, this would mean that the level of security required of, for instance, an e-mail requesting confirmation of the exact address at which an information meeting will be held would not need to be set at the same level as for the tender itself which constitutes a binding offer for the economic operator. Similarly, the evaluation of proportionality could result in lower levels of security being required in connection with the resubmission of electronic catalogues or the submission of tenders in the context of mini-competitions under a framework agreement or the access to procurement documents. (69) While essential elements of a procurement procedure such as the procurement documents, requests for participation, confirmation of interest and tenders should always be made in writing, oral communication with economic operators should otherwise continue to be possible, provided that its content is documented to a sufficient degree. This is necessary to ensure an adequate level of transparency that allows for a verification of whether the principle of equal treatment has been adhered to. In particular, it is essential that oral communications with tenderers which could have an impact on the content and assessment of the tenders be documented to a sufficient extent and by appropriate means, such as written or audio records or summaries of the main elements of the communication. (70) There is a strong trend emerging across Union public procurement markets towards the aggregation of demand by public purchasers, with a view to obtaining economies of scale, including lower prices and transaction costs, and to improving and professionalising

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PART II The Utilities Directive 2014/25/EU procurement management. This can be achieved by concentrating purchases either by the number of contracting entities involved or by volume and value over time. However, the aggregation and centralisation of purchases should be carefully monitored in order to avoid excessive concentration of purchasing power and collusion, and to preserve transparency and competition, as well as market access opportunities for SMEs. (71) Recourse to framework agreements can be an efficient procurement technique throughout the Union; however, there is a need to enhance competition by improving the transparency of and access to procurement carried out by means of framework agreements. It is therefore appropriate to revise the provisions applicable to those agreements, in particular by providing that the award of specific contracts based on such agreements take place on the basis of objective rules and criteria, for instance following a mini-competition, and by limiting the duration of framework agreements. (72) It should also be clarified, that while contracts based on a framework agreement are to be awarded before the end of the term of the framework agreement itself, the duration of the individual contracts based on a framework agreement does not need to coincide with the duration of that framework agreement, but might, as appropriate, be shorter or longer. In particular, it should be allowed to set the length of individual contracts based on a framework agreement taking account of factors such as the time needed for their performance; where maintenance of equipment with an expected useful life of more than eight years is included or where extensive training of staff to perform the contract is needed. It should also be clarified that there might be cases in which the length of the framework agreements themselves should be allowed to be longer than eight years. Such cases, which should be duly justified, in particular by the subject of the framework agreement, might for instance arise where economic operators need to dispose of equipment the

PART II The Utilities Directive 2014/25/EU amortisation period of which is longer than eight years and which must be available at any time over the entire duration of the framework agreement. In the particular context of utilities providing essential services to the public there may be a need in certain cases for both longer framework agreements and a longer duration of individual contracts; for instance in the case of framework agreements aimed at ensuring ordinary and extraordinary maintenance of networks which may require expensive equipment to be operated by personnel having received highly specialised ad-hoc training aimed at ensuring continuation of the services and minimisation of possible disruptions. (73) In view of the experience acquired, there is also a need to adjust the rules governing dynamic purchasing systems to enable contracting entities to take full advantage of the possibilities afforded by that instrument. The systems need to be simplified, in particular they should be operated in the form of a restricted procedure, hence eliminating the need for indicative tenders, which have been identified as one of the major burdens associated with dynamic purchasing systems. Thus any economic operator who submits a request to participate and meets the selection criteria should be allowed to take part in procurement procedures carried out through the dynamic purchasing system over its period of validity. This purchasing technique allows the contracting entity to have a particularly broad range of tenders and hence to ensure optimum use of funds through broad competition in respect of commonly used or off-the-shelf products, works or services which are generally available on the market. (74) The examination of those requests to participate should normally be performed within a maximum of 10 working days, given that the evaluation of the selection criteria will take place on the basis of the requirements for documentation set out by the contracting entities, where applicable in accordance with the simplified provisions of Directive 2014/24/EU. However, when a dynamic purchasing system is first set up,

DIRECTIVE 2014/25/EU contracting entities might, in response to the first publication of the contract notice or the invitation to confirm interest, be faced with such a large number of requests for participation that they would need more time to examine the requests. That should be admissible, provided that no specific procurement is launched before all the requests have been examined. Contracting entities should be free to organise the way in which they intend to examine the requests for participation, for instance by deciding to conduct such examinations only once a week, provided the deadlines for the examination of each request of admission are observed. Contracting entities using the exclusion or selection criteria provided for under Directive 2014/24/EU in the context of a dynamic purchasing system, should apply the relevant provisions of that Directive in the same way as contracting authorities operating a dynamic purchasing system pursuant to Directive 2014/24/EU. (75) In order to further the possibilities of SMEs to participate in a large-scale dynamic purchasing system, for instance one that is operated by a central purchasing body, the contracting authority or entity concerned should be able to articulate the system in objectively defined categories of products, works or services. Such categories should be defined by reference to objective factors which might for instance include the maximum allowable size of specific contracts to be awarded within the category concerned or a specific geographic area in which subsequent specific contracts are to be performed. Where a dynamic purchasing system is divided into categories, the contracting authority or entity should apply selection criteria that are proportionate to the characteristics of the category concerned. (76) It should be clarified that electronic auctions are typically not suitable for certain works contracts and certain service contracts having as their subjectmatter intellectual performances, such as the design of works, because only the elements suitable for automatic evaluation by electronic means, without any

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DIRECTIVE 2014/25/EU intervention or appreciation by the contracting entity, namely elements which are quantifiable so that they can be expressed in figures or percentages, may be the object of electronic auctions. It should, however, also be clarified that electronic auctions may be used in a procurement procedure for the purchase of a specific intellectual property right. It is also appropriate to recall that while contracting entities remain free to apply selection criteria enabling them to reduce the number of candidates or tenderers as long as the auction has not yet started, no further reduction of the number of tenderers participating in the electronic auction should be allowed after the auction has started. (77) New electronic purchasing techniques are constantly being developed, such as electronic catalogues. Electronic catalogues are a format for the presentation and organisation of information in a manner that is common to all the participating bidders and which lends itself to electronic treatment. An example could be tenders presented in the form of a spreadsheet. Contracting entities should be able to require electronic catalogues in all available procedures where the use of electronic means of communication is required. Electronic catalogues help to increase competition and streamline public purchasing, particularly in terms of savings in time and money. Certain rules should however be laid down to ensure that such use complies with this Directive with and the principles of equal treatment, nondiscrimination and transparency. Thus, the use of electronic catalogues for the presentation of tenders should not entail the possibility of economic operators limiting themselves to the transmission of their general catalogue. Economic operators should still have to adapt their general catalogues in view of the specific procurement procedure. Such adaptation ensures that the catalogue that is transmitted in response to a given procurement procedure contains only products, works or services that the economic operators estimated — after an active examination — correspond to the requirements of the con-

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PART II The Utilities Directive 2014/25/EU tracting entity. In so doing, economic operators should be allowed to copy information contained in their general catalogue, but they should not be allowed to submit the general catalogue as such. Furthermore, where sufficient guarantees are offered in respect of ensuring traceability, equal treatment and predictability, contracting entities should be allowed to generate tenders in relation to specific purchases on the basis of previously transmitted electronic catalogues, in particular where competition has been reopened under a framework agreement or where a dynamic purchasing system is being used. Where tenders have been generated by the contracting entity, the economic operator concerned should be given the possibility to verify that the tender thus constituted by the contracting entity does not contain any material errors. Where material errors are present, the economic operator should not be bound by the tender generated by the contracting entity unless the error is corrected. In line with the requirements of the rules for electronic means of communication, contracting entities should avoid unjustified obstacles to economic operators’ access to procurement procedures in which tenders are to be presented in the form of electronic catalogues and which guarantee compliance with the general principles of nondiscrimination and equal treatment. (78) Centralised purchasing techniques are increasingly used in most Member States. Central purchasing bodies are responsible for making acquisitions, managing dynamic purchasing systems or awarding contracts/framework agreements for other contracting authorities or contracting entities, with or without remuneration. The contracting entities for whom a framework agreement is concluded should be able to use it for individual or repetitive purchases. In view of the large volumes purchased, such techniques may help increase competition and should help to professionalise public purchasing. Provision should therefore be made for a Union definition of central purchasing bodies dedicated to contracting entities and it

PART II The Utilities Directive 2014/25/EU should be clarified that central purchasing bodies operate in two different manners. Firstly, they should be able to act as wholesalers by buying, stocking and reselling or, secondly, they should be able to act as intermediaries by awarding contracts, operating dynamic purchasing systems or concluding framework agreements to be used by contracting entities. Such an intermediary role might in some cases be carried out by conducting the relevant award procedures autonomously, without detailed instructions from the contracting entities concerned; in other cases, by conducting the relevant award procedures under the instructions of the contracting entities concerned, on their behalf and for their account. Furthermore, rules should be laid down for allocating responsibility for the observance of the obligations pursuant to this Directive, also in the case of remedies, as between the central purchasing body and the contracting entities procuring from or through it. Where the central purchasing body has sole responsibility for the conduct of the procurement procedures, it should also be solely and directly responsible for the legality of the procedures. Where a contracting entity conducts certain parts of the procedure, for instance the reopening of competition under a framework agreement or the award of individual contracts based on a dynamic purchasing system, it should continue to be responsible for the stages it conducts. (79) Contracting entities should be allowed to award a service contract for the provision of centralised purchasing activities to a central purchasing body without applying the procedures provided for in this Directive. It should also be permitted for such service contracts to include the provision of ancillary purchasing activities. Such service contracts for the provision of ancillary purchasing activities should, when performed otherwise than by a central purchasing body in connection with its provision of central purchasing activities to the contracting entity concerned,

DIRECTIVE 2014/25/EU be awarded in accordance with this Directive. It should also be recalled that this Directive should not apply where centralised or ancillary purchasing activities are provided other than through a contract for pecuniary interest which constitutes procurement within the meaning of this Directive. (80) Strengthening the provisions concerning central purchasing bodies should in no way prevent the current practices of occasional joint procurement, i.e. less institutionalised and systematic common purchasing or the established practice of having recourse to service providers that prepare and manage procurement procedures on behalf and for the account of a contracting entity and under its instructions. On the contrary, certain features of joint procurement should be clarified because of the important role joint procurement may play, not least in connection with innovative projects. Joint procurement can take many different forms, ranging from coordinated procurement through the preparation of common technical specifications for works, supplies or services that will be procured by a number of contracting entities, each conducting a separate procurement procedure, to situations where the contracting entities concerned jointly conduct one procurement procedure either by acting together or by entrusting one contracting entities with the management of the procurement procedure on behalf of all contracting entities. Where several contracting entities are jointly conducting a procurement procedure, they should be jointly responsible for fulfilling their obligations under this Directive. However, where only parts of the procurement procedure are jointly conducted by the contracting entities, joint responsibility should apply only to those parts of the procedure that have been carried out together. Each contracting entity should be solely responsible in respect of procedures or parts of procedures it conducts on its own, such as the awarding of a contract, the conclusion of a framework agreement, the operation of a dynamic purchasing system or the reopening of

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DIRECTIVE 2014/25/EU competition under a framework agreement. (81) Electronic means of communication are particularly well suited to supporting centralised purchasing practices and tools because of the possibility they offer to re-use and automatically process data and to minimise information and transaction costs. The use of such electronic means of communication should therefore, as a first step, be rendered compulsory for central purchasing bodies, while also facilitating converging practices across the Union. This should be followed by a general obligation to use electronic means of communication in all procurement procedures after a transition period of 30 months. (82) Joint awarding of contracts by contracting entities from different Member States currently encounters specific legal difficulties concerning conflicts of national laws. Despite the fact that Directive 2004/17/EC implicitly allowed for cross-border joint public procurement, contracting entities are still facing considerable legal and practical difficulties in purchasing from central purchasing bodies in other Member States or jointly awarding contracts. In order to allow contracting entities to derive maximum benefit from the potential of the internal market in terms of economies of scale and risk-benefit sharing, not least for innovative projects involving a greater amount of risk than reasonably bearable by a single contracting entity, those difficulties should be remedied. Therefore new rules on cross-border joint procurement should be established in order to facilitate cooperation between contracting entities and enhancing the benefits of the internal market by creating cross-border business opportunities for suppliers and service providers. Those rules should determine the conditions for cross-border utilisation of central purchasing bodies and designate the applicable public procurement legislation, including the applicable legislation on remedies, in cases of

PART II The Utilities Directive 2014/25/EU cross-border joint procedures, complementing the conflict of law rules of Regulation (EC) No 593/2008 of the European Parliament and the Council.21 In addition, contracting entities from different Member States should be able to set up joint legal entities established under national or Union law. Specific rules should be established for such form of joint procurement. However, contracting entities should not make use of the possibilities for cross-border joint procurement for the purpose of circumventing mandatory public law rules, in conformity with Union law, which are applicable to them in the Member State where they are located. Such rules might include, for example, provisions on transparency and access to documents or specific requirements for the traceability of sensitive supplies. (83) The technical specifications drawn up by purchasers need to allow public procurement to be open to competition as well as to achieve objectives of sustainability. To that end, it should be possible to submit tenders that reflect the diversity of technical solutions, standards and technical specifications in the marketplace, including those drawn up on the basis of performance criteria linked to the life cycle and the sustainability of the production process of the works, supplies and services. Consequently, technical specifications should be drafted in such a way as to avoid artificially narrowing down competition through requirements that favour a specific economic operator by mirroring key characteristics of the supplies, services or works habitually offered by that economic operator. Drawing up the technical specifications in terms of functional and performance requirements generally allows that objective to be achieved in the best way possible. Functional and performancerelated requirements are also appropriate means to favour innovation in public procurement and should be used as widely as possible. Where reference is made to a European standard or, in the

21 Regulation (EC) No 593/2008 of the European Parliament and the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) (OJ L 177, 4.7.2008, p. 6).

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PART II The Utilities Directive 2014/25/EU absence thereof, to a national standard, tenders based on other equivalent arrangements which meet the requirements of the contracting entities and are equivalent in terms of safety should be considered by the contracting entities. It should be the responsibility of the economic operator to prove equivalence with the requested label. To prove equivalence, it should be possible to require tenderers to provide third-party verified evidence. However, other appropriate means of proof such as a technical dossier of the manufacturer should also be allowed where the economic operator concerned has no access to such certificates or test reports, or no possibility of obtaining them within the relevant time limits provided that the economic operator concerned thereby proves that the works, supplies or services meet the requirements or criteria set out in the technical specifications, the award criteria or the contract performance conditions. (84) For all procurement intended for use by persons, whether the general public or the staff of the contracting entity, it is necessary for contracting entities to lay down technical specifications so as to take into account accessibility criteria for people with disabilities, or design for all users, except in duly justified cases. (85) Contracting entities that wish to purchase works, supplies or services with specific environmental, social or other characteristics should be able to refer to particular labels, such as the European Eco-label, (multi-) national eco-labels or any other label provided that the requirements for the label are linked to the subject-matter of the contract, such as the description of the product and its presentation, including packaging requirements. It is furthermore essential that those requirements are drawn up and adopted on the basis of objectively verifiable criteria, using a procedure in which stakeholders, such as government bodies, consumers, manufacturers, distributors and environmental organisations can participate, and that the label is accessible and available to all interested parties. It should be clari-

DIRECTIVE 2014/25/EU fied that stakeholders could be public or private bodies, businesses or any sort of non-governmental organisations (an organisation that is not a part of a government and is not a conventional forprofit businesses). It should equally be clarified that specific national or government bodies or organisations can be involved in setting up label requirements that may be used in connection with procurement by public authorities without those bodies or organisations losing their status as third parties. References to labels should not have the effect of restricting innovation. (86) When drawing up technical specifications, contracting entities should take into account requirements ensuing from Union law in the field of data protection law, in particular in relation to the design of the processing of personal data (data protection by design). (87) Public procurement should be adapted to the needs of SMEs. Contracting entities should be encouraged to make use of the Code of Best Practices set out in the Commission Staff Working Document of 25 June 2008 entitled ‘European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, providing guidance on how they may apply the public procurement framework in a way that facilitates SME participation. To that end, it should be provided explicitly that contracts may be divided into lots. Such division could be done on a quantitative basis, making the size of the individual contracts better correspond to the capacity of SMEs, or on a qualitative basis, in accordance with the different trades and specialisations involved, to adapt the content of the individual contracts more closely to the specialised sectors of SMEs or in accordance with different subsequent project phases. The size and subject-matter of the lots should be determined freely by the contracting entity, which, in accordance with the relevant rules on the calculation of the estimated value of procurement, should also be allowed to award some of the lots without applying the procedures of this Directive.

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DIRECTIVE 2014/25/EU Member States should remain free to go further in their efforts to facilitate the involvement of SMEs in the public procurement market, by introducing an obligation to consider the appropriateness of dividing contracts into lots to smaller contracts, by requiring contracting entities to provide a justification for a decision not to divide contracts into lots or by rendering a division into lots obligatory under certain conditions. With the same purpose, Member States should also be free to provide mechanisms for direct payments to subcontractors. (88) Where contracts are divided into lots, contracting entities should, for instance in order to preserve competition or to ensure reliability of supply, be allowed to limit the number of lots for which an economic operator may tender; they should also be allowed to limit the number of lots that may be awarded to any one tenderer. However, the objective of facilitating greater access to public procurement by SMEs might be hampered if contracting entities would be obliged to award the contract lot by lot even where this would entail having to accept substantially less advantageous solutions compared to an award grouping several or all of the lots. Where the possibility to apply such a method has been clearly indicated beforehand, it should therefore be possible for contracting entities to conduct a comparative assessment of the tenders in order to establish whether the tenders submitted by a particular tenderer for a specific combination of lots would, taken as whole, fulfil the award criteria laid down in accordance with this Directive with regard to those lots better than the tenders for the individual lots concerned seen in isolation. If so, then the contracting entities should be allowed to award a contract combining the lots in question to the tenderer concerned. It should be clarified that contracting entities should conduct such a comparative assessment by first determining which tenders best fulfil the award criteria laid down for each individual lot and then comparing it with the tenders submitted by a particular tenderer for a

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PART II The Utilities Directive 2014/25/EU specific combination of lots, taken as a whole. (89) In order to make procedures faster and more efficient, time limits for participation in procurement procedures should be kept as short as possible without creating undue barriers to access for economic operators from across the internal market and in particular SMEs. It should therefore be kept in mind that, when fixing the time limits for the receipt of tenders and requests to participate, contracting entities should take account in particular of the complexity of the contract and the time required to draw up tenders, even if this entails setting time limits that are longer than the minima provided for under this Directive. The use of electronic means of information and communication, in particular full electronic availability to economic operators, tenderers and candidates of procurement documents and electronic transmission of communications leads, on the other hand, to increased transparency and time savings. Therefore, provision should be made for reducing the minimum time limits applicable to open procedures in line with the rules set by the GPA and subject to the condition that they are compatible with the specific mode of transmission envisaged at Union level. Furthermore, contracting entities should have the opportunity to further shorten the time limits for receipt of tenders in open procedures in cases where a state of urgency renders the regular time limit in open procedures impracticable, but does not make an open procedure with shortened deadline impossible. Only in exceptional situations where extreme urgency brought about by events unforeseeable by the contracting entity concerned that are not attributable to that contracting entity makes it impossible to conduct a regular procedure even with shortened time limits, contracting entities should, insofar as strictly necessary, have the possibility to award contracts by negotiated procedure without prior call for competition. This might be case where natural catastrophes require immediate action.

PART II The Utilities Directive 2014/25/EU (90) It should be clarified that the need to ensure that economic operators have sufficient time in which to draw up responsive tenders may entail that the time limits which were set initially may have to be extended. This would, in particular, be the case where significant changes are made to the procurement documents. It should also be specified that, in that case, significant changes should be understood as covering changes, in particular to the technical specifications, in respect of which economic operators would need additional time in order to understand and respond appropriately. It should, however, be clarified that such changes should not be so substantial that the admission of candidates other than those initially selected would have been allowed for or additional participants in the procurement procedure would have been attracted. That could, in particular, be the case where the changes render the contract or the framework agreement materially different in character from the one initially set out in the procurement documents. (91) It should be clarified that the information concerning certain decisions taken during a procurement procedure, including the decision not to award a contract or not to conclude a framework agreement, should be sent by the contracting entities, without candidates or tenderers having to request such information. It should also be recalled that Council Directive 92/13/EEC22 provides for an obligation for contracting entities, again without candidates or tenderer having to request it, to provide the candidates and tenderers concerned with a summary of the relevant reasons for some of the central decisions that are taken in the course of a procurement procedure. It should finally be clarified that candidates and tenderers should be able to request

DIRECTIVE 2014/25/EU more detailed information concerning those reasons, which contracting entities should be required to give except where there would be serious grounds for not doing so. Those grounds should be set out in this Directive. To ensure the necessary transparency in the context of procurement procedures involving negotiations and dialogues with tenderers, tenderers having made an admissible tender should, except where there would be serious grounds for not doing so, also be enabled to request information on the conduct and progress of the procedure. (92) In so far as compatible with the need to ensure the objective of sound commercial practice while allowing for maximum flexibility, it is appropriate to provide for the application of Directive 2014/24/EU in respect of requirements concerning economic and financial capacity and documentary evidence. Contracting entities should therefore be allowed to apply the selection criteria provided for in that Directive and, where they do so, they should then be obliged to apply certain other provisions concerning, in particular, the ceiling to requirements on minimum turnover as well as on use of the European Single Procurement Document. (93) Contracting entities should be able to require that environmental management measures or schemes are to be applied during the performance of a contract. Environmental management schemes, whether or not they are registered under Union instruments such as Regulation (EC) No 1221/2009 of the European Parliament and of the Council,23 can demonstrate that the economic operator has the technical capability to perform the contract. A description of the measures implemented by the economic operator to ensure the same level of environmental protection should be accepted as an alternative to

22 Council Directive 92/13/EEC of 25 February 1992 coordinating the laws, regulations and administrative provisions relating to the application of Community rules on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (OJ L 76, 23.3.1992, p. 14). 23 Regulation (EC) No 1221/2009 of the European Parliament and of the Council of 25 November 2009 on the voluntary participation by organisations in a Community eco-management and audit scheme (EMAS), repealing Regulation (EC) No 761/2001 and Commission Decisions 2001/681/EC and 2006/193/EC (OJ L 342, 22.12.2009, p. 1).

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DIRECTIVE 2014/25/EU environmental management registration schemes as a form of evidence, where the economic operator concerned has no access to such environmental management registration schemes or no possibility of obtaining them within the relevant time limits. (94) The notion of award criteria is central to this Directive, it is therefore important that the relevant provisions be presented in as simple and streamlined a way as possible. This can be obtained by using the terminology ‘most economically advantageous tender’ as the overriding concept, since all winning tenders should finally be chosen in accordance with what the individual contracting entity considers to be the economically best solution among those offered. In order to avoid confusion with the award criterion that is currently known as the ‘most economically advantageous tender’ in Directives 2004/17/EC and 2004/18/EC, a different terminology should be used to cover that concept, the ‘best price-quality ratio’. Consequently, it should be interpreted in accordance with the case-law relating to those Directives, except where there is a clearly materially different solution in this Directive. (95) Contracts should be awarded on the basis of objective criteria that ensure compliance with the principles of transparency, non-discrimination and equal treatment, with a view to ensuring an objective comparison of the relative value of the tenders in order to determine, in conditions of effective competition, which tender is the most economically advantageous tender. It should be set out explicitly that the most economically advantageous tender should be assessed on the basis of the best price-quality ratio which should always include a price or cost element. It should equally be clarified that such assessment of the most economically advantageous tender could also be carried out on the basis of either price or cost effectiveness only. It is furthermore appropriate to recall that contracting entities are free to set adequate quality standards by using technical specifications or contract performance conditions.

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PART II The Utilities Directive 2014/25/EU In order to encourage a greater quality orientation of public procurement, Member States should be permitted to prohibit or restrict use of price only or cost only to assess the most economically advantageous tender where they deem this appropriate. To ensure compliance with the principle of equal treatment in the award of contracts, contracting entities should be obliged to create the necessary transparency to enable all tenderers to be reasonably informed of the criteria and arrangements which will be applied in the contract award decision. Contracting entities should therefore be obliged to indicate the contract award criteria and the relative weighting given to each of those criteria. Contracting entities should, however, be permitted to derogate from that obligation to indicate the weighting of the criteria in duly justified cases for which they must be able to give reasons, where the weighting cannot be established in advance, in particular because of the complexity of the contract. In such cases, they should indicate the criteria in decreasing order of importance. (96) Article 11 TFEU requires that environmental protection requirements be integrated into the definition and implementation of the Union policies and activities, in particular with a view to promoting sustainable development. This Directive clarifies how the contracting entities can contribute to the protection of the environment and the promotion of sustainable development, whilst ensuring that they can obtain the best value for money for their contracts. (97) When assessing the best price-quality ratio contracting entities should determine the economic and qualitative award criteria linked to the subjectmatter of the contract on the basis of which they will assess tenders in order to identify the most economically advantageous tender from the view of the contracting entity. Those criteria should thus allow for a comparative assessment of the level of performance offered by each tender to be assessed in the light of the subject-matter of the contract, as defined in the technical

PART II The Utilities Directive 2014/25/EU specifications. In the context of the best price-quality ratio, a non-exhaustive list of possible award criteria is set out in this Directive. Contracting entities should be encouraged to choose award criteria that allow them to obtain highquality works, supplies and services that are optimally suited to their needs. The chosen award criteria should not confer an unrestricted freedom of choice on the contracting entity and they should ensure the possibility of effective and fair competition and be accompanied by requirements that allow the information provided by the tenderers to be effectively verified. To identify the most economically advantageous tender, the contract award decision should not be based on noncost criteria only. Qualitative criteria should therefore be accompanied by a cost criterion that could, at the choice of the contracting entity, be either the price or a cost-effectiveness approach such as life-cycle costing. However, the award criteria should not affect the application of national provisions determining the remuneration of certain services or setting out fixed prices for certain supplies. (98) Where national provisions determine the remuneration of certain services or set out fixed prices for certain supplies, it should be clarified that it remains possible to assess value for money on the basis of other factors than solely the price or remuneration. Depending on the service or product concerned, such factors could, for instance, include conditions of delivery and payment, aspects of after-sale service (e.g. extent of advisory and replacement services) or environmental or social aspects (e.g. whether books were stamped on recycled paper or paper from sustainable timber, the cost imputed to environmental externalities or whether the social integration of disadvantaged persons or members of vulnerable groups amongst the persons assigned to performing the contract has been furthered). Given the numerous possibilities of evaluating value for money on

DIRECTIVE 2014/25/EU the basis of substantive criteria, recourse to drawing of lots as the sole means of awarding the contract should be avoided. (99) Wherever the quality of the staff employed is relevant to the level of performance of the contract, contracting entities should also be allowed to use as an award criterion the organisation, qualification and experience of the staff assigned to performing the contract in question, as this can affect the quality of contract performance and, as a result, the economic value of the tender. This might be the case, for example, in contracts for intellectual services such as consultancy or architectural services. Contracting entities which make use of this possibility should ensure, by appropriate contractual means, that the staff assigned to contract performance effectively fulfil the specified quality standards and that such staff can only be replaced with the consent of the contracting entity which verifies that the replacement staff affords an equivalent level of quality. (100) It is of utmost importance to fully exploit the potential of public procurement to achieve the objectives of the Europe 2020 strategy for smart, sustainable and inclusive growth. In this context, it should be recalled that public procurement is crucial to driving innovation, which is of great importance for future growth in Europe. In view of the important differences between individual sectors and markets, it would however not be appropriate to set general mandatory requirements for environmental, social and innovation procurement. The Union legislature has already set mandatory procurement requirements for obtaining specific goals in the sectors of road transport vehicles (Directive 2009/33/EC of the European Parliament and the Council)24 and office equipment (Regulation (EC) No 106/2008 of the European Parliament and the Council).25 In addition, the

24 Directive 2009/33/EC of the European Parliament and the Council of 23 April 2009 on the promotion of clean and energy-efficient road transport vehicles (OJ L 120, 15.5.2009, p. 5).

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DIRECTIVE 2014/25/EU definition of common methodologies for life cycle costing has significantly advanced. It therefore appears appropriate to continue on that path, leaving it to sectorspecific legislation to set mandatory objectives and targets in function of the particular policies and conditions prevailing in the relevant sector and to promote the development and use of European approaches to life-cycle costing as a further underpinning for the use of public procurement in support of sustainable growth. (101) Those sector-specific measures should be complemented by an adaptation of Directives 2004/17/EC and 2004/18/EC empowering contracting entities to pursue the objectives of the Europe 2020 strategy for smart, sustainable and inclusive growth in their purchasing strategies. It should hence be made clear that, except where it is assessed on the basis of price only, contracting entities can determine the most economically advantageous tender and the lowest cost using a life-cycle costing approach. The notion of life-cycle costing includes all costs over the life-cycle of a works, supplies or services. This means internal costs such as research to be carried out, development, production, transport, use, maintenance and end-of-life disposal costs, but can also include costs imputed to environmental externalities, such as pollution caused by extraction of the raw materials used in the product or caused by the product itself or its manufacturing, provided they can be monetised and monitored. The methods which contracting entities use for assessing costs imputed to environmental externalities should be established in advance in an objective and non-discriminatory manner and be accessible to all interested parties. Such methods can be established at national, regional or local level, but they should, to avoid distortions of competition through tailor-made methodologies, remain general in the sense that they should not be set up specifically for a particular pub-

PART II The Utilities Directive 2014/25/EU lic procurement procedure. Common methodologies should be developed at Union level for the calculation of lifecycle costs for specific categories of supplies or services. Where such common methodologies are developed, their use should be made compulsory. Furthermore, the feasibility of establishing a common methodology on social life cycle costing should be examined, taking into account existing methodologies such as the Guidelines for Social Life Cycle Assessment of Products adopted within the framework of the United Nations Environment Programme. (102) Furthermore, with a view to a better integration of social and environmental considerations in the procurement procedures, contracting entities should be allowed to use award criteria or contract performance conditions relating to the works, supplies or services to be provided under the public contract in any respect and at any stage of their life cycles from extraction of raw materials for the product to the stage of disposal of the product, including factors involved in the specific process of production, provision or trading and its conditions of those works, supplies or services or a specific process during a later stage of their life cycle, even where such factors do not form part of their material substance. Criteria and conditions referring to such a production or provision process are for example that the manufacturing of the purchased products did not involve toxic chemicals, or that the purchased services are provided using energy-efficient machines. In accordance with the case-law of the Court of Justice of the European Union, this includes also award criteria or contract performance conditions relating to the supply or utilisation of fair trade products in the course of the performance of the contract to be awarded. Contract performance conditions pertaining to environmental considerations might include, for example, the delivery, package and disposal of prod-

25 Regulation (EC) No 106/2008 of the European Parliament and the Council of 15 January 2008 on a Community energy-efficiency labelling programme for office equipment (OJ L 39, 13.2.2008, p. 1).

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PART II The Utilities Directive 2014/25/EU ucts, and in respect of works and services contracts, waste minimisation or resource efficiency. However, the condition of a link with the subject-matter of the contract excludes criteria and conditions relating to general corporate policy, which cannot be considered as a factor characterising the specific process of production or provision of the purchased works, supplies or services. Contracting entities should hence not be allowed to require tenderers to have a certain corporate social or environmental responsibility policy in place. (103) It is essential that award criteria or contract performance conditions concerning social aspects of the production process relate to the works, supplies or services to be provided under the contract. In addition, they should be applied in accordance with Directive 96/71/EC, as interpreted by the Court of Justice of the European Union, and should not be chosen or applied in a way that discriminates directly or indirectly against economic operators from other Member States or from third countries parties to the GPA or to Free Trade Agreements to which the Union is party. Thus, requirements concerning the basic working conditions regulated in Directive 96/71/EC, such as minimum rates of pay, should remain at the level set by national legislation or by collective agreements applied in accordance with Union law in the context of that Directive. Contract performance conditions might also be intended to favour the promotion of equality of women and men at work, the increased participation of women in the labour market and the reconciliation of work and private life, the protection of the environment or animal welfare and, to comply in substance with fundamental International Labour Organisation (ILO) Conventions, and to recruit more disadvantaged persons than are required under national legislation. (104) Measures aiming at the protection of health of the staff involved in the production process, the favouring of social integration of disadvantaged persons or members of vulnerable groups

DIRECTIVE 2014/25/EU amongst the persons assigned to performing the contract or training in the skills needed for the contract in question can also be the subject of award criteria or contract performance conditions provided that they relate to the works, supplies or services to be provided under the contract. For instance, such criteria or conditions might refer, amongst other things, to the employment of long-term job-seekers, the implementation of training measures for the unemployed or young persons in the course of the performance of the contract to be awarded. In technical specifications contracting entities can provide such social requirements which directly characterise the product or service in question, such as accessibility for persons with disabilities or design for all users. (105) Public contracts should not be awarded to economic operators that have participated in a criminal organisation or have been found guilty of corruption, fraud to the detriment of the Union’s financial interests, terrorist offences, money laundering or terrorist financing. The non-payment of taxes or social security contributions should also lead to mandatory exclusion at the level of the Union. Member States should, however, be able to provide for a derogation from those mandatory exclusions in exceptional situations where overriding requirements in the general interest make a contract award indispensable. This might, for example, be the case where urgently needed vaccines or emergency equipment can only be purchased from an economic operator to whom one of the mandatory grounds for exclusion otherwise applies. Given that contracting entities, which are not contracting authorities, might not have access to indisputable proof on the matter, it is appropriate to leave the choice of whether to apply the exclusion criteria listed in Directive 2014/24/EU to such contracting entities. The obligation to apply Article 57(1) and (2) of Directive 2014/24/EU should therefore be limited to contracting entities that are contracting authorities.

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DIRECTIVE 2014/25/EU (106) Contracting entities should further be given the possibility to exclude economic operators which have proven unreliable, for instance because of violations of environmental or social obligations, including rules on accessibility for disabled persons or other forms of grave professional misconduct, such as violations of competition rules or of intellectual property rights. It should be clarified that grave professional misconduct can render an economic operator’s integrity questionable and thus render the economic operator unsuitable to receive the award of a public contract irrespective of whether the economic operator would otherwise have the technical and economical capacity to perform the contract. Bearing in mind that the contracting entity will be responsible for the consequences of its possible erroneous decision, contracting entities should also remain free to consider that there has been grave professional misconduct, where, before a final and binding decision on the presence of mandatory exclusion grounds has been rendered, they can demonstrate by any appropriate means that the economic operator has violated its obligations, including obligations relating to the payment of taxes or social security contributions, unless otherwise provided by national law. They should also be able to exclude candidates or tenderers whose performance in earlier public contracts or contracts with other contracting entities has shown major deficiencies with regard to substantive requirements, for instance failure to deliver or perform, significant shortcomings of the product or service delivered, making it unusable for the intended purpose, or misbehaviour that casts serious doubts as to the reliability of the economic operator. National law should provide for a maximum duration for such exclusions. In applying facultative grounds for exclusion, particular attention should be paid to the principle of proportionality. Minor irregularities should only in exceptional circumstances lead to the exclusion of an economic operator. However repeated cases of minor irregularities can give rise to doubts about the re-

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PART II The Utilities Directive 2014/25/EU liability of an economic operator which might justify its exclusion. (107) Where contracting entities are obliged or choose to apply the such exclusion criteria, they should apply Directive 2014/24/EU concerning the possibility that economic operators adopt compliance measures aimed at remedying the consequences of any criminal offences or misconduct and at effectively preventing further occurrences of the misbehaviour. (108) Tenders that appear abnormally low in relation to the works, supplies or services might be based on technically, economically or legally unsound assumptions or practices. Where the tenderer cannot provide a sufficient explanation, the contracting entity should be entitled to reject the tender. Rejection should be mandatory in cases where the contracting entity has established that the abnormally low price or costs proposed results from non-compliance with mandatory Union law or national law compatible with it in the fields of social, labour or environmental law or international labour law provisions. (109) Contract performance conditions are for laying down specific requirements relating to the performance of the contract. Unlike contract award criteria which are the basis for a comparative assessment of the quality of tenders, contract performance conditions constitute fixed objective requirements that have no impact on the assessment of tenders. Contract performance conditions should be compatible with this Directive provided that they are not directly or indirectly discriminatory and are linked to the subject-matter of the contract, which comprises all factors involved in the specific process of production, provision or commercialisation. This includes conditions concerning the process of performance of the contract, but excludes requirements referring to a general corporate policy. (110) It is important that observance by subcontractors of applicable obligations in the fields of environmental, social and labour law, established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in

PART II The Utilities Directive 2014/25/EU this Directive, provided that such rules, and their application, comply with Union law, be ensured through appropriate actions by the competent national authorities within the scope of their responsibilities and remit, such as labour inspection agencies or environmental protection agencies. It is also necessary to ensure some transparency in the subcontracting chain, as this gives contracting entities information on who is present at building sites on which works are being performed for them, or on which undertakings are providing services in or at buildings, infrastructures or areas, such as town halls, municipal schools, sports facilities, ports or motorways, for which the contracting entities are responsible or over which they have a direct oversight. It should be clarified that the obligation to deliver the required information is in any case incumbent upon the main contractor, either on the basis of specific clauses, that each contracting entity would have to include in all procurement procedures, or on the basis of obligations which Member States would impose on main contractors by means of generally applicable provisions. It should also be clarified that the conditions relating to the enforcement of observance of applicable obligations in the fields of environmental, social and labour law, established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in this Directive, provided that such rules, and their application, comply with Union law, should be applied whenever the national law of a Member State provides for a mechanism of joint liability between subcontractors and the main contractor. Furthermore, it should be stated explicitly that Member States should be able to go further, for instance by extending the transparency obligations, by enabling direct payment to subcontractors or by enabling or requiring contracting authorities to verify that subcontractors are not in any of

DIRECTIVE 2014/25/EU the situations in which exclusion of economic operators would be warranted. Where such measures are applied to subcontractors, coherence with the provisions applicable to main contractors should be ensured so that the existence of compulsory exclusion grounds would be followed by a requirement that the main contractor replaces the subcontractor concerned. Where such verification shows the presence of noncompulsory grounds for exclusion, it should be clarified that contracting authorities are able to require the replacement. It should, however, also be set out explicitly that contracting authorities may be obliged to require the replacement of the subcontractor concerned where exclusion of main contractors would be obligatory in such cases. It should also be set out explicitly that Member States remain free to provide for more stringent liability rules under national law or to go further under national law on direct payments to subcontractors. (111) Having regard to current discussions on horizontal provisions governing relations with third countries in the context of public procurement, it is appropriate to maintain for an interim period the status quo of the regime which applies to the utilities sector pursuant to Articles 58 and 59 of Directive 2004/17/EC. Consequently, those provisions should be kept unchanged, including the provision for the adoption of implementing acts where Union undertakings have difficulties in accessing third country markets. Under these circumstances, those implementing acts should continue to be adopted by the Council. (112) It should be recalled that Council Regulation (EEC, Euratom) No 1182/7126 applies to the calculation of the time limits contained in this Directive. (113) It is necessary to clarify the conditions under which modifications to a contract during its performance require a new procurement procedure, taking in-

26 Council Regulation (EEC, Euratom) No 1182/71 of 3 June 1971 determining the rules applicable to periods, dates and time limits (OJ — English special edition: Series V Volume 1952-1972 p. 88).

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DIRECTIVE 2014/25/EU to account the relevant case-law of the Court of Justice of the European Union. A new procurement procedure is required in case of material changes to the initial contract, in particular to the scope and content of the mutual rights and obligations of the parties, including the distribution of intellectual property rights. Such changes demonstrate the parties’ intention to renegotiate essential terms or conditions of that contract. This is the case in particular if the amended conditions would have had an influence on the outcome of the procedure, had they been part of the initial procedure. Modifications to the contract resulting in a minor change of the contract value up to a certain value should always be possible without the need to carry out a new procurement procedure. To this effect and in order to ensure legal certainty, this Directive should provide for de minimis thresholds, below which a new procurement procedure is not necessary. Modifications to the contract above those thresholds should be possible without the need to carry out a new procurement procedure to the extent they comply with the relevant conditions laid down in this Directive. (114) Contracting entities may be faced with situations where additional works, supplies or services become necessary; in such cases a modification of the initial contract without a new procurement procedure may be justified, in particular where the additional deliveries are intended either as a partial replacements or as the extension of existing services, supplies or installations where a change of supplier would oblige the contracting entity to acquire material, works or services having different technical characteristics which would result in incompatibility or disproportionate technical difficulties in operation and maintenance (115) Contracting entities can be faced with external circumstances that they could not foresee when they awarded the contract, in particular when the performance of the contract covers a long period. In this case, a certain degree of flexibility is needed to adapt the contract to those circumstances without a

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PART II The Utilities Directive 2014/25/EU new procurement procedure. The notion of unforeseeable circumstances refers to circumstances that could not have been predicted despite reasonably diligent preparation of the initial award by the contracting entity, taking into account its available means, the nature and characteristics of the specific project, good practice in the field in question and the need to ensure an appropriate relationship between the resources spent in preparing the award and its foreseeable value. However, this cannot apply in cases where a modification results in an alteration of the nature of the overall procurement, for instance by replacing the works, supplies or services to be procured by something different or by fundamentally changing the type of procurement since, in such a situation, a hypothetical influence on the outcome may be assumed. (116) In line with the principles of equal treatment and transparency, the successful tenderer should not, for instance where a contract is terminated because of deficiencies in the performance, be replaced by another economic operator without reopening the contract to competition. However, the successful tenderer performing the contract should be able, in particular where the contract has been awarded to more than one undertaking, to undergo certain structural changes during the performance of the contract, such as purely internal reorganisations, takeovers, mergers and acquisitions or insolvency. Such structural changes should not automatically require new procurement procedures for all contracts performed by that tenderer. (117) Contracting entities should, in the individual contracts themselves, have the possibility to provide for modifications by way of review or option clauses, but such clauses should not give them unlimited discretion. This Directive should therefore set out to what extent modifications may be provided for in the initial contract. It should consequently be clarified that sufficiently clearly drafted review or option clauses may for instance provide for price indexations or ensure that, for example,

PART II The Utilities Directive 2014/25/EU communications equipment to be delivered over a given period continues to be suitable, also in the case of changing communications protocols or other technological changes. It should also be possible under sufficiently clear clauses to provide for adaptations of the contract which are rendered necessary by technical difficulties which have appeared during operation or maintenance. It should also be recalled that contracts could, for instance, include both ordinary maintenance as well as provide for extraordinary maintenance interventions that might become necessary in order to ensure continuation of a public service. (118) Contracting entities are sometimes faced with circumstances that require the early termination of public contracts in order to comply with obligations under Union law in the field of public procurement. Member States should therefore ensure that contracting entities have the possibility, under the conditions determined by national law, to terminate a public contract during its term if so required by Union law. (119) The results of the Commission staff working paper of 27 June 2011 entitled ‘Evaluation Report: Impact and Effectiveness of EU Public Procurement Legislation’ suggested that the exclusion of certain services from the full application of Directive 2004/17/EC should be reviewed. As a result, the full application of this Directive should be extended to a number of services. (120) Certain categories of services continue by their very nature to have a limited cross-border dimension, namely what are known as services to the person such as certain social, health and educational services. Those services are provided within a particular context that varies widely amongst Member States, due to different cultural traditions. A specific regime should therefore be established for contracts for those services, with a higher threshold than that which applies to other services. In the particular context of procurement in those sectors, services to the person with values below that threshold will typically not be of interest to

DIRECTIVE 2014/25/EU providers from other Member States unless there are concrete indications to the contrary, such as Union financing for cross-border projects. Contracts for services to the person above that threshold should be subject to Union-wide transparency. Given the importance of the cultural context and the sensitivity of those services, Member States should be given wide discretion to organise the choice of the service providers in the way they consider most appropriate. The rules of this Directive take account of that imperative, imposing only the observance of basic principles of transparency and equal treatment and making sure that contracting entities are able to apply specific quality criteria for the choice of service providers, such as the criteria set out in the voluntary European Quality Framework for Social Services, published by the Social Protection Committee. When determining the procedures to be used for the award of contracts for services to the person, Member States should take Article 14 TFEU and Protocol No 26 into account. In so doing, Member States should also pursue the objectives of simplification and of alleviating the administrative burden for contracting entities and economic operators; it should be clarified that so doing might also entail relying on rules applicable to service contracts not subject to the specific regime. Member States and contracting entities remain free to provide those services themselves or to organise social services in a way that does not entail the conclusion of public contracts, for example through the mere financing of such services or by granting licences or authorisations to all economic operators meeting the conditions established beforehand by the contracting entity, without any limits or quotas, provided that such a system ensures sufficient advertising and complies with the principles of transparency and non-discrimination. (121) Likewise, hotel and restaurant services are typically offered only by operators located in the specific place of delivery of those services and therefore also have a limited cross-border dimension.

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DIRECTIVE 2014/25/EU They should therefore only be covered by the light regime, as from a threshold of EUR 1 000 000. Large hotel and restaurant service contracts above that threshold can be of interest for various economic operators, such as travel agencies and other intermediaries, also on a cross-border basis. (122) Similarly, certain legal services concern exclusively issues of purely national law and are therefore typically offered only by operators located in the Member State concerned and consequently also have a limited cross-border dimension. They should therefore only be covered by the light regime, as from a threshold of EUR 1 000 000. Large legal service contracts above that threshold can be of interest for various economic operators, such as international law firms, also on a cross-border basis, in particular where they involve legal issues arising from or having as its background Union or other international law or involving more than one country. (123) Experience has shown that a series of other services, such as rescue services, firefighting services and prison services are normally only of cross-border interest as of such time as they acquire sufficient critical mass through their relatively high value. In so far as they are not excluded from the scope of this Directive, they should be included under the light regime. To the extent that their provision is actually based on contracts, other categories of services, such as investigation and security services, they would normally only be likely to present a cross-border interest as from a threshold of EUR 1 000 000 and should consequently only then be subject to the light regime. (124) In order to ensure the continuity of public services, this Directive should allow that participation in procurement procedures for certain services in the fields of health, social and cultural services could be reserved for organisations which are based on employee ownership or active employee participation in their governance, and for existing organisations such as coopera-

PART II The Utilities Directive 2014/25/EU tives to participate in delivering these services to end users. This provision is limited in scope exclusively to certain health, social and related services, certain education and training services, library, archive, museum and other cultural services, sporting services, and services for private households, and is not intended to cover any of the exclusions otherwise provided for by this Directive. Those services should only be covered by the ‘light regime’. (125) It is appropriate to identify those services by reference to specific positions of the Common Procurement Vocabulary (CPV) as adopted by Regulation (EC) No 2195/2002 of the European Parliament and of the Council,27 which is a hierarchically structured nomenclature, divided into divisions, groups, classes, categories and subcategories. In order to avoid legal uncertainty, it should be clarified that reference to a division does not implicitly entail a reference to subordinate subdivisions. Such comprehensive coverage should instead be set out explicitly by mentioning all the relevant positions, where appropriate as a range of codes. (126) Design contests have traditionally mostly been used in the fields of town and country planning, architecture and engineering or data processing, It should, however, be recalled that these flexible instruments could be used also for other purposes and that it may be stipulated that the subsequent service contracts would be awarded to the winner or one of the winners of the design contest by a negotiated procedure without publication. (127) The evaluation has shown that there is still considerable room for improvement in the application of the Union public procurement rules. With a view to a more efficient and consistent application of the rules, it is essential to get a good overview on possible structural problems and general patterns in national procurement policies, in order to address possible problems in a more targeted way. That overview should be gained through appropriate moni-

27 Regulation (EC) No 2195/2002 of the European Parliament and of the Council of 5 November 2002 on the Common Procurement Vocabulary (CPV) (OJ L 340, 16.12.2002, p. 1).

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PART II The Utilities Directive 2014/25/EU toring, the results of which should be regularly published, in order to allow an informed debate on possible improvements of procurement rules and practice. Acquiring such a good overview could also allow insights on the application of public procurement rules in the context of the implementation of projects co-financed by the Union. Member States should remain free to decide how and by whom this monitoring should be carried out in practice; in so doing, they should also remain free to decide whether the monitoring should be based on a sample-based ex-post control or on a systematic, ex-ante control of public procurement procedures covered by this Directive. It should be possible to bring potential problems to the attention of the proper bodies; this should not necessarily require that those having performed the monitoring have standing before courts and tribunals. Better guidance, information and support to contracting entities and economic operators could also greatly contribute to enhancing the efficiency of public procurement, through better knowledge, increased legal certainty and professionalisation of procurement practices. Such guidance should be made available to contracting entities and economic operators wherever it appears necessary to improve correct application of the rules. The guidance to be provided could cover all matters relevant to public procurement, such as acquisition planning, procedures, choice of techniques and instruments and good practices in the conduct of the procedures. With regard to legal questions, guidance should not necessarily amount to a complete legal analysis of the issues concerned; it could be limited to a general indication of the elements that should be taken into consideration for the subsequent detailed analysis of the questions, for instance by pointing to case-law that could be relevant or to guidance notes or other sources having examined the specific question concerned. (128) Directive 92/13/EEC provides for certain review procedures to be available at least to any person having or having

DIRECTIVE 2014/25/EU had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement of Union law in the field of public procurement or national rules transposing that law. Those review procedures should not be affected by this Directive. However, citizens, concerned stakeholders, organised or not, and other persons or bodies which do not have access to review procedures pursuant to Directive 92/13/EEC do nevertheless have a legitimate interest, as taxpayers, in sound procurement procedures. They should therefore be given a possibility, otherwise than through the review system pursuant to Directive 92/13/EEC and without it necessarily involving them being given standing before courts and tribunals, to indicate possible violations of this Directive to a competent authority or structure. So as not to duplicate existing authorities or structures, Member States should be able to provide for recourse to general monitoring authorities or structures, sectoral oversight bodies, municipal oversight authorities, competition authorities, the ombudsman or national auditing authorities. (129) In order to fully exploit the potential of public procurement to achieve the objectives of the Europe 2020 strategy for smart, sustainable and inclusive growth, environmental, social and innovation procurement will also have to play its part. It is therefore important to obtain an overview of the developments in the field of strategic procurement so as to take an informed view on the general trends at the overall level in that area. Any already prepared, appropriate reports can of course be used in this context also. (130) Given the potential of SMEs for job creation, growth and innovation it is important to encourage their participation in public procurement, both through appropriate provisions in this Directive as well as through initiatives at the national level. The new provisions provided for in this Directive should contribute towards an improvement of the level of success, by which is understood the share of SMEs in the total value of contracts awarded. It is not

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DIRECTIVE 2014/25/EU appropriate to impose obligatory shares of success, however, the national initiatives to enhance SME participation should be closely monitored given its importance. (131) A series of procedures and working methods have already been established in respect of the Commission’s communications and contacts with Member States, such as communications and contacts relating to the procedures provided for under Articles 258 and 260 TFEU, the Internal Market Problem Solving Network (SOLVIT) and EU Pilot, which are not modified by this Directive. They should, however, be complemented by the designation of one single point of reference in each Member States for the cooperation with the Commission, which would function as sole entry point for matters concerning public procurement in the Member State concerned. This function may be performed by persons or structures which are already regularly in contact with the Commission on issues relating to public procurement, such as national contact points, members of the Advisory Committee on Public Procurement, Members of the Procurement Network or national coordinating instances. (132) The traceability and transparency of decision-making in procurement procedures is essential for ensuring sound procedures, including efficiently fighting corruption and fraud. Contracting authorities should therefore keep copies of concluded high-value contracts, in order to be able to provide access to those documents to interested parties in accordance with applicable rules on access to documents. Furthermore, the essential elements and decisions of individual procurement procedures should be documented by contracting entities in a procurement report. To avoid administrative burdens wherever possible, it should be permitted for the procurement report to refer to information already contained in the relevant contract award notice. The electronic systems for publication of

PART II The Utilities Directive 2014/25/EU those notices, managed by the Commission, should also be improved with a view to facilitating the entry of data while making it easier to extract global reports and exchange data between systems. (133) In the interests of administrative simplification and in order to lessen the burden on Member States, the Commission should periodically examine whether the quality and completeness of the information contained in the notices which are published in connection with public procurement procedures is sufficient to allow the Commission to extract the statistical information that would otherwise have to be transmitted by the Member States. (134) Effective administrative cooperation is necessary for the exchange of information needed for conducting award procedures in cross-border situations, in particular with regard to the verification of the grounds for exclusion and the selection criteria and the application of quality and environmental standards. The Internal Market Information System (IMI) established by Regulation (EU) No 1024/2012 of the European Parliament and of the Council28 could provide a useful electronic means to facilitate and enhance administrative cooperation managing the exchange of information on the basis of simple and unified procedures overcoming language barriers. A pilot project should consequently be launched as soon as possible to test the suitability of an expansion of IMI to cover the exchange of information under this Directive. (135) In order to adapt to rapid technical, economic and regulatory developments, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of a number of non-essential elements of this Directive. Due to the need to comply with international agreements, the Commission should be empowered to modify the technical procedures for the calculation methods concerning thresholds as well as to periodically re-

28 Regulation (EU) No 1024/2012 of the European Parliament and of the Council of 25 October 2012 on administrative cooperation through the Internal Market Information System and repealing Commission Decision 2008/49/EC (‘the IMI Regulation’) (OJ L 316, 14.11.2012, p. 1).

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PART II The Utilities Directive 2014/25/EU vise the thresholds themselves; references to the CPV nomenclature may undergo regulatory changes at Union level and it is necessary to reflect those changes into the text of this Directive; the technical details and characteristics of the devices for electronic receipt should be kept up to date with technological developments; it is also necessary to empower the Commission to make mandatory certain technical standards for electronic communication to ensure the interoperability of technical formats, processes and messaging in procurement procedures conducted using electronic means of communication taking into account technological developments; the Commission should also be empowered to adapt the list of legislative acts of the Union establishing common methodologies for the calculation of life-cycle costs; the list of International Social and Environmental Conventions and the list of Union legislation whose implementation creates a presumption of free access to a given market as well as Annex II„ setting out a list of legal acts to be taken into account when assessing the existence of special or exclusive rights, should be quickly adapted to incorporate the measures adopted on a sectoral basis. In order to satisfy that need, the Commission should be empowered to keep the lists up-to date. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level. When preparing and drawing up delegated acts, the Commission should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council. (136) In the application of this Directive the Commission should consult appropriate groups of experts in the field of eprocurement ensuring a balanced composition of the main stakeholder groups. (137) In order to ensure uniform conditions for the implementation of this Direc-

DIRECTIVE 2014/25/EU tive, as for the procedure for sending and publishing data referred to in Annex IX and the procedures for drawing up and transmitting notices, the standard forms for the publication of notices, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council.29 (138) The advisory procedure should be used for the adoption of the implementing acts concerning standard forms for the publication of notices, which do not have any impact either from the financial point of view or on the nature and scope of obligations stemming from this Directive. On the contrary, those acts are characterised by a mere administrative purpose and serve to facilitate the application of the rules set out in this Directive. Furthermore, decisions to establish whether a given activity is directly exposed to competition on markets to which access is free should be adopted under conditions ensuring uniform conditions for implementing that provision. Implementing powers should therefore be conferred on the Commission also in respect of the detailed provisions for the implementation of the procedure, provided for under Article 35, for establishing whether Article 34 is applicable as well as the implementing acts themselves. Those powers should be exercised in accordance with Regulation (EU) No 182/2011. The advisory procedure should be used for the adoption of those implementing acts. (139) The Commission should review the effects on the internal market resulting from the application of the thresholds and report thereon to the European Parliament and the Council. In so doing, it should take into account factors such as the level of cross-border procurement, SME participation, transaction costs and the cost-benefit tradeoff.

29 Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by the Member States of the Commission’s exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).

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DIRECTIVE 2014/25/EU In accordance with Article XXII(7) thereof, the GPA shall be the subject of further negotiations three years after its entry into force and periodically thereafter. In that context, the appropriateness of the level of thresholds should be examined, bearing in mind the impact of inflation in view of a long period without changes of the thresholds in the GPA; in the event that the level of thresholds should change as a consequence, the Commission should, where appropriate, adopt a proposal for a legal act amending the thresholds set out in this Directive. (140) Since the objective of this Directive, namely the coordination of laws, regulations and administrative provisions of the Member States applying to certain public procurement procedures, cannot be sufficiently achieved by the Member States but can rather, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve that objective. (141) Directive 2004/17/EC should be repealed. (142) In accordance with the Joint Political Declaration of Member States and the Commission on explanatory documents of 28 September 2011, Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified, HAVE ADOPTED THIS DIRECTIVE: TITLE I: SCOPE, DEFINITIONS AND GENERAL PRINCIPLES CHAPTER I: Subject-matter and definitions Article 1:

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Subject-matter and scope

PART II The Utilities Directive 2014/25/EU Article 2: Article 3: Article 4: Article 5: Article 6:

Definitions Contracting authorities Contracting entities Mixed procurement covering the same activity Procurement covering several activities

CHAPTER II: Activities Article 7: Article 8: Article 9: Article 10: Article 11: Article 12: Article 13: Article 14:

Common provisions Gas and heat Electricity Water Transport services Ports and airports Postal services Extraction of oil and gas and exploration for, or extraction of, coal or other solid fuels

CHAPTER III: Material scope SECTION 1: Thresholds Article 15: Article 16: Article 17:

Threshold amounts Methods for calculating the estimated value of procurement Revision of the thresholds

SECTION 2: Excluded contracts and design contests; Special provisions for procurement involving defence and security aspects Subsection 1: Exclusions applicable to all contracting entities and special exclusions for the water and energy sectors Article 18: Article 19:

Article 20: Article 21: Article 22: Article 23:

Contracts awarded for purposes of resale or lease to third parties Contracts and design contests awarded or organised for purposes other than the pursuit of a covered activity or for the pursuit of such an activity in a third country Contracts awarded and design contest organised pursuant to international rules Specific exclusions for service contracts Service contracts awarded on the basis of an exclusive right Contracts awarded by certain contracting entities for the purchase of water and for the supply of energy or of fuels for the production of energy

DIRECTIVE 2014/25/EU

PART II The Utilities Directive 2014/25/EU Subsection 2: Procurement involving defence and security aspects Article 24: Article 25: Article 26: Article 27:

Defence and security Mixed procurement covering the same activity and involving defence or security aspects Procurement covering several activities and involving defence or security aspects Contracts and design contests involving defence or security aspects which are awarded or organised pursuant to international rules

Subsection 3: Special relations (cooperation, affiliated undertakings and joint ventures) Article 28: Article 29: Article 30:

Article 31:

Contracts between contracting authorities Contracts awarded to an affiliated undertaking Contracts awarded to a joint venture or to a contracting entity forming part of a joint venture Notification of information

Subsection 4: Specific situations Article 32: Article 33:

Research and development services Contracts subject to special arrangements

Subsection 5: Activities directly exposed to competition and procedural provisions relating thereto Article 34: Article 35:

Activities directly exposed to competition Procedure for establishing whether Article 34 is applicable

CHAPTER IV: General principles Article 36: Article 37: Article 38: Article 39: Article 40: Article 41: Article 42:

Principles of procurement Economic operators Reserved contracts Confidentiality Rules applicable to communication Nomenclatures Conflicts of interests

TITLE II: RULES APPLICABLE TO CONTRACTS CHAPTER I: Procedures

Article 43: Article 44: Article 45: Article 46: Article 47: Article 48: Article 49: Article 50:

Conditions relating to the GPA and other international agreements Choice of procedures Open procedure Restricted procedure Negotiated procedure with prior call for competition Competitive dialogue Innovation partnership Use of the negotiated procedure without prior call for competition

CHAPTER II: Techniques and instruments for electronic and aggregated procurement Article 51: Article 52: Article 53: Article 54: Article 55: Article 56: Article 57:

Framework agreements Dynamic purchasing systems Electronic auctions Electronic catalogues Centralised purchasing activities and central purchasing bodies Occasional joint procurement Procurement involving contracting entities from different Member States

CHAPTER III: Conduct of the procedure SECTION 1: Preparation Article 58: Article 59: Article 60: Article 61: Article 62: Article 63: Article 64: Article 65: Article 66:

Preliminary market consultations Prior involvement of candidates or tenderers Technical specifications Labels Test reports, certification and other means of proof Communication of technical specifications Variants Division of contracts into lots Setting time limits

SECTION 2: Publication and transparency Article 67: Article 68: Article 69: Article 70: Article 71: Article 72: Article 73:

Periodic indicative notices Notices on the existence of a qualification system Contract notices Contract award notices Form and manner of publication of notices Publication at national level Electronic availability of procurement documents

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DIRECTIVE 2014/25/EU Article 74: Article 75:

Invitations to candidates Informing applicants for qualification, candidates and tenderers

SECTION 3: Choice of participants and award of contracts Article 76:

General principles

Subsection 1: Qualification and qualitative selection Article 77: Article 78: Article 79: Article 80: Article 81:

Qualification systems Criteria for qualitative selection Reliance on the capacities of other entities Use of exclusion and selection criteria provided for under Directive 2014/24/EU Quality assurance standards and environmental management standards

Subsection 2: Award of the contract Article 82: Article 83: Article 84:

Contract award criteria Life-cycle costing Abnormally low tenders

SECTION 4: Tenders comprising products originating in third countries and relations with those countries Article 85: Article 86:

Tenders comprising products originating in third countries Relations with third countries as regards works, supplies and service contracts

CHAPTER IV: Contract performance Article 87: Article 88: Article 89: Article 90:

Conditions for performance of contracts Subcontracting Modification of contracts during their term Termination of contracts

TITLE III: PARTICULAR PROCUREMENT REGIMES CHAPTER I: Social and other specific services Article 91: Article 92: Article 93: Article 94:

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Award of contracts for social and other specific services Publication of notices Principles of awarding contracts Reserved contracts for certain services

PART II The Utilities Directive 2014/25/EU CHAPTER II: Rules governing design contests Article 95: Article 96: Article 97: Article 98:

Scope Notices Rules on the organisation of design contests, the selection of participants and the jury Decisions of the jury

TITLE IV: GOVERNANCE Article 99: Article 100: Article 101: Article 102:

Enforcement Individual reports on procedures for the award of contracts National reporting and statistical information Administrative cooperation

TITLE V: DELEGATED POWERS, IMPLEMENTING POWERS AND FINAL PROVISIONS Article 103: Article 104: Article 105: Article 106: Article 107: Article 108: Article 109: Article 110:

Exercise of the delegation Urgency procedure Committee procedure Transposition and transitional provisions Repeal Review Entry into force Addressees

ANNEXES ANNEX I: ANNEX II: ANNEX III: ANNEX IV:

ANNEX V:

List of activities as set out in point (a) of point 2 of Article 2 List of Union legal acts referred to in Article 4(3) List of Union legal acts referred to in Article 34(3) Deadlines for the adoption of the implementing acts referred to in Article 35 Requirements relating to tools and devices for the electronic receipt of tenders, requests to participate, applications for qualification as well as plans and projects in contests

DIRECTIVE 2014/25/EU

PART II The Utilities Directive 2014/25/EU ANNEX VI Part A:

ANNEX VI Part B:

ANNEX VII:

ANNEX VIII: ANNEX IX: ANNEX X:

ANNEX XI:

ANNEX XII:

ANNEX XIII:

ANNEX XIV:

ANNEX XV: ANNEX XVI:

Information to be included in the periodic indicative notice (as referred to in Article 67) Information to be included in notices of publication of a periodic indicative notice on a buyer profile not used as a means of calling for competition (as referred to in Article 67(1)) Information to be included in the procurement documents relating to electronic auctions (Article 53(4)) Definition of certain technical specifications Features concerning publication Information to be included in the notice on the existence of a qualification system (as referred to in point (b) of Article 44(4) and in Article 68) Information to be included in contract notices (as referred to in Article 69) Information to be included in the contract award notice (as referred to in Article 70) Contents of the invitations to submit a tender, to participate in the dialogue, to negotiate or to confirm interest provided for under Article 74 List of International Social and Environmental Conventions referred to in Article 36(2) List of Union legal acts referred to in Article 83(3) Information to be included in notices of modifications of a contract during its term (as referred to in Article 89(1))

ANNEX XVII: ANNEX XVIII:

ANNEX XIX:

ANNEX XX:

ANNEX XXI:

Services referred to in Article 91 Information to be included in notices concerning contracts for social and other specific services (as referred to in Article 92) Information to be included in the design contest notice (as referred to in Article 96(1)) Information to be included in the results of design contest notices (as referred to in Article 96(1)) Correlation table

TITLE I SCOPE, DEFINITIONS AND GENERAL PRINCIPLES Chapter I Subject-matter and definitions Article 1 Subject matter and scope 1. This Directive establishes rules on the procedures for procurement by contracting entities with respect to contracts as well as design contests, whose value is estimated to be not less than the thresholds laid down in Article 15. 2. Procurement within the meaning of this Directive is the acquisition by means of a supply, works or service contract of works, supplies or services by one or more contracting entities from economic operators chosen by those contracting entities, provided that the works, supplies or services are intended for the pursuit of one of the activities referred to in Articles 8 to 14. 3. The application of this Directive is subject to Article 346 of TFEU. 4. This Directive does not affect the freedom of Member States to define, in conformity with Union law, what they consider to be services of general economic interest, how those services should be organised and financed, in compliance with the State aid rules, and what specific obligations they should be subject to. Equally, this Directive does not affect the decision of public authorities whether, how and to what extent they wish to perform public functions themselves pursuant to Article 14 TFEU and Protocol No 26.

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DIRECTIVE 2014/25/EU 5. This Directive does not affect the way in which the Member States organise their social security systems. 6. The scope of this Directive shall not include non-economic services of general interest.

Article 2 Definitions For the purposes of this Directive, the following definitions apply: (1) ‘supply, works and service contracts’ means contracts for pecuniary interest concluded in writing between one or more contracting entities and one or more economic operators and having as their object the execution of works, the supply of products or the provision of services; (2) ‘works contracts’ means contracts having as their object one of the following: (a) the execution, or both the design and execution, of works related to one of the activities within the meaning of Annex I; (b) the execution, or both the design and execution, of a work; (c) the realisation by whatever means of a work corresponding to the requirements specified by the contracting entity exercising a decisive influence on the type or design of the work; (3) ‘a work’ means the outcome of building or civil engineering works taken as a whole which is sufficient in itself to fulfil an economic or technical function; (4) ‘supply contracts’ means contracts having as their object the purchase, lease, rental or hire-purchase, with or without an option to buy, of products. A supply contract may include, as an incidental matter, siting and installation operations; (5) ‘service contracts’ means contracts having as their object the provision of services other than those referred to in point 2; (6) ‘economic operator’ means any natural or legal person, or a contracting entity, or a group of such persons and/or entities, including any temporary association of undertakings, which offers the execution of works and/or a work, the supply of products or the provision of services on the market;

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PART II The Utilities Directive 2014/25/EU (7) ‘tenderer’ means an economic operator that has submitted a tender; (8) ‘candidate’ means an economic operator that has sought an invitation or has been invited to take part in a restricted or negotiated procedure, in a competitive dialogue or in an innovation partnership; (9) ‘procurement document’ means any document produced or referred to by the contracting entity to describe or determine elements of the procurement or the procedure, including the contract notice, the periodic indicative notice or the notices on the existence of a qualification system where they are used as a means of calling for competition, the technical specifications, the descriptive document, proposed conditions of contract, formats for the presentation of documents by candidates and tenderers, information on generally applicable obligations and any additional documents; (10) ‘centralised purchasing activities’ means activities conducted on a permanent basis, in one of the following forms: (a) the acquisition of supplies and/or services intended for contracting entities, (b) the award of contracts or the conclusion of framework agreements for works, supplies or services intended for contracting entities; (11) ‘ancillary purchasing activities’ means activities consisting in the provision of support to purchasing activities, in particular in the following forms: (a) technical infrastructure enabling contracting entities to award public contracts or to conclude framework agreements for works, supplies or services; (b) advice on the conduct or design of procurement procedures; (c) preparation and management of procurement procedures on behalf and for the account of the contracting entity concerned; (12) ‘central purchasing body’ means a contracting entity within the meaning of Article 4(1) of this Directive or a contracting authority within the meaning of point 1 of Article 2(1) of Directive 2014/24/EU providing centralised purchasing activities and, possibly, ancillary purchasing activities.

PART II The Utilities Directive 2014/25/EU Procurement carried out by a central purchasing body in order to perform centralised purchasing activities shall be deemed to be procurement for the pursuit of an activity as described in Articles 8 to 14. Article 18 shall not apply to procurement carried out by a central purchasing body in order to perform centralised purchasing activities; (13) ‘procurement service provider’ means a public or private body, which offers ancillary purchasing activities on the market; (14) ‘written’ or ‘in writing’ means any expression consisting of words or figures which can be read, reproduced and subsequently communicated, including information transmitted and stored by electronic means; (15) ‘electronic means’ means electronic equipment for the processing (including digital compression) and storage of data which is transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means; (16) ‘life cycle’ means all consecutive and/or interlinked stages, including research and development to be carried out, production, trading and its conditions, transport, use and maintenance, throughout the existence of the product or the works or the provision of the service, from raw material acquisition or generation of resources to disposal, clearance and end of service or utilisation; (17) ‘design contests’ means those procedures which enable the contracting entity to acquire, mainly in the fields of town and country planning, architecture, engineering or data processing, a plan or design selected by a jury after being put out to competition with or without the award of prizes; (18) ‘innovation’ means the implementation of a new or significantly improved product, service or process, including but not limited to production, building or construction processes, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations, inter alia,

DIRECTIVE 2014/25/EU with the purpose of helping to solve societal challenges or to support the Europe 2020 strategy for smart, sustainable and inclusive growth; (19) ‘label’ means any document, certificate or attestation confirming that the works, products, services, processes or procedures in question meet certain requirements; (20) ‘label requirements’ means the requirements to be met by the works, products, services, processes or procedures in question in order to obtain the label concerned.

Article 3 Contracting authorities 1. For the purpose of this Directive ‘contracting authorities’ means State, regional or local authorities, bodies governed by public law or associations formed by one or more such authorities or one or more such bodies governed by public law. 2. ‘Regional authorities’ includes all authorities of the administrative units, listed nonexhaustively in NUTS 1 and 2, as referred to in Regulation (EC) No 1059/2003 of the European Parliament and of the Council.1 3. ‘Local authorities’ includes all authorities of the administrative units falling under NUTS 3 and smaller administrative units, as referred to in Regulation (EC) No 1059/2003. 4. ‘Bodies governed by public law’ means bodies that have all of the following characteristics: (a) they are established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; (b) they have legal personality; and (c) they are financed, for the most part, by the State, regional or local authorities, or by other bodies governed by public law; or are subject to management supervision by those authorities or bodies; or which have an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law.

1 Regulation (EC) No 1059/2003 of the European Parliament and of the Council of 26 May 2003 on the establishment of a common classification of territorial units for statistics (NUTS) (OJ L 154, 21.6.2003, p. 1).

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Article 4 Contracting entities 1. For the purpose of this Directive contracting entities are entities, which: (a) are contracting authorities or public undertakings and which pursue one of the activities referred to in Articles 8 to 14; (b) when they are not contracting authorities or public undertakings, have as one of their activities any of the activities referred to in Articles 8 to 14, or any combination thereof and operate on the basis of special or exclusive rights granted by a competent authority of a Member State. 2. ‘Public undertaking’ means any undertaking over which the contracting authorities may exercise directly or indirectly a dominant influence by virtue of their ownership of it, their financial participation therein, or the rules which govern it. A dominant influence on the part of the contracting authorities shall be presumed in any of the following cases in which those authorities, directly or indirectly: (a) hold the majority of the undertaking’s subscribed capital; (b) control the majority of the votes attaching to shares issued by the undertaking, (c) can appoint more than half of the undertaking’s administrative, management or supervisory body. 3. For the purposes of this Article, ‘special or exclusive rights’ means rights granted by a competent authority of a Member State by way of any legislative, regulatory or administrative provision the effect of which is to limit the exercise of activities defined in Articles 8 to 14 to one or more entities, and which substantially affects the ability of other entities to carry out such activity. Rights which have been granted by means of a procedure in which adequate publicity has been ensured and where the granting of those rights was based on objective criteria shall not constitute special or exclusive rights within the meaning of the first subparagraph. Such procedures include: (a) procurement procedures with a prior call for competition in conformity with Directive 2014/24/EU, Directive 2009/81/EC, Directive 2014/23/EU or this Directive;

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PART II The Utilities Directive 2014/25/EU (b) procedures pursuant to other legal acts of the Union listed in Annex II, ensuring adequate prior transparency for granting authorisations on the basis of objective criteria. 4. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 concerning the modification of the list of Union legal acts set out in Annex II, when on the basis of the adoption of new legal acts, repeal or modification of such legal acts, such amendments prove necessary.

Article 5 Mixed procurement covering the same activity 1. Paragraph 2 shall apply to mixed contracts which have as their subject-matter different types of procurement all of which are covered by this Directive. Paragraphs 3 to 5 shall apply to mixed contracts which have as their subject-matter procurement covered by this Directive and procurement covered by other legal regimes. 2. Contracts which have as their subjectmatter two or more types of procurement (works, services or supplies) shall be awarded in accordance with the provisions applicable to the type of procurement that characterises the main subject of the contract in question. In the case of mixed contracts consisting partly of services within the meaning of Chapter I of Title III and partly of other services or of mixed contracts consisting partly of services and partly of supplies, the main subject shall be determined in accordance with which of the estimated values of the respective services or supplies is the highest. 3. Where the different parts of a given contract are objectively separable, paragraph 4 shall apply. Where the different parts of a given contract are objectively not separable, paragraph 5 shall apply. Where part of a given contract is covered by Article 346 TFEU or Directive 2009/81/EC Article 25 of this Directive shall apply. 4. In the case of contracts which have as their subject-matter procurement covered by this Directive as well as procurement not covered by this Directive, contracting entities may choose to award separate con-

PART II The Utilities Directive 2014/25/EU tracts for the separate parts or to award a single contract. Where contracting entities choose to award separate contracts for separate parts, the decision as to which legal regime applies to any one of such separate contracts shall be taken on the basis of the characteristics of the separate part concerned. Where contracting entities choose to award a single contract, this Directive shall, unless otherwise provided in Article 25, apply to the ensuing mixed contract, irrespective of the value of the parts that would otherwise fall under a different legal regime and irrespective of which legal regime those parts would otherwise have been subject to. In the case of mixed contracts containing elements of supply, works and service contracts and of concessions, the mixed contract shall be awarded in accordance with this Directive, provided that the estimated value of the part of the contract which constitutes a contract covered by this Directive, calculated in accordance with Article 16, is equal to or greater than the relevant threshold set out in Article 15. 5. Where the different parts of a given contract are objectively not separable, the applicable legal regime shall be determined on the basis of the main subject-matter of that contract.

Article 6 Procurement covering several activities 1. In the case of contracts intended to cover several activities, contracting entities may choose to award separate contracts for the purposes of each separate activity or to award a single contract. Where contracting entities choose to award separate contracts, the decision as to which rules apply to any one of such separate contracts shall be taken on the basis of the characteristics of the separate activity concerned. Notwithstanding Article 5, where contracting entities choose to award a single contract, paragraphs 2 and 3 of this Article shall apply. However, where one of the activities concerned is covered by Article 346 TFEU or Directive 2009/81/EC, Article 26 of this Directive shall apply. The choice between awarding a single contract or awarding a number of separate contracts shall not, however, be made with

DIRECTIVE 2014/25/EU the objective of excluding the contract or contracts from the scope of application either of this Directive or, where applicable, Directive 2014/24/EU or Directive 2014/23/EU. 2. A contract which is intended to cover several activities shall be subject to the rules applicable to the activity for which it is principally intended. 3. In the case of contracts for which it is objectively impossible to determine for which activity the contract is principally intended, the applicable rules shall be determined in accordance with points (a), (b), and (c): (a) the contract shall be awarded in accordance with Directive 2014/24/EU, if one of the activities for which the contract is intended is subject to this Directive and the other to Directive 2014/24/EU; (b) the contract shall be awarded in accordance with this Directive, if one of the activities for which the contract is intended is subject to this Directive and the other to Directive 2014/23/EU; (c) the contract shall be awarded in accordance with this Directive, if one of the activities for which the contract is intended is subject to this Directive and the other is not subject to either this Directive, Directive 2014/24/EU or 2014/23/EU.

Chapter II Activities Article 7 Common provisions For the purposes of Articles 8, 9 and 10, ‘supply’ shall include generation/production, wholesale and retail sale. However, production of gas in the form of extraction falls within the scope of Article 14.

Article 8 Gas and heat 1. As far as gas and heat are concerned, this Directive shall apply to the following activities: (a) the provision or operation of fixed networks intended to provide a service to the public in connection with the production, transport or distribution of gas or heat; (b) the supply of gas or heat to such networks.

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DIRECTIVE 2014/25/EU 2. The supply, by a contracting entity other than a contracting authority, of gas or heat to fixed networks which provide a service to the public shall not be considered to be a relevant activity within the meaning of paragraph 1 where all of the following conditions are met: (a) the production of gas or heat by that contracting entity is the unavoidable consequence of carrying out an activity other than those referred to in paragraph 1 of this Article or in Articles 9 to 11; (b) the supply to the public network is aimed only at the economic exploitation of such production and amounts to not more than 20 % of the contracting entity’s turnover on the basis of the average for the preceding three years, including the current year.

Article 9 Electricity 1. As far as electricity is concerned, this Directive shall apply to the following activities: (a) the provision or operation of fixed networks intended to provide a service to the public in connection with the production, transport or distribution of electricity; (b) the supply of electricity to such networks. 2. The supply, by a contracting entity other than a contracting authority, of electricity to fixed networks which provide a service to the public shall not be considered to be a relevant activity within the meaning of paragraph 1 where all of the following conditions are met: (a) the production of electricity by that contracting entity takes place because its consumption is necessary for carrying out an activity other than those referred to in paragraph 1 of this Article or in Articles 8, 10 and 11; (b) supply to the public network depends only on that contracting entity’s own consumption and has not exceeded 30 % of that contracting entity’s total production of energy, on the basis of the average for the preceding three years, including the current year.

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Article 10 Water 1. As far as water is concerned, this Directive shall apply to the following activities: (a) the provision or operation of fixed networks intended to provide a service to the public in connection with the production, transport or distribution of drinking water; (b) the supply of drinking water to such networks. 2. This Directive shall also apply to contracts or design contests awarded or organised by contracting entities which pursue an activity referred to in paragraph 1 and which are connected with one of the following: (a) hydraulic engineering projects, irrigation or land drainage, provided that the volume of water to be used for the supply of drinking water represents more than 20 % of the total volume of water made available by such projects or irrigation or drainage installations, (b) the disposal or treatment of sewage. 3. The supply, by a contracting entity other than a contracting authority, of drinking water to fixed networks which provide a service to the public shall not be considered to be a relevant activity within the meaning of paragraph 1 where all of the following conditions are met: (a) the production of drinking water by that contracting entity concerned takes place because its consumption is necessary for carrying out an activity other than those referred to in Articles 8 to 11; (b) the supply to the public network depends only on that contracting entity’s own consumption and has not exceeded 30 % of that contracting entity’s total production of drinking water, on the basis of the average for the preceding three years, including the current year.

Article 11 Transport services This Directive shall apply to activities relating to the provision or operation of networks providing a service to the public in the field of transport by railway, automated systems, tramway, trolley bus, bus or cable. As regards transport services, a network shall be considered to exist where the service is provided under operating conditions laid

PART II The Utilities Directive 2014/25/EU down by a competent authority of a Member State, such as conditions on the routes to be served, the capacity to be made available or the frequency of the service.

Article 12 Ports and airports This Directive shall apply to activities relating to the exploitation of a geographical area for the purpose of the provision of airports and maritime or inland ports or other terminal facilities to carriers by air, sea or inland waterway.

Article 13 Postal services 1. This Directive shall apply to activities relating to the provision of: (a) postal services; (b) other services than postal services, on condition that such services are provided by an entity which also provides postal services within the meaning of point (b) of paragraph 2 of this Article and provided that the conditions set out in Article 34(1) are not satisfied in respect of the services falling within point (b) of paragraph 2 of this Article. 2. For the purpose of this Article and without prejudice to Directive 97/67/EC of the European Parliament and of the Council:1 (a) ‘postal item’ means an item addressed in the final form in which it is to be carried, irrespective of weight. In addition to items of correspondence, such items also include for instance books, catalogues, newspapers, periodicals and postal packages containing merchandise with or without commercial value, irrespective of weight; (b) ‘postal services’ means services consisting of the clearance, sorting, routing and delivery of postal items. This shall include both services falling within as well as services falling outside the scope of the universal service set up in conformity with Directive 97/67/EC;

DIRECTIVE 2014/25/EU (c) ‘other services than postal services’ means services provided in the following areas: (i) mail service management services (services both preceding and subsequent to despatch, including mailroom management services); (ii) services concerning postal items not included in point (a), such as direct mail bearing no address.

Article 14 Extraction of oil and gas and exploration for, or extraction of, coal or other solid fuels This Directive shall apply to activities relating to the exploitation of a geographical area for the purpose of: (a) extracting oil or gas; (b) exploring for, or extracting, coal or other solid fuels.

Chapter III Material scope Section 1 Thresholds Article 15 Threshold amounts Save where they are ruled out by the exclusions in Articles 18 to 23 or pursuant to Article 34, concerning the pursuit of the activity in question, this Directive shall apply to procurements with a value net of value-added tax (VAT) estimated to be equal to or greater than the following thresholds: (a) EUR 414 000 for supply and service contracts as well as for design contests; (b) EUR 5 186 000 for works contracts; (c) EUR 1 000 000 for service contracts for social and other specific services listed in Annex XVII.

Article 16 Methods for calculating the estimated value of procurement 1. The calculation of the estimated value of a procurement shall be based on the total amount payable, net of VAT, as estimated by the contracting entity, including any form of option and any renewals of the

1 Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the development of the internal market of Community postal services and the improvement of quality of service (OJ L 15, 21.1.1998, p. 14).

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2.

3.

4.

5.

6.

7.

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contracts as explicitly set out in the procurement documents. Where the contracting entity provides for prizes or payments to candidates or tenderers it shall take them into account when calculating the estimated value of the procurement. Where a contracting entity is comprised of separate operational units, account shall be taken of the total estimated value for all the individual operational units. Notwithstanding the first subparagraph, where a separate operational unit is independently responsible for its procurement or certain categories thereof, the values may be estimated at the level of the unit in question. The choice of the method used to calculate the estimated value of a procurement shall not be made with the intention of excluding it from the scope of this Directive. A procurement shall not be subdivided with the effect of preventing it from falling within the scope of this Directive, unless justified by objective reasons. That estimated value shall be valid at the moment at which the call for competition is sent or, in cases where such call for competition is not foreseen, at the moment at which the contracting entity commences the contract procurement procedure, for instance, where appropriate, by contacting economic operators in relation to the procurement. With regard to framework agreements and dynamic purchasing systems, the value to be taken into consideration shall be the maximum estimated value net of VAT of all the contracts envisaged for the total term of the agreement or system. In the case of innovation partnerships, the value to be taken into consideration shall be the maximum estimated value net of VAT of the research and development activities to take place during all stages of the envisaged partnership as well as of the supplies, services or works to be developed and procured at the end of the envisaged partnership. For the purposes of Article 15, contracting entities shall include in the estimated value of a works contract both the cost of the works and the total estimated value of any supplies or services that are made available to the contractor by the con-

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8.

9.

10.

11.

tracting entities provided that they are necessary for the execution of the works. Where a proposed work or a proposed provision of services may result in contracts being awarded in the form of separate lots, account shall be taken of the total estimated value of all such lots. Where the aggregate value of the lots is equal to or exceeds the threshold laid down in Article 15, this Directive shall apply to the awarding of each lot. Where a proposal for the acquisition of similar supplies may result in contracts being awarded in the form of separate lots, account shall be taken of the total estimated value of all such lots when applying points (b) and (c) of Article 15. Where the aggregate value of the lots is equal to or exceeds the threshold laid down in Article 15, this Directive shall apply to the awarding of each lot. Notwithstanding paragraphs 8 and 9, contracting entities may award contracts for individual lots without applying the procedures provided for under this Directive, provided that the estimated value net of VAT of the lot concerned is less than EUR 80 000 for supplies or services or EUR 1 million for works. However, the aggregate value of the lots thus awarded without applying this Directive shall not exceed 20 % of the aggregate value of all the lots into which the proposed work, the proposed acquisition of similar supplies or the proposed provision of services has been divided. In the case of supply or service contracts which are regular in nature or which are intended to be renewed within a given period, the calculation of the estimated contract value shall be based on the following: (a) either the total actual value of the successive contracts of the same type awarded during the preceding 12 months or financial year adjusted, where possible, to take account of the changes in quantity or value which would occur in the course of the 12 months following the initial contract; (b) or the total estimated value of the successive contracts awarded during the 12 months following the first delivery, or during the financial year where that is longer than 12 months.

PART II The Utilities Directive 2014/25/EU 12. With regard to supply contracts relating to the leasing, hire, rental or hire purchase of products, the value to be taken as a basis for calculating the estimated contract value shall be as follows: (a) in the case of fixed-term contracts, if that term is less than or equal to 12 months, the total estimated value for the term of the contract or, where the term of the contract is greater than 12 months, the total value including the estimated residual value; (b) in the case of contracts without a fixed term or the term of which cannot be defined, the monthly value multiplied by 48. 13. With regard to service contracts, the basis for calculating the estimated contract value shall, where appropriate, be the following: (a) insurance services: the premium payable, and other forms of remuneration; (b) banking and other financial services: the fees, commissions payable, interest and other forms of remuneration; (c) design contracts: fees, commissions payable and other forms of remuneration. 14. With regard to service contracts which do not indicate a total price, the basis for calculating the estimated contract value shall be the following: (a) in the case of fixed-term contracts, where that term is less than or equal to 48 months: the total value for their full term; (b) in the case of contracts without a fixed term or with a term greater than 48 months: the monthly value multiplied by 48.

Article 17 Revision of the thresholds 1. Every two years from 30 June 2013, the Commission shall verify that the thresholds set out in points (a) and (b) of Article 15 correspond to the thresholds established in the World Trade Organisation Agreement on Government Procurement (GPA) and shall, where necessary, revise them in accordance with this Article. In accordance with the calculation method set out in the GPA, the Commission shall calculate the value of those thresholds on the basis of the average dai-

DIRECTIVE 2014/25/EU ly value of the euro in terms of the special drawing rights (SDRs), over a period of 24 months terminating on 31 August preceding the revision with effect from 1 January. The value of the thresholds thus revised shall, where necessary, be rounded down to the nearest thousand euros so as to ensure that the thresholds in force provided for by the GPA, expressed in SDRs, are observed. 2. Every two years from 1 January 2014, the Commission shall determine the values, in the national currencies of Member States, whose currency is not the euro, of the thresholds referred to in points (a) and (b) of Article 15, revised pursuant to paragraph 1 of this Article. At the same time, the Commission shall determine the value, in the national currencies of the Member States, whose currency is not the euro, of the threshold referred to in point (c) of Article 15. In accordance with the calculation method set out in the GPA, the determination of such values shall be based on the average daily values of those currencies, corresponding to the applicable threshold expressed in euros over the 24 months terminating on 31 August preceding the revision with effect from 1 January. 3. The Commission shall publish the revised thresholds referred to in paragraph 1, their corresponding values in the national currencies referred to in the first subparagraph of paragraph 2, and the value determined in accordance with the second subparagraph of paragraph 2 in the Official Journal of the European Union at the beginning of the month of November following their revision. 4. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 to adapt the methodology set out in the second subparagraph of paragraph 1 of this Article to any change in the methodology provided in the GPA for the revision of the thresholds referred to in points (a) and (b) of Article 15 and for the determination of the corresponding values in the national currencies of the Member States, whose currency is not the euro, as referred to in paragraph 2 of this Article. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 to revise the thresholds re-

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DIRECTIVE 2014/25/EU ferred to in points (a) and (b) of Article 15 when necessary. 5. Where it is necessary to revise the thresholds referred to in points (a) and (b) of Article 15 and time constraints prevent the use of the procedure set in Article 103 and therefore imperative grounds of urgency so require, the procedure provided for in Article 104 shall apply to delegated acts adopted pursuant to the second subparagraph of paragraph 4 of this Article.

Section 2 Excluded contracts and design contests; special provisions for procurement involving defence and security aspects Subsection 1 Exclusions applicable to all contracting entities and special exclusions for the water and energy sectors Article 18 Contracts awarded for purposes of resale or lease to third parties 1. This Directive shall not apply to contracts awarded for purposes of resale or lease to third parties, provided that the contracting entity enjoys no special or exclusive right to sell or lease the subject of such contracts, and other entities are free to sell or lease it under the same conditions as the contracting entity. 2. The contracting entities shall notify the Commission if so requested of all the categories of products or activities which they regard as excluded under paragraph 1. The Commission may periodically publish in the Official Journal of the European Union, for information purposes, of lists of the categories of products and activities which it considers to be covered by this exclusion. In so doing, the Commission shall respect any sensitive commercial aspects that the contracting entities may point out when forwarding information.

Article 19 Contracts and design contests awarded or organised for purposes other than the pursuit of a covered activity or for the pursuit of such an activity in a third country 1. This Directive shall not apply to contracts which the contracting entities award for purposes other than the pursuit of their activities as described in Articles 8 to 14 or for the pursuit of such activities in a

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PART II The Utilities Directive 2014/25/EU third country, in conditions not involving the physical use of a network or geographical area within the Union nor shall it apply to design contests organised for such purposes. 2. The contracting entities shall notify the Commission, if so requested, of any activities which they regard as excluded under paragraph 1. The Commission may periodically publish in the Official Journal of the European Union, for information purposes, lists of the categories of activities which it considers to be covered by this exclusion. In so doing, the Commission shall respect any sensitive commercial aspects that the contracting entities may point out when forwarding this information.

Article 20 Contracts awarded and design contests organised pursuant to international rules 1. This Directive shall not apply to contracts or design contests which the contracting entity is obliged to award or organise in accordance with procurement procedures different from those laid down in this Directive established by any of the following: (a) a legal instrument creating international law obligations, such as an international agreement, concluded in accordance with the Treaties, between a Member State and one or more third countries or subdivisions thereof and covering works, supplies or services intended for the joint implementation or exploitation of a project by their signatories; (b) an international organisation. Member States shall communicate all legal instruments referred to in point (a) of the first subparagraph of this paragraph to the Commission, which may consult the Advisory Committee for Public Contracts referred to in Article 105. 2. This Directive shall not apply to contracts and design contests which the contracting entity awards or organises in accordance with procurement rules provided by an international organisation or international financing institution, where the contracts or design contests concerned are fully financed by that organisation or institution; in the case of contracts or design contests co-financed the most part by an international organisation or international fi-

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PART II The Utilities Directive 2014/25/EU nancing institution the parties shall agree on applicable procurement procedures. 3. Article 27 shall apply to contracts and design contests involving defence or security aspects which are awarded or organised pursuant to international rules. Paragraphs 1 and 2 of this Article shall not apply to those contracts and design contests.

Article 21 Specific exclusions for service contracts This Directive shall not apply to service contracts for: (a) the acquisition or rental, by whatever financial means, of land, existing buildings or other immovable property or concerning rights thereon; (b) arbitration and conciliation services; (c) any of the following legal services: (i) legal representation of a client by a lawyer within the meaning of Article 1 of Council Directive 77/249/EEC1 in: – an arbitration or conciliation held in a Member State, a third country or before an international arbitration or conciliation instance; or – judicial proceedings before the courts, tribunals or public authorities of a Member State or a third country or before international courts, tribunals or institutions; (ii) legal advice given in preparation of any of the proceedings referred to in point (i) of this point or where there is a tangible indication and high probability that the matter to which the advice relates will become the subject of such proceedings, provided that the advice is given by a lawyer within the meaning of Article 1 of Directive 77/249/ EEC;

(d)

(e) (f) (g) (h)

(i)

(iii) document certification and authentication services which must be provided by notaries; (iv) legal services provided by trustees or appointed guardians or other legal services the providers of which are designated by a court or tribunal in the Member State concerned or are designated by law to carry out specific tasks under the supervision of such tribunals or courts; (v) other legal services which in the Member State concerned are connected, even occasionally, with the exercise of official authority; financial services in connection with the issue, sale, purchase or transfer of securities or other financial instruments within the meaning of Directive 2004/39/EC of the European Parliament and of the Council2 and operations conducted with the European Financial Stability Facility and the European Stability Mechanism; loans, whether or not in connection with the issue, sale, purchase or transfer of securities or other financial instruments; employment contracts; public passenger transport services by rail or metro; civil defence, civil protection, and danger prevention that are provided by nonprofit organisations or associations, and which are covered by CPV codes 75250000-3, 75251000-0, 75251100-1, 75251110-4, 75251120-7, 75252000-7, 75222000-8; 98113100-9 and 85143000-3 except patient transport ambulance services; contracts for broadcasting time or programme provision that are awarded to audiovisual or radio media service providers. For the purposes of this point, ‘media service providers’ shall have the same meaning as pursuant to point (d) of Article 1(1) of Directive 2010/13/EU of

1 Council Directive 77/249/EEC of 22 March 1977 to facilitate the effective exercise by lawyers of freedom to provide services (OJ L 78, 26.3.1977, p. 17). 2 Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (OJ L 145, 30.4.2004, p. 1).

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DIRECTIVE 2014/25/EU the European Parliament and of the Council.3 ‘Programme’ shall have the same meaning as pursuant to point (b) of Article 1(1) of that Directive, but shall also include radio programmes and radio programme materials. Furthermore, for the purposes of this provision, ‘programme material’ shall have the same meaning as ‘programme’.

Article 22 Service contracts awarded on the basis of an exclusive right This Directive shall not apply to service contracts awarded to an entity which is itself a contracting authority or to an association of contracting authorities on the basis of an exclusive right which they enjoy pursuant to a law, regulation or published administrative provision which is compatible with the TFEU.

Article 23 Contracts awarded by certain contracting entities for the purchase of water and for the supply of energy or of fuels for the production of energy This Directive shall not apply: (a) to contracts for the purchase of water if awarded by contracting entities engaged in one or both of the activities relating to drinking water referred to in Article 10(1); (b) to contracts awarded by contracting entities themselves being active in the energy sector by being engaged in an activity referred to in Article 8(1), Article 9(1) or Article 14 for the supply: (i) of energy; (ii) of fuels for the production of energy.

Subsection 2 Procurement involving defence and security aspects Article 24 Defence and security 1. In respect of contracts awarded and design contests organised in the fields of defence and security, this Directive shall not apply to: (a) contracts falling within the scope of Directive 2009/81/EC;

PART II The Utilities Directive 2014/25/EU (b) contracts to which Directive 2009/81/EC does not apply pursuant to Articles 8, 12 and 13 thereof. 2. This Directive shall not apply to contracts and design contests not otherwise exempted under paragraph 1, to the extent that the protection of the essential security interests of a Member State cannot be guaranteed by less intrusive measures, for instance by imposing requirements aimed at protecting the confidential nature of information which the contracting entity makes available in a contract award procedure as provided for in this Directive. Furthermore, and in conformity with point (a) Article 346(1) TFEU, this Directive shall not apply to contracts and design contests not otherwise exempted under paragraph 1 of this Article to the extent that the application of this Directive would oblige a Member State to supply information the disclosure of which it considers contrary to the essential interests of its security. 3. Where the procurement and performance of the contract or design contest are declared to be secret or must be accompanied by special security measures in accordance with the laws, regulations or administrative provisions in force in a Member State, this Directive shall not apply provided that the Member State has determined that the essential interests concerned cannot be guaranteed by less intrusive measures, such as those referred to in the first subparagraph of paragraph 2.

Article 25 Mixed procurement covering the same activity and involving defence or security aspects 1. In the case of mixed contracts covering the same activity which have as their subjectmatter procurement covered by this Directive and procurement or other elements covered by Article 346 TFEU or Directive 2009/81/EC, this Article shall apply. 2. Where the different parts of a given contract are objectively separable, contracting entities may choose to award separate

3 Directive 2010/13/EU of the European Parliament and of the Council of 10 March 2010 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services (Audiovisual Media Services Directive) (OJ L 95, 15.4.2010, p. 1).

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PART II The Utilities Directive 2014/25/EU contracts for the separate parts or to award a single contract. Where contracting entities choose to award separate contracts for separate parts, the decision of which legal regime applies to any one of such separate contracts shall be taken on the basis of the characteristics of the separate part concerned. Where contracting entities choose to award a single contract, the following criteria shall apply to determine the applicable legal regime: (a) where part of a given contract is covered by Article 346 TFEU, the contract may be awarded without applying this Directive, provided that the award of a single contract is justified for objective reasons; (b) where part of a given contract is covered by Directive 2009/81/EC, the contract may be awarded in accordance with that Directive, provided that the award of a single contract is justified for objective reasons. This point shall be without prejudice to the thresholds and exclusions for which that Directive provides. The decision to award a single contract shall not, however, be taken for the purpose of excluding contracts from the application of either this Directive or Directive 2009/81/EC. 3. Point (a) of the third subparagraph of paragraph 2 shall apply to mixed contracts to which both point (a) and point (b) of that subparagraph could otherwise apply. 4. Where the different parts of a given contract are objectively not separable, the contract may be awarded without applying this Directive where it includes elements to which Article 346 TFEU applies; otherwise it may be awarded in accordance with Directive 2009/81/EC.

Article 26 Procurement covering several activities and involving defence or security aspects 1. In the case of contracts intended to cover several activities, contracting entities may choose to award separate contracts for the purposes of each separate activity or to award a single contract. Where contracting entities choose to award separate contracts for separate parts, the decision of

DIRECTIVE 2014/25/EU which legal regime applies to any one of such separate contracts shall be taken on the basis of the characteristics of the separate activity concerned. Where contracting entities choose to award a single contract, paragraph 2 of this Article shall apply. The choice between awarding a single contract and awarding a number of separate contracts shall not be made with the objective of excluding the contract or contracts from the scope of this Directive or Directive 2009/81/EC. 2. In the case of contracts intended to cover an activity which is subject to this Directive and another which is: (a) subject to Directive 2009/81/EC, or (b) covered by Article 346 TFEU, the contract may be awarded in accordance with Directive 2009/81/EC in the cases set out under point (a) and may be awarded without applying this Directive in the cases set out under point (b). This subparagraph is without prejudice to the thresholds and exclusions for which Directive 2009/81/EC provides. Contracts as set out under point (a) of the first subparagraph, which in addition include procurement or other elements which are covered by Article 346 TFEU, may be awarded without applying this Directive. However, it is a condition for the application of the first and second subparagraph that the award of a single contract is justified for objective reasons and the decision to award a single contract is not taken for the purpose of excluding contracts from the application of this Directive.

Article 27 Contracts and design contests involving defence or security aspects which are awarded or organised pursuant to international rules 1. This Directive shall not apply to contracts or design contests involving defence or security aspects which the contracting entity is obliged to award or organise in accordance with procurement procedures different from those laid down in this Directive established by any of the following: (a) an international agreement or arrangement, concluded in accordance with the Treaties, between a Member State and one or more third countries or subdivisions thereof and covering

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DIRECTIVE 2014/25/EU works, supplies or services intended for the joint implementation or exploitation of a project by their signatories; (b) an international agreement or arrangement relating to the stationing of troops and concerning the undertakings of a Member State or a third country; (c) an international organisation. All agreements or arrangements referred to in point (a) of the first subparagraph of this paragraph shall be communicated to the Commission, which may consult the Advisory Committee on Public Procurement referred to in Article 105. 2. This Directive shall not apply to contracts and design contests involving defence or security aspects which the contracting entity awards in accordance with procurement rules provided by an international organisation or international financing institution, where the contracts or design contests concerned are fully financed by this organisation or institution. In the case of contracts or design contests co-financed for the most part by an international organisation or international financing institution the parties shall agree on applicable procurement procedures.

Subsection 3 Special relations (cooperation, affiliated undertakings and joint ventures) Article 28 Contracts between contracting authorities 1. A contract awarded by a contracting authority to a legal person governed by private or public law shall fall outside the scope of this Directive where all of the following conditions are fulfilled: (a) the contracting authority exercises over the legal person concerned a control which is similar to that which it exercises over its own departments; (b) more than 80 % of the activities of the controlled legal person are carried out in the performance of tasks entrusted to it by the controlling contracting authority or by other legal persons controlled by that contracting authority; (c) there is no direct private capital participation in the controlled legal

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PART II The Utilities Directive 2014/25/EU person with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person. A contracting authority shall be deemed to exercise over a legal person a control similar to that which it exercises over its own departments within the meaning of point (a) of the first subparagraph where it exercises a decisive influence over both strategic objectives and significant decisions of the controlled legal person. Such control may also be exercised by another legal person, which is itself controlled in the same way by the contracting authority. 2. Paragraph 1 also applies where a controlled person which is a contracting authority awards a contract to its controlling contracting authority, or to another legal person controlled by the same contracting authority, provided that there is no direct private capital participation in the legal person being awarded the public contract with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person. 3. A contracting authority, which does not exercise over a legal person governed by private or public law control within the meaning of paragraph 1, may nevertheless award a contract to that legal person without applying this Directive, where all of the following conditions are fulfilled: (a) the contracting authority exercises jointly with other contracting authorities a control over that legal person which is similar to that which they exercise over their own departments; (b) more than 80 % of the activities of that legal person are carried out in the performance of tasks entrusted to it by the controlling contracting authorities or by other legal persons controlled by the same contracting authorities; and (c) there is no direct private capital participation in the controlled legal person with the exception of non-controlling and non-blocking forms of private capital participation required

PART II The Utilities Directive 2014/25/EU by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person. For the purposes of point (a) of the first subparagraph, contracting authorities shall be deemed to exercise joint control over a legal person where all of the following conditions are fulfilled: (i) the decision-making bodies of the controlled legal person are composed of representatives of all participating contracting authorities. Individual representatives may represent several or all of the participating contracting authorities; (ii) those contracting authorities are able to jointly exert decisive influence over the strategic objectives and significant decisions of the controlled legal person; and (iii) the controlled legal person does not pursue any interests which are contrary to those of the controlling contracting authorities. 4. A contract concluded exclusively between two or more contracting authorities shall fall outside the scope of this Directive, where all of the following conditions are met: (a) the contract establishes or implements a cooperation between the participating contracting authorities with the aim of ensuring that public services they have to perform are provided with a view to achieving objectives they have in common; (b) the implementation of that cooperation is governed solely by considerations relating to the public interest; and (c) the participating contracting authorities perform on the open market less than 20 % of the activities concerned by the cooperation. 5. For the determination of the percentage of activities referred to in point (b) of the first subparagraph of paragraph 1, point (b) of the first subparagraph of paragraph 3 and point (c) of paragraph 4, the average total turnover, or an appropriate alternative activity based measure such as costs incurred by the relevant legal person with respect to services, supplies and works for the three years preceding the contract award shall be taken into consideration.

DIRECTIVE 2014/25/EU Where, because of the date on which the relevant legal person was created or commenced activities or because of a reorganisation of its activities, the turnover, or alternative activity based measure such as costs, are either not available for the preceding three years or no longer relevant, it shall be sufficient to show that the measurement of activity is credible, particularly by means of business projections.

Article 29 Contracts awarded to an affiliated undertaking 1. For the purposes of this Article, ‘affiliated undertaking’ means any undertaking the annual accounts of which are consolidated with those of the contracting entity in accordance with the requirements of the Directive 2013/34/EU. 2. In the case of entities, which are not subject to Directive 2013/34/EU, ‘affiliated undertaking’ shall mean any undertaking that: (a) may be, directly or indirectly, subject to a dominant influence by the contracting entity; (b) may exercise a dominant influence over the contracting entity; or (c) in common with the contracting entity, is subject to the dominant influence of another undertaking by virtue of ownership, financial participation, or the rules which govern it. For the purposes of this paragraph, ‘dominant influence’ shall have the same meaning as in the second subparagraph of Article 4(2). 3. Notwithstanding Article 28 and provided that the conditions in paragraph 4 of this Article are met, this Directive shall not apply to contracts awarded: (a) by a contracting entity to an affiliated undertaking, or (b) by a joint venture, formed exclusively by a number of contracting entities for the purpose of carrying out activities described in Articles 8 to 14, to an undertaking which is affiliated with one of those contracting entities. 4. Paragraph 3 shall apply to: (a) service contracts provided that at least 80 % of the average total turnover of the affiliated undertaking over the preceding three years, taking into account all services provided by

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DIRECTIVE 2014/25/EU that undertaking, derives from the provision of services to the contracting entity or other undertakings with which it is affiliated; (b) supply contracts provided that at least 80 % of the average total turnover of the affiliated undertaking, taking into account all supplies provided by that undertaking, over the preceding three years derives from the provision of supplies to the contracting entity or other undertakings with which it is affiliated; (c) to works contracts provided that at least 80 % of the average total turnover of the affiliated undertaking, taking into account all works provided by that undertaking, over the preceding three years derives from the provision of works to the contracting entity or other undertakings with which it is affiliated. 5. Where, because of the date on which an affiliated undertaking was created or commenced activities, the turnover is not available for the preceding three years, it shall be sufficient for that undertaking to show that the turnover referred to in points (a), (b) or (c) of paragraph 4 is credible, in particular by means of business projections. 6. Where more than one undertaking affiliated with the contracting entity with which they form an economic group provides the same or similar services, supplies or works, the percentages shall be calculated taking into account the total turnover deriving respectively from the provision of services, supplies or works by those affiliated undertakings.

Article 30 Contracts awarded to a joint venture or to a contracting entity forming part of a joint venture Notwithstanding Article 28 and provided that the joint venture has been set up in order to carry out the activity concerned over a period of at least three years and that the instrument setting up the joint venture stipulates that the contracting entities, which form it, will be part thereof for at least the same

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PART II The Utilities Directive 2014/25/EU period, this Directive shall not apply to contracts awarded by any of the following: (a) by a joint venture, formed exclusively by a number of contracting entities for the purpose of carrying out activities within the meaning of Articles 8 to 14, to one of those contracting entities; or (b) by a contracting entity to such a joint venture of which it forms part.

Article 31 Notification of information Contracting entities shall notify to the Commission, if so requested, the following information regarding the application of Article 29(2) and (3) and Article 30: (a) the names of the undertakings or joint ventures concerned, (b) the nature and value of the contracts involved, (c) proof deemed necessary by the Commission that the relationship between the undertaking or joint venture to which the contracts are awarded and the contracting entity complies with the requirements of Articles 29 or 30.

Subsection 4 Specific situations Article 32 Research and development services This Directive shall only apply to service contracts for research and development services which are covered by CPV codes 73000000-2 to 73120000-9, 73300000-5, 73420000-2 and 73430000-5 provided that both of the following conditions are fulfilled: (a) the benefits accrue exclusively to the contracting entity for its use in the conduct of its own affairs, and (b) the service provided is wholly remunerated by the contracting entity.

Article 33 Contracts subject to special arrangements 1. Without prejudice to Article 34 of this Directive the Republicof Austriaand the Federal Republic of Germany shall ensure, by way of the conditions of authorisation or other appropriate measures, that any enti-

PART II The Utilities Directive 2014/25/EU ty operating in the sectors mentioned in Commission Decision1 2002/205/EC and Commission Decision 2004/73/EC:2 (a) observes the principles of non-discrimination and competitive procurement in respect of the award of supplies, works and service contracts, in particular as regards the information which the entity makes available to economic operators concerning its procurement intentions; (b) communicates to the Commission, under the conditions defined in Commission Decision 93/327/EEC,3 information relating to the contracts they award. 2. Without prejudice to Article 34, the United Kingdom shall ensure, by way of the conditions of authorisation or other appropriate measures, that any entity operating in the sectors mentioned in Decision 97/367/EEC applies points (a) and (b) of paragraph 1 of this Article in respect of contracts awarded for the pursuit of that activity in Northern Ireland. 3. Paragraphs 1 and 2 shall not apply to contracts awarded for the purpose of exploring for oil or gas.

Subsection 5 Activities directly exposed to competition and procedural provisions relating thereto Article 34 Activities directly exposed to competition 1. Contracts intended to enable an activity mentioned in Articles 8 to 14 to be carried out shall not be subject to this Directive if the Member State or the contracting entities having introduced the request pursuant to Article 35 can demonstrate that, in the Member State in which it is performed, the activity is directly exposed to competition on markets to which access is not restricted; nor shall design contests that are organised for the pursuit of such an activity in that geographic area be sub-

DIRECTIVE 2014/25/EU ject to this Directive. The activity concerned may form a part of a larger sector or be exercised only in certain parts of the Member State concerned. The competition assessment referred to in the first sentence of this paragraph, which will be made in the light of the information available to the Commission and for the purposes of this Directive, is without prejudice to the application of competition law. Such assessment shall be made having regard to the market for the activities in question and the geographical reference market within the meaning of paragraph 2. 2. For the purposes of paragraph 1 of this Article, the question of whether an activity is directly exposed to competition shall be decided on the basis of criteria that are in conformity with the provisions on competition of the TFEU. Those may include the characteristics of the products or services concerned, the existence of alternative products or services considered to be substitutable on the supply side or demand side, the prices and the actual or potential presence of more than one supplier of the products or provider of the services in question. The geographical reference market, on the basis of which exposure to competition is assessed, shall consist of the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because, in particular, conditions of competition are appreciably different in those areas. That assessment shall take account in particular of the nature and characteristics of the products or services concerned, of the existence of entry barriers or of consumer preferences, of appreciable differences of the undertakings’ market shares between the area con-

1 Commission Decision 2002/205/EC of 4 March 2002 following a request by Austriaapplying for the special regime provided for in Article 3 of Directive 93/38/EEC (OJ L 68, 12.3.2002, p. 31). 2 Commission Decision 2004/73/EC of 15 January 2004 on a request from Germanyto apply the special procedure laid down in Article 3 of Directive 93/38/EEC (OJ L 16, 23.1.2004, p. 57). 3 Commission Decision 93/327/EEC of 13 May 1993 defining the conditions under which contracting entities exploiting geographical areas for the purpose of exploring for or extracting oil, gas, coal or other solid fuels must communicate to the Commission information relating to the contracts they award (OJ L 129, 27.5.1993, p. 25).

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DIRECTIVE 2014/25/EU cerned and neighbouring areas or of substantial price differences. 3. For the purposes of paragraph 1 of this Article, access to a market shall be deemed not to be restricted if the Member State has implemented and applied the Union legislation listed in Annex III. If free access to a given market cannot be presumed on the basis of the first subparagraph, it must be demonstrated that access to the market in question is free de facto and de jure.

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Article 35 Procedure for establishing whether Article 34 is applicable 1. Where a Member State or, where the legislation of the Member State concerned provides for it, a contracting entity considers that, on the basis of the criteria set out in Article 34(2) and (3), a given activity is directly exposed to competition on markets to which access is not restricted, it may submit a request to the Commission to establish that this Directive does not apply to the award of contracts or the organisation of design contests for the pursuit of that activity, where appropriate together with the position adopted by an independent national authority that is competent in relation to the activity concerned. Such requests may concern activities which are part of a larger sector or which are exercised only in certain parts of the Member State concerned. In the request, the Member State or contracting entity concerned shall inform the Commission of all relevant facts, and in particular of any law, regulation, administrative provision or agreement concerning compliance with the conditions set out in Article 34(1). 2. Unless a request coming from a contracting entity is accompanied by a reasoned and substantiated position, adopted by an independent national authority that is competent in relation to the activity concerned, which thoroughly analyses the conditions for the possible applicability of Article 34(1) to the activity concerned in accordance with paragraphs 2 and 3 of that Article, the Commission shall immediately inform the Member State concerned. The Member State concerned shall in such cases inform the Commission of all relevant facts, and in particular of any

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law, regulation, administrative provision or agreement concerning compliance with the conditions set out in Article 34(1). Upon request submitted in accordance with paragraph 1 of this Article, the Commission may, by means of implementing acts adopted within the periods set out in Annex IV, establish whether an activity referred to in Articles 8 to 14 is directly exposed to competition on the basis of the criteria set out in Article 34. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 105(2). Contracts intended to enable the activity concerned to be carried out and design contests that are organised for the pursuit of such an activity shall cease to be subject to this Directive in any of the following cases: (a) The Commission has adopted the implementing act establishing the applicability of Article 34(1) within the period provided for in Annex IV; (b) has not adopted the implementing act within the period provided for in Annex IV. After the submission of a request, the Member State or the contracting entity concerned may, with the Commission’s agreement, substantially modify its request, in particular as regards the activities or the geographical areas concerned. In that case, a new period for the adoption of the implementing act shall apply, which shall be calculated in accordance with paragraph 1 of Annex IV, unless a shorter period is agreed on by the Commission and the Member State or contracting entity which has presented the request. Where an activity in a given Member State is already the subject of a procedure under paragraphs 1, 2 and 4, further requests concerning the same activity in the same Member State before the expiry of the period opened in respect of the first request shall not be considered as new procedures and shall be treated in the context of the first request. The Commission shall adopt an implementing act establishing detailed rules for the application of paragraphs 1 to 5. That implementing act shall include at least rules relating to: (a) the publication in the Official Journal of the European Union, for informa-

PART II The Utilities Directive 2014/25/EU tion, of the date on which the period set out in paragraph 1 of Annex IV begins and ends, including any prolongations or suspensions of those periods, as provided for in that Annex; (b) publication of the possible applicability of Article 34(1) in accordance with point (b) of the second subparagraph of paragraph 3 of this Article; (c) implementing provisions concerning the form, content and other details of requests pursuant to paragraph 1 of this Article; Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 105(2).

Chapter IV General principles Article 36 Principles of procurement 1. Contracting entities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner. The design of the procurement shall not be made with the intention of excluding it from the scope of this Directive or of artificially narrowing competition. Competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators. 2. Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex XIV.

Article 37 Economic operators 1. Economic operators that, under the law of the Member State in which they are established, are entitled to provide the relevant service, shall not be rejected solely on the ground that, under the law of the Member State in which the contract is awarded, they would be required to be either natural or legal persons. However, in the case of service and works contracts as well as supply contracts covering in addition services or siting and in-

DIRECTIVE 2014/25/EU stallation operations, legal persons may be required to indicate, in the tender or the request to participate, the names and relevant professional qualifications of the staff responsible for the performance of the contract in question. 2. Groups of economic operators, including temporary associations, may participate in procurement procedures. They shall not be required by contracting entities to have a specific legal form in order to submit a tender or a request to participate. Where necessary, contracting entities may clarify in the procurement documents how groups of economic operators are to meet the criteria and requirements for qualification and qualitative selection referred to in Articles 77 to 81 provided that this is justified by objective reasons and is proportionate. Member States may establish standard terms for how groups of economic operators are to meet those requirements. Any conditions for the performance of a contract by such groups of economic operators, which are different from those imposed on individual participants, shall also be justified by objective reasons and shall be proportionate. 3. Notwithstanding paragraph 2, contracting entities may require groups of economic operators to assume a specific legal form once they have been awarded the contract, to the extent that such a change is necessary for the satisfactory performance of the contract.

Article 38 Reserved contracts 1. Member States may reserve the right to participate in procurement procedures to sheltered workshops and economic operators whose main aim is the social and professional integration of disabled or disadvantaged persons or may provide for such contracts to be performed in the context of sheltered employment programmes, provided that at least 30 % of the employees of those workshops, economic operators or programmes are disabled or disadvantaged workers. 2. The call for competition shall make reference to this Article.

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Article 39 Confidentiality 1. Unless otherwise provided in this Directive or in the national law to which the contracting entity is subject, in particular legislation concerning access to information, and without prejudice to the obligations relating to the advertising of awarded contracts and to the information to candidates and tenderers set out in Articles 70 and 75, the contracting entity shall not disclose information forwarded to it by economic operators which they have designated as confidential, including, but not limited to, technical or trade secrets and the confidential aspects of tenders. 2. Contracting entities may impose on economic operators requirements aimed at protecting the confidential nature of information which the contracting entities make available throughout the procurement procedure, including information made available in connection with the operation of a qualification system, whether or not this has been the subject of a notice on the existence of a qualification system used as a means of calling for competition.

Article 40 Rules applicable to communication 1. Member States shall ensure that all communication and information exchange under this Directive, in particular electronic submission, are performed using electronic means of communication in accordance with the requirements of this Article. The tools and devices to be used for communicating by electronic means, as well as their technical characteristics, shall be non-discriminatory, generally available and interoperable with the ICT products in general use and shall not restrict economic operators’ access to the procurement procedure. Notwithstanding the first subparagraph, contracting entities shall not be obliged to require electronic means of communication in the submission process in the following situations: (a) due to the specialised nature of the procurement, the use of electronic means of communication would require specific tools, devices or file formats that are not generally available or supported by generally available applications;

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PART II The Utilities Directive 2014/25/EU (b) the applications supporting file formats that are suitable for the description of the tenders use file formats that cannot be handled by any other open or generally available applications or are under a proprietary licensing scheme and cannot be made available for downloading or remote use by the contracting entity; (c) the use of electronic means of communication would require specialised office equipment that is not generally available to contracting entities; (d) the procurement documents require the submission of physical or scale models which cannot be transmitted using electronic means. In respect of communications for which electronic means of communication are not used pursuant to the second subparagraph, communication shall be carried out by post or other suitable carrier or by a combination of post or other suitable carrier and electronic means. Notwithstanding the first subparagraph of this paragraph, contracting entities are not obliged to require electronic means of communication in the submission process to the extent that the use of means of communication other than electronic means is necessary either because of a breach of security of the electronic means of communications or for the protection of the particularly sensitive nature of information requiring such a high level of protection that it cannot be properly ensured by using electronic tools and devices that are either generally available to economic operators or can be made available to them by alternative means of access within the meaning of paragraph 5. It shall be the responsibility of the contracting entities requiring, in accordance with the second subparagraph of this paragraph, means of communication other than electronic means in the submission process to indicate in the individual report referred to in Article 100 the reasons for this requirement. Where applicable, contracting entities shall indicate in the individual report the reasons why use of means of communication other than electronic means has been considered necessary in application of the fourth subparagraph of this paragraph.

PART II The Utilities Directive 2014/25/EU 2. Notwithstanding paragraph 1, oral communication may be used in respect of communications other than those concerning the essential elements of a procurement procedure, provided that the content of the oral communication is documented to a sufficient degree. For this purpose, the essential elements of the procurement procedure include the procurement documents, requests for participation and confirmations of interest and tenders. In particular, oral communications with tenderers which could have a substantial impact on the content and assessment of the tenders shall be documented to a sufficient extent and by appropriate means, such as written or audio records or summaries of the main elements of the communication. 3. In all communication, exchange and storage of information, contracting entities shall ensure that the integrity of data and the confidentiality of tenders and requests to participate are preserved. They shall examine the content of tenders and requests to participate only after the time limit set for submitting them has expired. 4. For public works contracts and design contests, Member States may require the use of specific electronic tools, such as of building information electronic modelling tools or similar. In such cases the contracting entities shall offer alternative means of access as provided for in paragraph 5, until such time as those tools become generally available within the meaning of the second sentence of the first subparagraph of paragraph 1. 5. Contracting entities may, where necessary, require the use of tools which are not generally available, provided that the contracting entities offer alternative means of access. Contracting entities shall be deemed to offer suitable alternative means of access in any of the following situations, where they: (a) offer unrestricted and full direct access free of charge by electronic means to those tools and devices from the date of publication of the notice in accordance with Annex IX or from the date on which the invitation to

DIRECTIVE 2014/25/EU confirm interest is sent. The text of the notice or the invitation to confirm interest shall specify the internet address at which those tools and devices are accessible; (b) ensure that tenderers having no access to the tools and devices concerned, or no possibility of obtaining them within the relevant time limits, provided that the lack of access is not attributable to the tenderer concerned, may access the procurement procedure through the use of provisional tokens made available free of charge online; or (c) support an alternative channel for electronic submission of tenders. 6. In addition to the requirements set out in Annex V, the following rules shall apply to tools and devices for the electronic transmission and receipt of tenders and for the electronic receipt of requests to participate: (a) information on specifications for the electronic submission of tenders and requests to participate, including encryption and time-stamping, shall be available to interested parties; (b) Member States, or contracting entities acting within an overall framework established by the Member State concerned, shall specify the level of security required for the electronic means of communication to be used in the various stages of the specific procurement procedure; that level shall be proportionate to the risks attached; (c) where Member States, or contracting entities acting within an overall framework established by the Member State concerned, conclude that the level of risks, assessed under point (b) of this paragraph, is such that advanced electronic signatures as defined by Directive 1999/93/EC of the European Parliament and of the Council1 are required, contracting entities shall accept advanced electronic signatures supported by a qualified certificate, taking into account

1 Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures (OJ L 13, 19.1.2000, p. 12).

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DIRECTIVE 2014/25/EU whether those certificates are provided by a certificate services provider, which is on a trusted list as provided for in Commission Decision 2009/767/EC,2 created with or without a secure signature creation device, subject to compliance with the following conditions: (i) the contracting entities shall establish the required advanced signature format on the basis of formats established in Commission Decision 2011/130/EU3 and shall put in place necessary measures to be able to process those formats technically; in case a different format of electronic signature is used, the electronic signature or the electronic document carrier shall include information on existing validation possibilities, which shall be under the responsibility of the Member State. The validation possibilities shall allow the contracting entity to validate online, free of charge and in a way that is understandable for non-native speakers, the received electronic signature as an advanced electronic signature supported by a qualified certificate. Member States shall notify information on the provider of validation services to the Commission, which shall make the information received from the Member States available to the public on the internet; (ii) where a tender is signed with the support of a qualified certificate that is included on a trusted list, the contracting entities shall not apply additional requirements that may hinder the use of those signatures by tenderers.

PART II The Utilities Directive 2014/25/EU In respect of documents used in the context of a procurement procedure that are signed by a competent authority of a Member State or by another issuing entity, the competent issuing authority or entity may establish the required advanced signature format in accordance with the requirements set out in Article 1(2) of Decision 2011/130/EU. They shall put in place the necessary measures to be able to process that format technically by including the information required for the purpose of processing the signature in the document concerned. Such documents shall contain in the electronic signature or in the electronic document carrier information on existing validation possibilities that allow the validation of the received electronic signature online, free of charge and in a way that is understandable for non-native speakers. 7. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 to amend the technical details and characteristics set out in Annex V to take account of technical developments. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 to amend the list set out in points (a) to (d) of the second subparagraph of paragraph 1 of this Article where technological developments render continued exceptions from the use of electronic means of communication inappropriate or, exceptionally, where new exceptions must be provided for because of technological developments. To ensure the interoperability of technical formats as well as of process and messaging standards, especially in a cross-border context, the Commission shall be empowered to adopt delegated acts in accordance with Article 103 to establish the mandatory use of such specific technical standards, in particular with regard to the use of electronic submission, electronic catalogues and means for electronic authentication, only where technical standards have been thoroughly tested

2 Commission Decision 2009/767/EC of 16 October 2009 setting out measures facilitating the use of procedures by electronic means through the points of single contact under Directive 2006/123/EC of the European Parliament and of the Council on services in the internal market (OJ L 274, 20.10.2009, p. 36). 3 Commission Decision 2011/130/EU of 25 February 2011 establishing minimum requirements for the cross-border processing of documents signed electronically by competent authorities under Directive 2006/123/EC of the European Parliament and of the Council on services in the internal market (OJ L 53, 26.2.2011, p. 66).

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PART II The Utilities Directive 2014/25/EU and proved their usefulness in practice. Before making the use of any technical standard mandatory, the Commission shall also carefully consider the costs that this may entail, in particular in terms of adaptations to existing e-procurement solutions, including infrastructure, processes or software.

Article 41 Nomenclatures 1. Any references to nomenclatures in the context of public procurement shall be made using the Common Procurement Vocabulary (CPV) as adopted by Regulation (EC) No 2195/2002. 2. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 to adapt the CPV codes referred to in this Directive, whenever changes in the CPV nomenclature have to be reflected in this Directive and they do not imply a modification of the scope of this Directive.

Article 42 Conflicts of interest Member States shall ensure that contracting authorities take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators. The concept of conflicts of interest shall at least cover any situation where staff members of the contracting authority or of a procurement service provider acting on behalf of the contracting authority who are involved in the conduct of the procurement procedure or may influence the outcome of that procedure have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure.

TITLE II RULES APPLICABLE TO CONTRACTS Chapter I Procedures Article 43 Conditions relating to the GPA and other international agreements In so far as they are covered by Annexes 3, 4 and 5 and the General Notes to the European Union’s Appendix I to the GPA and by the

DIRECTIVE 2014/25/EU other international agreements by which the Union is bound, contracting entities within the meaning of Article 4(1)(a) shall accord to the works, supplies, services and economic operators of the signatories to those agreements treatment no less favourable than the treatment accorded to the works, supplies, services and economic operators of the Union.

Article 44 Choice of procedures 1. When awarding supply, works or service contracts, contracting entities shall apply the procedures adjusted to be in conformity with this Directive, provided that, without prejudice to Article 47, a call for competition has been published in accordance with this Directive. 2. Member States shall provide that contracting entities may apply open or restricted procedures or negotiated procedures with prior call for competition as regulated in this Directive. 3. Member States shall provide that contracting entities may apply competitive dialogues and innovation partnerships as regulated in this Directive. 4. The call for competition may be made by one of the following means: (a) a periodic indicative notice pursuant to Article 67 where the contract is awarded by restricted or negotiated procedure; (b) a notice on the existence of a qualification system pursuant to Article 68 where the contract is awarded by restricted or negotiated procedure or by a competitive dialogue or an innovation partnership; (c) by means of a contract notice pursuant to Article 69. In the case referred to in point (a) of this paragraph, economic operators having expressed their interest following the publication of the periodic indicative notice shall subsequently be invited to confirm their interest in writing by means of an invitation to confirm interest in conformity with Article 74. 5. In the specific cases and circumstances referred to expressly in Article 50, Member States may provide that contracting entities may apply a negotiated procedure without prior call for competition. Member States shall not allow the application

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Article 45 Open procedure 1. In open procedures any interested economic operator may submit a tender in response to a call for competition The minimum time limit for the receipt of tenders shall be 35 days from the date on which the contract notice was sent. The tender shall be accompanied by the information for qualitative selection that is requested by the contracting entity. 2. Where contracting entities have published a periodic indicative notice which was not itself used as a means of calling for competition, the minimum time limit for the receipt of tenders, as laid down in the second subparagraph of paragraph 1 of this Article, may be shortened to 15 days, provided that all of the following conditions are fulfilled: (a) the periodic indicative notice included, in addition to the information required by Section I of Part A of Annex VI, all the information required by Section II of Part A of Annex VI, insofar as the latter information was available at the time the periodic indicative notice was published; (b) the periodic indicative notice was sent for publication between 35 days and 12 months before the date on which the contract notice was sent. 3. Where a state of urgency duly substantiated by the contracting entity renders impracticable the time limit laid down in the second subparagraph of paragraph 1, it may fix a time limit which shall be not less than 15 days from the date on which the contract notice was sent. 4. The contracting entity may reduce by five days the time limit for receipt of tenders set out in the second subparagraph of paragraph 1 of this Article where it accepts that tenders may be submitted by electronic means in accordance with first subparagraph of Article 40(4) and Article 40(5) and (6).

Article 46 Restricted procedure 1. In restricted procedures, any economic operator may submit a request to participate in response to a call for competition

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PART II The Utilities Directive 2014/25/EU by providing the information for qualitative selection that is requested by the contracting entity. The minimum time limit for the receipt of requests to participate shall, as a general rule, be fixed at no less than 30 days from the date on which the contract notice or the invitation to confirm interest was sent and shall in any event not be less than 15 days. 2. Only those economic operators invited to do so by the contracting entity following its assessment of the information provided may submit a tender. Contracting entities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 78(2). The time limit for the receipt of tenders may be set by mutual agreement between the contracting entity and the selected candidates, provided that all selected candidates have the same time to prepare and submit their tenders. In the absence of agreement on the time limit for the receipt of tenders, the time limit shall be at least 10 days from the date on which the invitation to tender was sent.

Article 47 Negotiated procedure with prior call for competition 1. In negotiated procedures with prior call for competition, any economic operator may submit a request to participate in response to a call for competition by providing the information for qualitative selection that is requested by the contracting entity. The minimum time limit for the receipt of requests to participate shall, as a general rule, be fixed at no less than 30 days from the date on which the contract notice or, where a periodic indicative notice is used as a means of calling for competition, the invitation to confirm interest was sent and shall in any event not be less than 15 days. 2. Only those economic operators invited by the contracting entity following its assessment of the information provided may participate in the negotiations. Contracting entities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 78(2).

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PART II The Utilities Directive 2014/25/EU The time limit for the receipt of tenders may be set by mutual agreement between the contracting entity and the selected candidates, provided that they all have the same time to prepare and submit their tenders. In the absence of agreement on the time limit for the receipt of tenders, the time limit shall be at least 10 days from the date on which the invitation to tender was sent.

Article 48 Competitive dialogue 1. In competitive dialogues, any economic operator may submit a request to participate in response to a call for competition in accordance with points (b) and (c) of Article 44(4) by providing the information for qualitative selection that is requested by the contracting entity. The minimum time limit for receipt of requests to participate shall, as a general rule, be fixed at no less than 30 days from the date on which the contract notice or, where a periodic indicative notice is used as a means of calling for competition, the invitation to confirm interest was sent and shall in any event not be less than 15 days. Only those economic operators invited by the contracting entity following the assessment of the information provided may participate in the dialogue. Contracting entities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 78(2). The contract shall be awarded on the sole basis of the award criterion of the tender presenting the best price-quality ratio in accordance with Article 82(2). 2. Contracting entities shall set out and define their needs and requirements in the call for competition and/or in a descriptive document. At the same time and in the same documents, they shall also set out and define the chosen award criteria and set out an indicative timeframe. 3. Contracting entities shall open, with the participants selected in accordance with the relevant provisions of Articles 76 to 81, a dialogue the aim of which shall be to identify and define the means best suited to satisfying their needs. They may discuss all aspects of the procurement with the chosen participants during this dialogue. During the dialogue, contracting entities shall ensure equality of treatment among

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all participants. To that end, they shall not provide information in a discriminatory manner which may give some participants an advantage over others. In accordance with Article 39, contracting entities shall not reveal to the other participants solutions proposed or other confidential information communicated by a participating candidate or tenderer in the dialogue without its agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. Competitive dialogues may take place in successive stages in order to reduce the number of solutions to be discussed during the dialogue stage by applying the award criteria laid down in the call for competition or in the descriptive document. In the call for competition or the descriptive document, the contracting entity shall indicate whether it will use that option. The contracting entity shall continue the dialogue until it can identify the solution or solutions which are capable of meeting its needs. Having declared that the dialogue is concluded and having so informed the remaining participants, contracting entities shall ask them to submit their final tenders on the basis of the solution or solutions presented and specified during the dialogue. Those tenders shall contain all the elements required and necessary for the performance of the project. Those tenders may be clarified, specified and optimised at the request of the contracting entity. However, such clarification, specification, optimisation or additional information may not involve changes to the essential aspects of the tender or of the procurement, including the needs and requirements set out in the call for competition or in the descriptive document, where variations to those aspects, needs and requirements are likely to distort competition or have a discriminatory effect. Contracting entities shall assess the tenders received on the basis of the award criteria laid down in the call for competition or in the descriptive document. At the request of the contracting entity, negotiations with the tenderer identified

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DIRECTIVE 2014/25/EU as having submitted the tender presenting the best price-quality ratio in accordance with Article 82(2) may be carried out to confirm financial commitments or other terms contained in the tender by finalising the terms of the contract provided such negotiations do not have the effect of materially modifying essential aspects of the tender or of the procurement, including the needs and requirements set out in the call for competition or in the descriptive document and does not risk distorting competition or causing discrimination. 8. Contracting entities may specify prizes or payments to the participants in the dialogue.

Article 49 Innovation partnership 1. In innovation partnerships, any economic operator may submit a request to participate in response to a call for competition in accordance with points (b) and (c) of Article 44(4) by providing the information for qualitative selection that is requested by the contracting entity. In the procurement documents, the contracting entity shall identify the need for an innovative product, service or works that cannot be met by purchasing products, services or works already available on the market. It shall indicate which elements of this description define the minimum requirements to be met by all tenders. The indications shall be sufficiently precise to enable economic operators to identify the nature and scope of the required solution and decide whether to request to participate in the procedure. The contracting entity may decide to set up the innovation partnership with one partner or with several partners conducting separate research and development activities. The minimum time limit for receipt of requests to participate shall, as a general rule, be fixed at no less than 30 days from the date on which the contract notice is sent and shall in any event not be less than 15 days. Only those economic operators invited by the contracting entity following the assessment of the information provided may participate in the procedure. Contracting entities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with

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PART II The Utilities Directive 2014/25/EU Article 78(2).The contracts shall be awarded on the sole basis of the award criterion of the tender presenting the best price-quality ratio in accordance with Article 82(2). 2. The innovation partnership shall aim at the development of an innovative product, service or works and the subsequent purchase of the resulting supplies, services or works, provided that they correspond to the performance levels and maximum costs agreed between the contracting entities and the participants. The innovation partnership shall be structured in successive phases following the sequence of steps in the research and innovation process, which may include the manufacturing of the products, the provision of the services or the completion of the works. The innovation partnership shall set intermediate targets to be attained by the partners and provide for payment of the remuneration in appropriate instalments. Based on those targets, the contracting entity may decide after each phase to terminate the innovation partnership or, in the case of an innovation partnership with several partners, to reduce the number of partners by terminating individual contracts, provided that the contracting entity has indicated in the procurement documents those possibilities and the conditions for their use. 3. Unless otherwise provided for in this Article, contracting entities shall negotiate with tenderers the initial and all subsequent tenders submitted by them, except for the final tender, to improve the content thereof. The minimum requirements and the award criteria shall not be subject to negotiations. 4. During the negotiations, contracting entities shall ensure the equal treatment of all tenderers. To that end, they shall not provide information in a discriminatory manner which may give some tenderers an advantage over others. They shall inform all tenderers, whose tenders have not been eliminated, pursuant to paragraph 5, in writing of any changes to the technical specifications or other procurement documents other than those setting out the minimum requirements. Following those changes, contracting entities shall provide

PART II The Utilities Directive 2014/25/EU sufficient time for tenderers to modify and re-submit amended tenders, as appropriate. In accordance with Article 39, contracting entities shall not reveal to the other participants confidential information communicated by a candidate or tenderer participating in the negotiations without its agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. 5. Negotiations during innovation partnership procedures may take place in successive stages in order to reduce the number of tenders to be negotiated by applying the award criteria specified in the contract notice, in the invitation to confirm interest or in the procurement documents. In the contract notice, the invitation to confirm interest or in the procurement documents, the contracting entity shall indicate whether it will use that option. 6. In selecting candidates, contracting entities shall in particular apply criteria concerning the candidates’ capacity in the field of research and development and of developing and implementing innovative solutions. Only those economic operators invited by the contracting entity following its assessment of the requested information may submit research and innovation projects aimed at meeting the needs identified by the contracting entity that cannot be met by existing solutions. In the procurement documents, the contracting entity shall define the arrangements applicable to intellectual property rights. In the case of an innovation partnership with several partners, the contracting entity shall not, in accordance with Article 39, reveal to the other partners solutions proposed or other confidential information communicated by a partner in the framework of the partnership without that partner’s agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. 7. The contracting entity shall ensure that the structure of the partnership and, in particular the duration and value of the different phases reflect the degree of innovation of the proposed solution and the

DIRECTIVE 2014/25/EU sequence of the research and innovation activities required for the development of an innovative solution not yet available on the market. The estimated value of supplies, services or works purchased shall not be disproportionate in relation to the investment for their development.

Article 50 Use of the negotiated procedure without prior call for competition Contracting entities may use a negotiated procedure without prior call for competition in the following cases: (a) where no tenders or no suitable tenders or no requests to participate or no suitable requests to participate have been submitted in response to a procedure with a prior call for competition, provided that the initial conditions of the contract are not substantially altered; A tender shall be considered not to be suitable where it is irrelevant to the contract, being manifestly incapable, without substantial changes, of meeting the contracting entity’s needs and requirements as specified in the procurement documents. A request for participation shall be considered not to be suitable where the economic operator concerned is to be or may be excluded pursuant to Articles 78(1) or 80(1), or does not meet the selection criteria laid down by the contracting entity pursuant to Articles 78 or 80; (b) where a contract is purely for the purpose of research, experiment, study or development, and not for the purpose of securing a profit or of recovering research and development costs, and insofar as the award of such contract does not prejudice the competitive award of subsequent contracts which do seek, in particular, those ends; (c) where the works, supplies or services can be supplied only by a particular economic operator for any of the following reasons: (i) the aim of the procurement is the creation or acquisition of a unique work of art or artistic performance; (ii) competition is absent for technical reasons; (iii) the protection of exclusive rights, including intellectual property rights. The exceptions set out in points (ii) and (iii) shall only apply when no reasonable

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(d)

(e)

(f)

(g) (h)

(i)

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alternative or substitute exists and the absence of competition is not the result of an artificial narrowing down of the parameters of the procurement; in so far as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting entity, the time limits laid down for open procedures, restricted procedures and negotiated procedures with prior call for competition cannot be complied with. The circumstances invoked to justify extreme urgency shall not in any event be attributable to the contracting entity; in the case of supply contracts for additional deliveries by the original supplier which are intended either as a partial replacement of supplies or installations or as the extension of existing supplies or installations, where a change of supplier would oblige the contracting entity to acquire supplies having different technical characteristics which would result in incompatibility or disproportionate technical difficulties in operation and maintenance; for new works or services consisting in the repetition of similar works or services assigned to the contractor to which the same contracting entities awarded an earlier contract, provided that such works or services conform to a basic project for which a first contract was awarded according to a procedure in accordance with Article 44(1). The basic project shall indicate the extent of possible additional works or services and the conditions under which they will be awarded. As soon as the first project is put up for tender, the possible use of this procedure shall be disclosed and the total estimated cost of subsequent works or services shall be taken into consideration by the contracting entities when they apply Articles 15 and 16; for supplies quoted and purchased on a commodity market; for bargain purchases, where it is possible to procure supplies by taking advantage of a particularly advantageous opportunity available for a very short time at a price considerably lower than normal market prices; for purchases of supplies or services under particularly advantageous conditions

PART II The Utilities Directive 2014/25/EU from either a supplier which is definitively winding up its business activities or the liquidator in an insolvency procedure, an arrangement with creditors or a similar procedure under national laws or regulations; (j) where the service contract concerned follows a design contest organised in accordance with this Directive and is to be awarded, under the rules provided for in the design contest, to the winner or to one of the winners of that contest; in the latter case, all the winners shall be invited to participate in the negotiations.

Chapter II Techniques and instruments for electronic and aggregated procurement Article 51 Framework agreements 1. Contracting entities may conclude framework agreements, provided that they apply the procedures provided for in this Directive. A framework agreement means an agreement between one or more contracting entities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantities envisaged. The term of a framework agreement shall not exceed eight years, save in exceptional cases duly justified, in particular by the subject of the framework agreement. 2. Contracts based on a framework agreement shall be awarded on the basis of objective rules and criteria, which may include reopening the competition among those economic operators party to the framework agreement as concluded. These rules and criteria shall be set out in the procurement documents for the framework agreement. The objective rules and criteria referred to in the first subparagraph shall ensure equal treatment of the economic operators who are parties to the agreement. Where a reopening the competition is included, contracting entities shall set a time limit which is sufficiently long to allow tenders for each specific contract to be submitted and contracting entities shall award each contract to the tenderer that has submitted the best tender on the basis of the

PART II The Utilities Directive 2014/25/EU award criteria set out in the specifications of the framework agreement. Contracting entities shall not use framework agreements improperly or in such a way as to prevent, restrict or distort competition.

Article 52 Dynamic purchasing systems 1. For commonly used purchases, the characteristics of which, as generally available on the market, meet the requirements of the contracting entities, they may use a dynamic purchasing system. The dynamic purchasing system shall be operated as a completely electronic process and shall be open throughout the period of validity of the purchasing system to any economic operator that satisfies the selection criteria. It may be divided into categories of products, works or services that are objectively defined on the basis of characteristics of the procurement to be undertaken under the category concerned. Such characteristics may include reference to the maximum allowable size of the subsequent specific contracts or to a specific geographic area in which subsequent specific contracts will be performed. 2. In order to procure under a dynamic purchasing system, contracting entities shall follow the rules of the restricted procedure. All the candidates who satisfy the selection criteria shall be admitted to the system, and the number of candidates to be admitted to the system shall not be limited in accordance with Article 78(2). Where contracting entities have divided the system into categories of products, works or services in accordance with paragraph 1 of this Article, they shall specify the applicable selection criteria for each category. Notwithstanding Article 46, the following time limits shall apply: (a) the minimum time limit for receipt of requests to participate shall, as a general rule, be fixed at no less than 30 days from the date on which the contract notice or, where a periodic indicative notice is used as a means of calling for competition, the invitation to confirm interest is sent and shall in any event not be less than 15 days. No further time limits for receipt of requests to participate shall apply once the invitation to tender for the first

DIRECTIVE 2014/25/EU specific procurement under the dynamic purchasing system has been sent. (b) The minimum time limit for receipt of tenders shall be at least 10 days from the date on which the invitation to tender is sent. The second and third subparagraphs of Article 46(2) shall apply. 3. All communications in the context of a dynamic purchasing system shall only be made by electronic means in accordance with Article 40(1), (3), (5) and (6). 4. For the purposes of awarding contracts under a dynamic purchasing system, contracting entities shall: (a) publish a call for competition making it clear that a dynamic purchasing system is involved; (b) indicate in the procurement documents at least the nature and estimated quantity of the purchases envisaged, as well as all the necessary information concerning the dynamic purchasing system, including how the dynamic purchasing system operates, the electronic equipment used and the technical connection arrangements and specifications; (c) indicate any division into categories of products, works or services and the characteristics defining them; (d) offer unrestricted and full direct access, as long as the system is valid, to the procurement documents in accordance with Article 73. 5. Contracting entities shall give any economic operator, throughout the entire period of validity of the dynamic purchasing system, the possibility of requesting to participate in the system under the conditions referred to in paragraph 2. Contracting entities shall finalise their assessment of such requests in accordance with the selection criteria within 10 working days following their receipt. That deadline may be prolonged to 15 working days in individual cases where justified, in particular because of the need to examine additional documentation or to otherwise verify whether the selection criteria are met. Notwithstanding the first subparagraph, as long as the invitation to tender for the first specific procurement under the dynamic purchasing system has not been sent, contracting entities may extend the

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DIRECTIVE 2014/25/EU evaluation period provided that no invitation to tender is issued during the extended evaluation period. Contracting entities shall indicate in the procurement documents the length of the extended period that they intend to apply. Contracting entities shall inform the economic operator concerned at the earliest possible opportunity of whether or not it has been admitted to the dynamic purchasing system. 6. Contracting entities shall invite all admitted participants to submit a tender for each specific procurement under the dynamic purchasing system, in accordance with Article 74. Where the dynamic purchasing system has been divided into categories of works, products or services, contracting entities shall invite all participants having been admitted to the category corresponding to the specific procurement concerned to submit a tender. They shall award the contract to the tenderer that submitted the best tender on the basis of the award criteria set out in the contract notice for the dynamic purchasing system, in the invitation to confirm interest, or, where the means of calling for competition is a notice on the existence of a qualification system, in the invitation to tender. Those criteria may, where appropriate, be formulated more precisely in the invitation to tender. 7. Contracting entities who, pursuant to Article 80, apply exclusion grounds and selection criteria provided for under Directive 2014/24/EU, may, at any time during the period of validity of the dynamic purchasing system, require admitted participants to submit a renewed and updated self-declaration as provided for in Article 59(1) of that Directive, within five working days from the date on which that request is transmitted. Paragraphs 2 to 4 of Article 59 shall apply throughout the entire period of validity of the dynamic purchasing system. 8. Contracting entities shall indicate the period of validity of the dynamic purchasing system in the call for competition. They shall notify the Commission of any change in period of validity, using the following standard forms: (a) where the period of validity is changed without terminating the system, the form used initially for the

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PART II The Utilities Directive 2014/25/EU call for competition for the dynamic purchasing system; (b) where the system is terminated, a contract award notice referred to in Article 70. 9. No charges may be billed prior to or during the period of validity of the dynamic purchasing system to the economic operators interested in or party to the dynamic purchasing system.

Article 53 Electronic auctions 1. Contracting entities may use electronic auctions in which new prices, revised downwards, and/or new values concerning certain elements of tenders are presented. For this purpose, contracting entities shall structure the electronic auction as a repetitive electronic process, which occurs after an initial full evaluation of the tenders, enabling them to be ranked using automatic evaluation methods. Certain service contracts and certain works contracts having as their subjectmatter intellectual performances, such as the design of works, which cannot be ranked using automatic evaluation methods, shall not be the object of electronic auctions. 2. In open or restricted procedures or negotiated procedures with a prior call for competition, the contracting entities may decide that the award of a contract shall be preceded by an electronic auction when the content of the procurement documents, in particular the technical specifications, can be established with precision. In the same circumstances, an electronic auction may be held on the reopening of competition among the parties to a framework agreement as provided for in Article 51(2) and on the opening for competition of contracts to be awarded under the dynamic purchasing system referred to in Article 52. 3. The electronic auction shall be based on one of the following elements of the tenders: (a) solely on prices where the contract is awarded on the basis of price only, (b) on prices and/or on the new values of the features of the tenders indicated in the procurement documents, where the contract is awarded on the basis of the best price-quality ratio or to the

PART II The Utilities Directive 2014/25/EU tender with the lowest cost using a cost-effectiveness approach. 4. Contracting entities which decide to hold an electronic auction shall state that fact in the contract notice, in the invitation to confirm interest or, where a notice on the existence of a qualification system is used as a means of calling for competition, in the invitation to tender. The procurement documents shall include at least the information set out in Annex VII. 5. Before proceeding with the electronic auction, contracting entities shall make a full initial evaluation of the tenders in accordance with the award criterion or criteria and with the weighting fixed for them. A tender shall be considered admissible where it has been submitted by a tenderer, who has not been excluded pursuant to Article 78(1) or 80(1) and who meets the selection criteria laid down pursuant to Articles 78 and 80, and whose tender is in conformity with the technical specifications without being irregular or unacceptable or unsuitable. In particular, tenders which do not comply with the procurement documents, which were received late, where there is evidence of collusion or corruption, or which have been found by the contracting authority to be abnormally low, shall be considered as being irregular. In particular tenders submitted by tenderers that do not have the required qualifications, and tenders whose price exceeds the contracting authority’s budget as determined and documented prior to the launching of the procurement procedure shall be considered as unacceptable. A tender shall be considered not to be suitable where it is irrelevant to the contract, being manifestly incapable, without substantial changes, of meeting the contracting entity’s needs and requirements as specified in the procurement documents. A request for participation shall be considered not to be suitable where the economic operator concerned is to be or may be excluded pursuant to Articles 78(1) or 80(1), or does not meet the selection criteria laid down by the contracting entity pursuant to Articles 78 or 80. All tenderers that have submitted admissible tenders shall be invited simultaneously by electronic means to participate in the electronic auction using, as of the speci-

DIRECTIVE 2014/25/EU fied date and time, the connections in accordance with the instructions set out in the invitation. The electronic auction may take place in a number of successive phases. The electronic auction shall not start sooner than two working days after the date on which invitations are sent out. 6. The invitation shall be accompanied by the outcome of a full evaluation of the relevant tender, carried out in accordance with the weighting provided for in the first subparagraph of Article 82(5). The invitation shall also state the mathematical formula to be used in the electronic auction to determine automatic rerankings on the basis of the new prices and/or new values submitted. Except where the most economically advantageous offer is identified on the basis of price alone, that formula shall incorporate the weighting of all the criteria established to determine the most economically advantageous tender, as indicated in the notice used as a means of calling for competition or in other procurement documents. For that purpose, any ranges shall, however, be reduced beforehand to a specified value. Where variants are authorised, a separate formula shall be provided for each variant. 7. Throughout each phase of an electronic auction the contracting entities shall instantaneously communicate to all tenderers sufficient information to enable them to ascertain their relative rankings at any moment. They may also communicate other information concerning other prices or values submitted, provided that that is stated in the specifications. They may also at any time announce the number of participants in that phase of the auction. In no case, however, may they disclose the identities of the tenderers during any phase of an electronic auction. 8. Contracting entities shall close an electronic auction in one or more of the following manners: (a) at the previously indicated date and time; (b) when they receive no more new prices or new values which meet the requirements concerning minimum differences, provided that they have previously stated the time which they will allow to elapse after receiving the last

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DIRECTIVE 2014/25/EU submission before they close the electronic auction; or (c) when the previously indicated number of phases in the auction has been completed. Where the contracting entities intend to close an electronic auction in accordance with point (c) of the first subparagraph, possibly in combination with the arrangements laid down in point (b) thereof, the invitation to take part in the auction shall indicate the timetable for each phase of the auction. 9. After closing an electronic auction the contracting entities shall award the contract in accordance with Article 82 on the basis of the results of the electronic auction.

Article 54 Electronic catalogues 1. Where use of electronic means of communication is required, contracting entities may require tenders to be presented in the format of an electronic catalogue or to include an electronic catalogue. Member States may render the use of electronic catalogues mandatory in connection with certain types of procurement. Tenders presented in the form of an electronic catalogue may be accompanied by other documents, completing the tender. 2. Electronic catalogues shall be established by the candidates or tenderers with a view to participating in a given procurement procedure in accordance with the technical specifications and format established by the contracting entity. Furthermore, electronic catalogues shall comply with the requirements for electronic communication tools as well as with any additional requirements set by the contracting entity in accordance with Article 40. 3. Where the presentation of tenders in the form of electronic catalogues is accepted or required, contracting entities shall: (a) state so in the contract notice, in the invitation to confirm interest, or, where the means of calling for competition is a notice on the existence of a qualification system, in the invitation to tender or to negotiate; (b) indicate in the procurement documents all the necessary information pursuant to Article 40(6) concerning

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PART II The Utilities Directive 2014/25/EU the format, the electronic equipment used and the technical connection arrangements and specifications for the catalogue. 4. Where a framework agreement has been concluded with more than one economic operator following the submission of tenders in the form of electronic catalogues, contracting entities may provide that the reopening of competition for specific contracts takes place on the basis of updated catalogues. In such a case, contracting entities shall use one of the following methods: (a) invite tenderers to resubmit their electronic catalogues, adapted to the requirements of the contract in question; or (b) notify tenderers that they intend to collect from the electronic catalogues which have already been submitted the information needed to constitute tenders adapted to the requirements of the contract in question, provided that the use of that method has been announced in the procurement documents for the framework agreement. 5. Where contracting entities reopen competition for specific contracts in accordance with point (b) of paragraph 4, they shall notify the tenderers of the date and time at which they intend to collect the information needed to constitute tenders adapted to the requirements of the specific contract in question and shall give tenderers the possibility to refuse such collection of information. Contracting entities shall allow for an adequate period between the notification and the actual collection of information. Before awarding the contract, contracting entities shall present the collected information to the tenderer concerned so as to give it the opportunity to contest or confirm that the tender thus constituted does not contain any material errors. 6. Contracting entities may award contracts based on a dynamic purchasing system by requiring that offers for specific contract are to be presented in the format of an electronic catalogue. Contracting entities may also award contracts based on a dynamic purchasing system in accordance with point (b) of paragraph 4 and paragraph 5 provided that the request for participation in the dynamic

PART II The Utilities Directive 2014/25/EU purchasing system is accompanied by an electronic catalogue in accordance with the technical specifications and format established by the contracting entity. That catalogue shall be completed subsequently by the candidates, when they are informed of the contracting entity’s intention to constitute tenders by means of the procedure set out in point (b) of paragraph 4.

Article 55 Centralised purchasing activities and central purchasing bodies 1. Member States may provide that contracting entities may acquire works, supplies and/or services from a central purchasing body offering the centralised purchasing activity referred to in point (a) of point (10) of Article 2. Member States may also provide that contracting entities may acquire works, supplies and services by using contracts awarded by a central purchasing body, by using dynamic purchasing systems operated by a central purchasing body or by using a framework agreement concluded by a central purchasing body offering the centralised purchasing activity referred to in point (b) of point (10) of Article 2. Where a dynamic purchasing system which is operated by a central purchasing body may be used by other contracting entities, this shall be mentioned in the call for competition setting up that dynamic purchasing system. In relation to the first and second subparagraphs, Member States may provide that certain procurements are to be made by having recourse to central purchasing bodies or to one or more specific central purchasing bodies. 2. A contracting entity fulfils its obligations pursuant to this Directive when it acquires supplies or services from a central purchasing body offering the centralised purchasing activity referred to in point (a) of point (10) of Article 2. Furthermore, a contracting entity also fulfils its obligations pursuant to this Directive where it acquires works, supplies or services by using contracts awarded by the central purchasing body, by using dynamic purchasing systems operated by the central purchasing body or by using a framework agreement concluded by the central purchasing body offering the centralised

DIRECTIVE 2014/25/EU purchasing activity referred to in point (b) of point (10) of Article 2. However, the contracting entity concerned shall be responsible for fulfilling the obligations pursuant to this Directive in respect of the parts it conducts itself, such as: (a) awarding a contract under a dynamic purchasing system, which is operated by a central purchasing body; or (b) conducting a reopening of competition under a framework agreement that has been concluded by a central purchasing body. 3. All procurement procedures conducted by a central purchasing body shall be performed using electronic means of communication, in accordance with the requirements set out in Article 40. 4. Contracting entities may, without applying the procedures provided for in this Directive, award a service contract for the provision of centralised purchasing activities to a central purchasing body. Such service contracts may also include the provision of ancillary purchasing activities.

Article 56 Occasional joint procurement 1. Two or more contracting entities may agree to perform certain specific procurements jointly. 2. Where the conduct of a procurement procedure in its entirety is carried out jointly in the name and on behalf of all the contracting entities concerned, they shall be jointly responsible for fulfilling their obligations pursuant to this Directive. This applies also in cases where one contracting entity alone manages the procurement procedure, acting on its own behalf and on the behalf of the other contracting entities concerned. Where the conduct of a procurement procedure is not in its entirety carried out in the name and on behalf of the contracting entities concerned, they shall be jointly responsible only for those parts carried out jointly. Each contracting entity shall have sole responsibility for fulfilling its obligations pursuant to this Directive in respect of the parts it conducts in its own name and on its own behalf.

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Article 57 Procurement involving contracting entities from different Member States 1. Without prejudice to Articles 28 to 31, contracting entities from different Member States may act jointly in the award of contracts by using one of the means provided for in this Article. Contracting entities shall not use the means provided in this Article for the purpose of avoiding the application of mandatory public law provisions in conformity with Union law to which they are subject in their Member State. 2. A Member State shall not prohibit its contracting entities from using centralised purchasing activities offered by central purchasing bodies located in another Member State. In respect of centralised purchasing activities offered by a central purchasing body located in another Member State than the contracting entity, Member States may, however, choose to specify that their contracting entities may only use the centralised purchasing activities as defined in either point (a) or in point (b) of point (10) of Article 2. 3. The provision of centralised purchasing activities by a central purchasing body located in another Member State shall be conducted in accordance with the national provisions of the Member State where the central purchasing body is located. The national provisions of the Member State where the central purchasing body is located shall also apply to the following: (a) the award of a contract under a dynamic purchasing system; (b) the conduct of a reopening of competition under a framework agreement. 4. Several contracting entities from different Member States may jointly award a contract, conclude a framework agreement or operate a dynamic purchasing system. They may also award contracts based on the framework agreement or on the dynamic purchasing system. Unless the necessary elements have been regulated by an international agreement concluded between the Member States concerned, the

PART II The Utilities Directive 2014/25/EU participating contracting entities shall conclude an agreement that determines: (a) the responsibilities of the parties and the relevant applicable national provisions; (b) the internal organisation of the procurement procedure, including the management of the procedure, the distribution of the works, supplies or services to be procured, and the conclusion of contracts. A participating contracting entity fulfils its obligations pursuant to this Directive when it purchases works, supplies or services from a contracting entity which is responsible for the procurement procedure. When determining responsibilities and the applicable national law as referred to in point (a), the participating contracting entities may allocate specific responsibilities among them and determine the applicable provisions of the national laws of any of their respective Member States. The allocation of responsibilities and the applicable national law shall be referred to in the procurement documents for jointly awarded contracts. 5. Where several contracting entities from different Member States have set up a joint entity, including European Groupings of territorial cooperation under Regulation (EC) No 1082/2006 of the European Parliament and of the Council1 or other entities established under Union law, the participating contracting entities shall, by a decision of the competent body of the joint entity, agree on the applicable national procurement rules of one of the following Member States: (a) the national provisions of the Member State where the joint entity has its registered office; (b) the national provisions of the Member State where the joint entity is carrying out its activities. The agreement referred to in the first subparagraph may either apply for an undetermined period, when fixed in the constitutive act of the joint entity, or may be limited to a certain period of time, certain types of contracts or to one or more individual contract awards.

1 Regulation (EC) No 1082/2006 of the European Parliament and of the Council of 5 July 2006 on a European grouping of territorial cooperation (EGTC) (OJ L 210, 31.7.2006, p. 19).

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Chapter III Conduct of the procedure

Article 60 Technical specifications

Section 1 Preparation

1. The technical specifications as defined in point 1 of Annex VIII shall be set out in the procurement documents. The technical specifications shall lay down the characteristics required of a works, service or supply. Those characteristics may also refer to the specific process or method of production or provision of the requested works, supplies or services or to a specific process for another stage of its life cycle even where such factors do not form part of their material substance, provided that they are linked to the subject-matter of the contract and proportionate to its value and its objectives. The technical specifications may also specify whether the transfer of intellectual property rights will be required. For all procurement which is intended for use by natural persons, whether general public or staff of the contracting entity, the technical specifications shall, except in duly justified cases, be drawn up so as to take into account accessibility criteria for persons with disabilities or design for all users. Where mandatory accessibility requirements are adopted by a legal act of the Union, technical specifications shall, as far as accessibility criteria for persons with disabilities or design for all users are concerned, be defined by reference thereto. 2. Technical specifications shall afford equal access of economic operators to the procurement procedure and shall not have the effect of creating unjustified obstacles to the opening up of public procurement to competition. 3. Without prejudice to mandatory national technical rules, to the extent that they are compatible with Union law, the technical specifications shall be formulated in one of the following ways: (a) in terms of performance or functional requirements, including environmental characteristics, provided that the parameters are sufficiently precise to allow tenderers to determine the subject-matter of the contract and to allow contracting entities to award the contract;

Article 58 Preliminary market consultations Before launching a procurement procedure, contracting entities may conduct market consultations with a view to preparing the procurement and informing economic operators of their procurement plans and requirements. For this purpose, contracting entities may for example seek or accept advice from independent experts or authorities or from market participants. That advice may be used in the planning and conduct of the procurement procedure, provided that such advice does not have the effect of distorting competition and does not result in a violation of the principles of non-discrimination and transparency.

Article 59 Prior involvement of candidates or tenderers Where a candidate or tenderer or an undertaking related to a candidate or tenderer has advised the contracting entity, whether in the context of Article 58 or not, or has otherwise been involved in the preparation of the procurement procedure, the contracting entity shall take appropriate measures to ensure that competition is not distorted by the participation of that candidate or tenderer. Such measures shall include the communication to the other candidates and tenderers of relevant information exchanged in the context of or resulting from the involvement of the candidate or tenderer in the preparation of the procurement procedure and the fixing of adequate time limits for the receipt of tenders. The candidate or tenderer concerned shall only be excluded from the procedure where there are no other means to ensure compliance with the duty to observe the principle of equal treatment. Prior to any such exclusion, candidates or tenderers shall be given the opportunity to prove that their involvement in preparing the procurement procedure is not capable of distorting competition. The measures taken shall be documented in the individual report required by to Article 100.

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DIRECTIVE 2014/25/EU (b) by reference to technical specifications and, in order of preference, to national standards transposing European standards, European Technical Assessments, common technical specifications, international standards, other technical reference systems established by the European standardisation bodies or – when any of those do not exist – national standards, national technical approvals or national technical specifications relating to the design, calculation and execution of the works and use of the supplies; each reference shall be accompanied by the words ‘or equivalent’; (c) in terms of performance or functional requirements referred to in point (a), with reference to the technical specifications referred to in point (b) as a means of presuming conformity with such performance or functional requirements; (d) by reference to the technical specifications referred to in point (b) for certain characteristics, and by reference to the performance or functional requirements referred to in point (a) for other characteristics. 4. Unless justified by the subject-matter of the contract, technical specifications shall not refer to a specific make or source, or to a particular process which characterises the products or services provided by a specific economic operator, or to trade marks, patents, types or a specific origin or production with the effect of favouring or eliminating certain undertakings or certain products. Such reference shall be permitted, on an exceptional basis, where a sufficiently precise and intelligible description of the subject-matter of the contract pursuant to paragraph 3 is not possible. Such reference shall be accompanied by the words ‘or equivalent’. 5. Where a contracting entity uses the option of referring to the technical specifications referred to in point (b) of paragraph 3, it shall not reject a tender on the ground that the works, supplies or services tendered for do not comply with the technical specifications to which it has referred, once the tenderer proves in its tender by any appropriate means, including the means of proof referred to in Article 62, that the solutions proposed satisfy in an

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PART II The Utilities Directive 2014/25/EU equivalent manner the requirements defined by the technical specifications. 6. Where a contracting entity uses the option provided for in point (a) of paragraph 3 to formulate technical specifications in terms of performance or functional requirements, it shall not reject a tender for supplies, services or works which comply with a national standard transposing a European standard, with a European technical approval, a common technical specification, an international standard or a technical reference system established by a European standardisation body, where those specifications address the performance or functional requirements which it has laid down. In its tender, the tenderer shall prove by any appropriate means including those referred to in Article 62, that the supplies, service or work in compliance with the standard meets the performance or functional requirements of the contracting entity.

Article 61 Labels 1. Where contracting entities intend to purchase works, supplies or services with specific environmental, social or other characteristics they may, in the technical specifications, the award criteria or the contract performance conditions, require a specific label as means of proof that the works, supplies or services correspond to the required characteristics, provided that all of the following conditions are fulfilled: (a) the label requirements only concern criteria which are linked to the subject-matter of the contract and are appropriate to define the characteristics of the works, supplies or services that are the subject-matter of the contract; (b) the label requirements are based on objectively verifiable and non-discriminatory criteria; (c) the labels are established in an open and transparent procedure in which all relevant stakeholders, including government bodies, consumers, social partners, manufacturers, distributors and non-governmental organisations may participate; (d) the labels are accessible to all interested parties;

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(e) the label requirements are set by a third party over which the economic operator applying for the label cannot exercise a decisive influence. Where contracting entities do not require the works, supplies or services to meet all of the label requirements, they shall indicate which label requirements are referred to. Contracting entities requiring a specific label shall accept all labels confirm that the works, supplies or services meet equivalent label requirements. Where an economic operator had demonstrably no possibility of obtaining the specific label indicated by the contracting entity or an equivalent label within the relevant time limits for reasons that are not attributable to that economic operator, the contracting entity shall accept other appropriate means of proof, which may include a technical dossier of the manufacturer, provided that the economic operator concerned proves that the works, supplies and services to be provided by it fulfil the requirements of the specific label or the specific requirements indicated by the contracting entity. 2. Where a label fulfils the conditions of provided in points (b), (c), (d) and (e) of paragraph 1 but also sets outs out requirements not linked to the subject-matter of the contract, contracting entities shall not require the label as such but may define the technical specification by reference to those of the detailed specifications of that label, or, if necessary, parts thereof, that are linked to the subject-matter of the contract and are appropriate to define characteristics of this subject-matter.

Where contracting entities require the submission of certificates drawn up by a specific conformity assessment body, certificates from equivalent other conformity assessment bodies shall also be accepted by the contracting entities. For the purpose of this paragraph, a conformity assessment body shall be a body that performs conformity assessment activities including calibration, testing, certification and inspection accredited in accordance with Regulation (EC) No 765/2008 of the European Parliament and of the Council.1 2. Contracting entities shall accept other appropriate means of proof than those referred to in paragraph 1, such as a technical dossier of the manufacturer where the economic operator concerned had no access to such certificates or test reports referred to in paragraph 1, or no possibility of obtaining them within the relevant time limits, provided that the lack of access is not attributable to the economic operator concerned and provided that the economic operator concerned thereby proves that the works, supplies or services meet the requirements or criteria set out in the technical specifications, the award criteria or the contract performance conditions. 3. Member States shall make available to other Member States, upon request, any information related to the evidence and documents submitted in accordance with Article 60(6), Article 61 and paragraphs 1 and 2 of this Article. The competent authorities of the Member State of establishment of the economic operator shall provide this information in accordance with Article 102.

Article 62 Test reports, certification and other means of proof

Article 63 Communication of technical specifications

1. Contracting entities may require that economic operators provide a test report from a conformity assessment body or a certificate issued by such a body as means of proof of conformity with requirements or criteria set out in the technical specifications, the award criteria or the contract performance conditions.

1. On request from economic operators interested in obtaining a contract, contracting entities shall make available the technical specifications regularly referred to in their supply, works or service contracts, or the technical specifications which they intend to apply to contracts for which the call for competition is a periodic indica-

1 Regulation (EC) No 765/2008 of the European Parliament and of the Council of 9 July 2008 setting out the requirements for accreditation and market surveillance relating to the marketing of products and repealing Regulation (EEC) No 339/93 (OJ L 218, 13.8.2008, p. 30).

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tive notice. Those specifications shall be made available by electronic means through unrestricted and full direct access free of charge. However, the technical specifications shall be transmitted by other means than electronic means where unrestricted and full direct access free of charge by electronic means to certain procurement documents cannot be offered for one of the reasons set out in the second subparagraph of Article 40(1) or where unrestricted and full direct access free of charge by electronic means to certain procurement documents cannot be offered because contracting entities intend to apply Article 39(2). 2. Where the technical specifications are based on documents available by electronic means through unrestricted and full direct access free of charge to interested economic operators, the inclusion of a reference to those documents shall be sufficient.

Article 65 Division of contracts into lots

Article 64 Variants 1. Contracting entities may authorise or require tenderers to submit variants which meet the minimum requirements specified by the contracting entities. Contracting entities shall indicate in the procurement documents whether or not they authorise or require variants and, if so, the minimum requirements to be met by the variants and any specific requirements for their presentation, in particular whether variants may be submitted only where a tender, which is not a variant, has also been submitted. Where variants are authorised or required, they shall also ensure that the chosen award criteria can be applied to variants meeting those minimum requirements as well as to conforming tenders which are not variants. 2. In procedures for awarding supply or service contracts, contracting entities that have authorised or required variants shall not reject a variant on the sole ground that it would, where successful, lead either to a service contract rather than a supply contract or to a supply contract rather than a service contract.

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1. Contracting entities may decide to award a contract in the form of separate lots and may determine the size and subject-matter of such lots. Contracting entities shall indicate, in the contract notice, in the invitation to confirm interest, or, where the means of calling for competition is a notice on the existence of a qualification system, in the invitation to tender or to negotiate, whether tenders may be submitted for one, for several or for all of the lots. 2. Contracting entities may, even where tenders may be submitted for several or all lots, limit the number of lots that may be awarded to one tenderer provided that the maximum number of lots per tenderer is stated in the contract notice or in the invitation to confirm interest, to tender or to negotiate. Contracting entities shall indicate in the procurement documents the objective and non-discriminatory criteria or rules they intend to apply for determining which lots will be awarded where the application of the award criteria would result in one tenderer being awarded more lots than the maximum number. 3. Member States may provide that, where more than one lot may be awarded to the same tenderer, contracting entities may award a contract combining several or all lots where they have specified in the contract notice or in the invitation to confirm interest, to tender or to negotiate that they reserve the possibility of doing so and indicate the lots or groups of lots that may be combined. 4. Member States may render it obligatory to award contracts in the form of separate lots under conditions to be specified in accordance with their national law and having regard for Union law. The second subparagraph of paragraph 1 and, where appropriate, paragraph 3 shall apply.

Article 66 Setting time limits 1. When fixing the time limits for requests to participate and the receipt of tenders, contracting entities shall take particular account of the complexity of the contract and the time required for drawing up tenders, without prejudice to the minimum time limits set out in Articles 45 to 49.

PART II The Utilities Directive 2014/25/EU 2. Where tenders can be made only after a visit to the site or after on-the-spot inspection of the documents supporting the procurement documents, the time limits for the receipt of tenders, which shall be longer than the minimum time limits set out in Articles 45 to 49, shall be fixed, so that all economic operators concerned may be aware of all the information needed to produce tenders. 3. Contracting entities shall extend the time limits for the receipt of tenders so that all economic operators concerned may be aware of all the information needed to produce tenders in the following cases: (a) where, for whatever reason, additional information, although requested by the economic operator in good time, is not supplied at the latest six days before the time limit fixed for the receipt of tenders. In the event of an accelerated open procedure as referred to in Article 45(3), that period shall be four days; (b) where significant changes are made to the procurement documents. The length of the extension shall be proportionate to the importance of the information or change. Where the additional information has either not been requested in good time or its importance with a view to preparing responsive tenders is insignificant, contracting entities shall not be required to extend the time limits.

Section 2 Publication and Transparency Article 67 Periodic indicative notices 1. Contracting entities may make known their intentions of planned procurement through the publication of a periodic indicative notice. Those notices shall contain the information set out in part A, section I of Annex VI. They shall be published either by the Publications Office of the European Union or by the contracting entities on their buyer profiles in accordance with point 2(b) of Annex IX. Where the periodic indicative notice is published by the contracting entities on their buyer profile, they shall send a notice of the publication of the periodic indicative notice on a buyer profile to the Publications Office of the European Union in accordance with point 3 of Annex IX. Those notices

DIRECTIVE 2014/25/EU shall contain the information set out in Annex VI Part B. 2. When a call for competition is made by means of a periodic indicative notice in respect of restricted procedures and negotiated procedures with prior call for competition, the notice shall meet all the following requirements: (a) it refers specifically to the supplies, works or services that will be the subject of the contract to be awarded; (b) it indicates that the contract will be awarded by restricted or negotiated procedure without further publication of a call for competition and invites interested economic operators to express their interest; (c) it contains, in addition to the information set out in part A, section I of Annex VI, the information set out in part A, section II of Annex VI; (d) it has been sent for publication between 35 days and 12 months prior to the date on which the invitation to confirm interest is sent. Such notices shall not be published on a buyer profile. However, the additional publication at national level pursuant to Article 72, if any, may be made on a buyer profile. The period covered by the periodic indicative notice shall be a maximum of 12 months from the date the notice is transmitted for publication. However, in the case of contracts for social and other specific services, the periodic indicative notice referred to in point (b) of Article 92(1) may cover a period which is longer than 12 months.

Article 68 Notices on the existence of a qualification system 1. Where contracting entities choose to set up a qualification system in accordance with Article 77, the system shall be the subject of a notice as referred to in Annex X, indicating the purpose of the qualification system and how to have access to the rules concerning its operation. 2. Contracting entities shall indicate the period of validity of the qualification system in the notice on the existence of the system. They shall notify the Publications Office of the European Union of any change in period of validity, using the following standard forms:

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DIRECTIVE 2014/25/EU (a) where the period of validity is changed without terminating the system, the form for notices on the existence of qualification systems; (b) where the system is terminated, a contract award notice referred to in Article 70.

Article 69 Contract notices Contract notices may be used as a means of calling for competition in respect of all procedures. They shall contain the information set out in the relevant part of Annex XI and shall be published in accordance with Article 71.

Article 70 Contract award notices 1. Not later than 30 days after the conclusion of a contract or of a framework agreement following the decision to award or conclude it, contracting entities shall send a contract award notice on the results of the procurement procedure. Such notice shall contain the information set out in Annex XII and shall be published in accordance with Article 71. 2. Where the call for competition for the contract concerned has been made in the form of a periodic indicative notice and the contracting entity has decided that it will not award further contracts during the period covered by the periodic indicative notice, the contract award notice shall contain a specific indication to that effect. In the case of framework agreements concluded in accordance with Article 51, contracting entities shall not be bound to send a notice of the results of the procurement procedure for each contract based on that agreement. Member States may provide that contracting entities shall group notices of the results of the procurement procedure for contracts based on the framework agreement on a quarterly basis. In that case, contracting entities shall send the grouped notices within 30 days of the end of each quarter. Contracting entities shall send a contract award notice within 30 days after the award of each contract based on a dynamic purchasing system. They may, however, group such notices on a quarterly basis. In that case, they shall send the grouped notices within 30 days of the end of each quarter.

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PART II The Utilities Directive 2014/25/EU 3. The information provided in accordance with Annex XII and intended for publication shall be published in accordance with Annex IX. Certain information on the contract award or the conclusion of the framework agreement may be withheld from publication where its release would impede law enforcement or otherwise be contrary to the public interest or would prejudice the legitimate commercial interests of a particular economic operator, public or private, or might prejudice fair competition between economic operators. In the case of contracts for research-anddevelopment services (‘R & D services’), the information concerning the nature and quantity of the services may be limited to: (a) the indication ‘R & D services’ where the contract has been awarded by a negotiated procedure without a call for competition in accordance with Article 50(b); (b) information at least as detailed as was indicated in the notice that was used as a means of calling for competition. 4. Information provided in accordance with Annex XII and marked as not being intended for publication shall be published only in simplified form and in accordance with Annex IX for statistical purposes.

Article 71 Form and manner of publication of notices 1. Notices referred to in Articles 67 to 70 shall include the information set out in Annexes VI Part A, VI Part B, X, XI, and XII and in the format of standard forms, including standard forms for corrigenda. The Commission shall establish those standard forms by means of implementing acts. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 105. 2. Notices referred to in Articles 67 to 70 shall be drawn up, transmitted by electronic means to the Publications Office of the European Union and published in accordance with Annex IX. Notices shall be published not later than five days after they are sent. The costs of publication of the notices by Publications Office of the European Union shall be borne by the Union.

PART II The Utilities Directive 2014/25/EU 3. Notices referred to in Articles 67 to 70 shall be published in full in the official language(s) of the institutions of the Union chosen by the contracting entity. That language version or those language versions shall constitute the sole authentic text(s). A summary of the important elements of each notice shall be published in the other official languages of the institutions of the Union. 4. The Publications Office of the European Union shall ensure that the full text and the summary of periodic indicative notices referred to in Article 67(2), calls for competition setting up a dynamic purchasing system as referred to in point (a) of Article 52(4) and notices on the existence of a qualification system used as a means of calling for competition in accordance with point (b) of Article 44(4) continue to be published: (a) in the case of periodic indicative notices for 12 months or until receipt of a contract award notice as provided for in Article 70(2) indicating that no further contracts will be awarded during the 12 month period covered by the call for competition. However, in the case of contracts for social and other specific services, the periodic indicative notice referred to in point (b) of Article 92(1) shall continue to be published until the end of its originally indicated period of validity or until receipt of a contract award notice as provided for in Article 70 indicating that no further contracts will be awarded during the period covered by the call for competition; (b) in the case of calls for competition setting up a dynamic purchasing system for the period of validity of the dynamic purchasing system; (c) in the case of notices on the existence of a qualification system for its period of validity. 5. Contracting entities shall be able to supply proof of the dates on which notices are dispatched. The Publications Office of the European Union shall give the contracting entity confirmation of the receipt of the notice and of the publication of the information sent, indicating the date of that publication. Such confirmation shall constitute proof of publication.

DIRECTIVE 2014/25/EU 6. Contracting entities may publish notices for works, supply or service contracts that are not subject to the publication requirements laid down in this Directive provided that those notices are sent to the Publications Office of the European Union by electronic means in accordance with the format and procedures for transmission indicated in Annex IX.

Article 72 Publication at national level 1. Notices referred to in Articles 67 to 70 and the information contained therein shall not be published at national level before the publication pursuant to Article 71. However, publication may in any event take place at the national level where contracting entities have not been notified of the publication within 48 hours after confirmation of the receipt of the notice in accordance with Article 71. 2. Notices published at national level shall not contain information other than that contained in the notices dispatched to the Publications Office of the European Union or published on a buyer profile, but shall indicate the date of dispatch of the notice to the Publications Office of the European Union or its publication on the buyer profile. 3. Periodic indicative notices shall not be published on a buyer profile before the dispatch to the Publications Office of the European Union of the notice of their publication in that form; they shall indicate the date of that dispatch.

Article 73 Electronic availability of procurement documents 1. Contracting entities shall by electronic means offer unrestricted and full direct access free of charge to the procurement documents from the date of publication of a notice in accordance with Article 71 or the date on which an invitation to confirm interest was sent. Where the means of calling for competition is a notice on the existence of a qualification system, such access shall be offered as soon as possible and at the latest when the invitation to tender or to negotiate is sent. The text of the notice or of those invitations shall specify the internet

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DIRECTIVE 2014/25/EU address at which the procurement documents are accessible. Where unrestricted and full direct access free of charge by electronic means to certain procurement documents cannot be offered for one of the reasons set out in the second subparagraph of Article 40(1), contracting entities may indicate in the notice or the invitation to confirm interest that the procurement documents concerned will be transmitted by other means than electronic means in accordance with paragraph 2 of this Article. In such a case, the time limit for the submission of tenders shall be prolonged by five days, except in the cases of duly substantiated urgency referred to in Article 45(3) and where the time limit is set by mutual agreement pursuant to the second subparagraph of Article 46(2) or the second subparagraph of Article 47(2). Where unrestricted and full direct access free of charge by electronic means to certain procurement documents cannot be offered because contracting entities intend to apply Article 39(2), they shall indicate in the notice or the invitation to confirm interest or, where the means of calling for competition is a notice on the existence of a qualification system, in the procurement documents which measures aimed at protecting the confidential nature of the information they require and how access can be obtained to the documents concerned. In such case, the time limit for the submission of tenders shall be prolonged by five days, except in the cases of duly substantiated urgency referred to in Article 45(3) and where the time limit is set by mutual agreement pursuant to the second subparagraph of Article 46(2) or the second subparagraph of Article 47(2). 2. Provided that it has been requested in good time, the contracting entities shall supply to all tenderers taking part in the procurement procedure additional information relating to the specifications and any supporting documents not later than six days before the time limit fixed for the receipt of tenders. In the event of an accelerated open procedure as referred to in Article 45(3), that period shall be four days.

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Article 74 Invitations to candidates 1. In restricted procedures, competitive dialogue procedures, innovation partnerships and negotiated procedures with prior call for competition, contracting entities shall simultaneously and in writing invite the selected candidates to submit their tenders, to take part in the dialogue or to negotiate. Where a periodic indicative notice is used as a call for competition pursuant to point (a) of Article 44(4), contracting entities shall simultaneously and in writing invite the economic operators which have expressed their interest to confirm their continuing interest. 2. The invitations referred to in paragraph 1 of this Article shall include a reference to the electronic address on which the procurement documents have been made directly available by electronic means. The invitations shall be accompanied by the procurement documents, where those documents have not been the subject of unrestricted and full direct access, free of charge, for the reasons set out in the third or fourth subparagraph of Article 73(1) and have not already been made otherwise available. In addition, the invitations referred to in paragraph 1 of this Article shall include the information set out in Annex XIII.

Article 75 Informing applicants for qualification, candidates and tenderers 1. Contracting entities shall as soon as possible inform each candidate and tenderer of decisions reached concerning the conclusion of a framework agreement, the award of the contract or admittance to a dynamic purchasing system, including the grounds for any decision not to conclude a framework agreement or award a contract for which there has been a call for competition or to recommence the procedure, or not to implement a dynamic purchasing system. 2. On request from the candidate or tenderer concerned, contracting entities shall, as soon as possible, and in any event within 15 days from receipt of a written request, inform:

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3.

4.

5.

6.

(a) any unsuccessful candidate of the reasons for the rejection of its request to participate; (b) any unsuccessful tenderer of the reasons for the rejection of its tender, including, for the cases referred to in Article 60(5) and (6), the reasons for their decision of non-equivalence or their decision that the works, supplies or services do not meet the performance or functional requirements; (c) any tenderer that has made an admissible tender of the characteristics and relative advantages of the tender selected, as well as the name of the successful tenderer or the parties to the framework agreement; (d) any tenderer that has made an admissible tender of the conduct and progress of negotiations and dialogue with tenderers. Contracting entities may decide to withhold certain information referred to in paragraphs 1 and 2, regarding the contract award, the conclusion of the framework agreement or the admittance to a dynamic purchasing system is to be withheld where its release would impede law enforcement or otherwise be contrary to the public interest or would prejudice the legitimate commercial interests of a particular economic operator, public or private, or might prejudice fair competition between economic operators. Contracting entities which establish and operate a system of qualification shall inform applicants of their decision as to qualification within a period of six months. If the decision will take longer than four months from the presentation of an application, the contracting entity shall inform the applicant, within two months of the application, of the reasons justifying the longer period and of the date by which his application will be accepted or refused. Applicants whose qualification is refused shall be informed of the refusal decision and the reasons for that decision as soon as possible and no more than 15 days later than the date of the refusal decision. The reasons shall be based on the criteria for qualification referred to in Article 77(2). Contracting entities which establish and operate a system of qualification may bring the qualification of an economic op-

DIRECTIVE 2014/25/EU erator to an end only for reasons based on the criteria for qualification referred to in Article 77(2). Any intention to bring the qualification to an end shall be notified in writing to the economic operator at least 15 days before the date on which the qualification is due to end, together with the reason or reasons justifying the proposed action.

Section 3 Choice of participants and award of contracts Article 76 General principles 1. For the purpose of selecting participants in their procurement procedures, the following rules shall all apply: (a) contracting entities having provided rules and criteria for the exclusion of tenderers or candidates in accordance with Article 78(1) or Article 80(1) shall exclude economic operators identified in accordance with such rules and fulfilling such criteria; (b) they shall select tenderers and candidates in accordance with the objective rules and criteria laid down pursuant to Articles 78 and 80; (c) in restricted procedures, in negotiated procedures with a call for competition, in competitive dialogues and in innovation partnerships, they shall where appropriate reduce in accordance with Article 78(2) the number of candidates selected pursuant to points (a) and (b) of this paragraph. 2. When a call for competition is made by means of a notice on the existence of a qualification system and for the purpose of selecting participants in procurement procedures for the specific contracts which are the subject of the call for competition, contracting entities shall: (a) qualify economic operators in accordance with Article 77; (b) apply to such qualified economic operators those provisions of paragraph 1 that are relevant to restricted or negotiated procedures, to competitive dialogues or to innovation partnerships. 3. When selecting participants for a restricted or negotiated procedure, a competitive dialogue or an innovation partnership, in reaching their decision as to qualification

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4.

5.

6.

7.

8.

or when the criteria and rules are being updated, contracting entities shall not: (a) impose administrative, technical or financial conditions on certain economic operators which would not be imposed on others; (b) require tests or evidence which would duplicate objective evidence already available. Where information or documentation to be submitted by economic operators is or appears to be incomplete or erroneous, or where specific documents are missing, contracting entities may, unless otherwise provided for by the national law implementing this Directive, request the economic operators concerned to submit, supplement, clarify or complete the relevant information or documentation within an appropriate time limit, provided that such requests are made in full compliance with the principles of equal treatment and transparency. Contracting entities shall verify that the tenders submitted by the selected tenderers comply with the rules and requirements applicable to tenders and award the contract on the basis of the criteria laid down in Articles 82 and 84, taking into account Article 64. Contracting entities may decide not to award a contract to the tenderer submitting the best tender where they have established that the tender does not comply with the applicable obligations referred to in Article 36(2). In open procedures, contracting entities may decide to examine tenders before verifying the suitability of tenderers, provided that the relevant provisions of Articles 76 to 84 are observed, including the rule that the contract shall not be awarded to a tenderer who should have been excluded pursuant to Article 80 or who does not meet the selection criteria set out by the contracting entity in accordance with Article 78(1) and Article 80. Member States may exclude the use of the procedure in the first subparagraph for, or restrict it to, certain types of procurement or specific circumstances. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 to amend the list in Annex XIV, where necessary, to add new international agreements that have been ratified

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Subsection 1 Qualification and qualitative selection Article 77 Qualification systems 1. Contracting entities which so wish may establish and operate a system of qualification of economic operators. Contracting entities which establish or operate a system of qualification shall ensure that economic operators are at all times able to request qualification. 2. The system under paragraph 1 may involve different qualification stages. Contracting entities shall establish objective rules and criteria for the exclusion and selection of economic operators requesting qualification and objective criteria and rules for the operation of the qualification system, covering matters such as inscription in the system, periodic updating of the qualifications, if any, and the duration of the system. Where those criteria and rules include technical specifications, Articles 60 to 62 shall apply. The criteria and rules may be updated as required. 3. The criteria and rules referred to in paragraph 2 shall be made available to economic operators on request. Those updated criteria and rules shall be communicated to interested economic operators. Where a contracting entity considers that the qualification system of certain other entities or bodies meets its requirements, it shall communicate to interested economic operators the names of such other entities or bodies. 4. A written record of qualified economic operators shall be kept; it may be divided into categories according to the type of contract for which the qualification is valid. 5. When a call for competition is made by means of a notice on the existence of a qualification system, specific contracts for the works, supplies or services covered by the qualification system shall be awarded by restricted procedures or negotiated

PART II The Utilities Directive 2014/25/EU procedures, in which all tenderers and participants are selected among the candidates already qualified in accordance with such a system. 6. Any charges that are billed in connection with requests for qualification or with updating or conserving an already obtained qualification pursuant to the system shall be proportionate to the generated costs.

Article 78 Criteria for qualitative selection 1. Contracting entities may establish objective rules and criteria for the exclusion and selection of tenderers or candidates; those rules and criteria shall be available to interested economic operators. 2. Where contracting entities need to ensure an appropriate balance between the particular characteristics of the procurement procedure and the resources required to conduct it, they may, in restricted or negotiated procedures, in competitive dialogues or in innovation partnerships, establish objective rules and criteria that reflect this need and enable the contracting entity to reduce the number of candidates that will be invited to tender or to negotiate. The number of candidates selected shall, however, take account of the need to ensure adequate competition.

Article 79 Reliance on the capacities of other entities 1. Where the objective rules and criteria for the exclusion and selection of economic operators requesting qualification in a qualification system include requirements relating to the economic and financial capacity of the economic operator, or to its technical and professional abilities, the economic operator may where necessary rely on the capacity of other entities, whatever the legal nature of the link between itself and those entities. With regard to criteria relating to the educational and professional qualifications of the service provider or contractor or those of the undertaking’s managerial staff or to the relevant professional experience, economic operators may however only rely on the capacities of other entities where the latter will perform the works or services for which these capacities are required. Where an economic operator wants to rely

DIRECTIVE 2014/25/EU on the capacities of other entities, it shall prove to the contracting entity that those resources will be available to it throughout the period of the validity of the qualification system, for example by producing a commitment by those entities to that effect. Where, pursuant to Article 80 of this Directive, contracting entities have referred to exclusion or selection criteria provided for under Directive 2014/24/EU, contracting entities shall verify in accordance with Article 80(3) of this Directive whether the other entities on whose capacity the economic operator intends to rely fulfil the relevant selection criteria or whether there are grounds for exclusion, to which the contracting entities have referred, pursuant to Article 57 of Directive 2014/24/EU. The contracting entity shall require that the economic operator replaces an entity in respect of which there are compulsory grounds for exclusion to which the contracting entity has referred. The contracting entity may require or may be required by the Member State to require that the economic operator replaces an entity in respect of which there are non-compulsory grounds for exclusion to which the contracting entity has referred. Where an economic operator relies on the capacities of other entities with regard to criteria relating to economic and financial standing, the contracting entity may require that the economic operator and those entities be jointly liable for the execution of the contract. Under the same conditions, a group of economic operators as referred to in Article 37(2) may rely on the capacity of participants in the group or of other entities. 2. Where the objective rules and criteria for the exclusion and selection of candidates and tenderers in open, restricted or negotiated procedures, in competitive dialogues or in innovation partnerships include requirements relating to the economic and financial capacity of the economic operator, or to its technical and professional abilities the economic operator may where necessary and for a particular contract rely on the capacity of other entities, whatever the legal nature of the link between itself and those entities. With regard to criteria relating to the educational and professional qualifications of the ser-

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DIRECTIVE 2014/25/EU vice provider or contractor or those of the undertaking’s managerial staff or to the relevant professional experience, economic operators may however only rely on the capacities of other entities where the latter will perform the works or services for which these capacities are required. Where an economic operator wants to rely on the capacities of other entities, it shall prove to the contracting entity that the necessary resources will be available to it, for example by delivering a commitment by those entities to that effect. Where, pursuant to Article 80 of this Directive, contracting entities have referred to exclusion or selection criteria provided for under Directive 2014/24/EU, contracting entities shall verify in accordance with Article 80(3) of this Directive whether the other entities on whose capacity the economic operator intends to rely fulfil the relevant selection criteria or whether there are grounds for exclusion, to which the contracting entities have referred, pursuant to Article 57 of Directive 2014/24/EU. The contracting entity shall require that the economic operator replaces an entity which does not meet a relevant selection criterion, or in respect of which there are compulsory grounds for exclusion to which the contracting entity has referred. The contracting entity may require or may be required by the Member State to require that the economic operator replaces an entity in respect of which there are non-compulsory grounds for exclusion to which the contracting entity has referred. Where an economic operator relies on the capacities of other entities with regard to criteria relating to economic and financial standing, the contracting entity may require that the economic operator and those entities be jointly liable for the execution of the contract. Under the same conditions, a group of economic operators as referred to in Article 37 may rely on the capacities of participants in the group or of other entities. 3. In the case of works contracts, service contracts and siting and installation operations in the context of a supply contract, contracting entities may require that certain critical tasks be performed directly by the tenderer itself or, where the tender is submitted by a group of economic opera-

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PART II The Utilities Directive 2014/25/EU tors as referred to in Article 37(2), a participant in that group.

Article 80 Use of exclusion grounds and selection criteria provided for under Directive 2014/24/EU 1. The objective rules and criteria for the exclusion and selection of economic operators requesting qualification in a qualification system and the objective rules and criteria for the exclusion and selection of candidates and tenderers in open, restricted or negotiated procedures, in competitive dialogues or in innovation partnerships may include the exclusion grounds listed in Article 57 of Directive 2014/24/EU on the terms and conditions set out therein. Where the contracting entity is a contracting authority, those criteria and rules shall include the exclusion grounds listed in Article 57(1) and (2) of Directive 2014/24/EU on the terms and conditions set out in that Article. If so required by Member States, those criteria and rules shall, in addition, include the exclusion grounds listed in Article 57(4) of Directive 2014/24/EU on the terms and conditions set out in that Article. 2. The criteria and rules referred to in paragraph 1 of this Article may include the selection criteria set out in Article 58 of Directive 2014/24/EU on the terms and conditions set out therein, notably as regards the limits to requirements concerning yearly turnovers, as provided for under the second subparagraph of paragraph 3 of that Article. 3. For the purpose of applying paragraphs 1 and 2 of this Article, Articles 59 to 61 of Directive 2014/24/EU shall apply.

Article 81 Quality assurance standards and environmental management standards 1. Contracting entities shall, where they require the production of certificates drawn up by independent bodies attesting that the economic operator complies with certain quality assurance standards, including on accessibility for disabled persons, refer to quality assurance systems based on the relevant European standards series certified by accredited bodies. They shall

PART II The Utilities Directive 2014/25/EU recognise equivalent certificates from bodies established in other Member States. They shall also accept other evidence of equivalent quality assurance measures where the economic operator concerned had no possibility of obtaining such certificates within the relevant time limits for reasons that are not attributable to that economic operator provided that the economic operator proves that the proposed quality assurance measures comply with the required quality assurance standards. 2. Where contracting entities require the production of certificates drawn up by independent bodies attesting that the economic operator complies with certain environmental management systems or standards, they shall refer to the Eco-Management and Audit Scheme (EMAS) of the Union or to other environmental management systems as recognised in accordance with Article 45 of Regulation (EC) No 1221/2009 or other environmental management standards based on the relevant European or international standards by accredited bodies. They shall recognise equivalent certificates from bodies established in other Member States. Where an economic operator had demonstrably no access to such certificates, or no possibility of obtaining them within the relevant time limits for reasons that are not attributable to that economic operator, the contracting entity shall also accept other evidence of environmental management measures, provided that the economic operator proves that these measures are equivalent to those required under the applicable environmental management system or standard. 3. Upon request, Member States shall make available to other Member States any information relating to the documents produced as evidence of compliance with quality and environmental standards referred to in paragraphs 1 and 2.

Subsection 2 Award of the contract Article 82 Contract award criteria 1. Without prejudice to national laws, regulations or administrative provisions on the price of certain supplies or the remuneration of certain services, contracting entities shall base the award of contracts on

DIRECTIVE 2014/25/EU the most economically advantageous tender. 2. The most economically advantageous tender from the point of view of the contracting entity shall be identified on the basis of the price or cost, using a cost-effectiveness approach, such as life-cycle costing in accordance with Article 83, and may include the best price-quality ratio, which shall be assessed on the basis of criteria, including qualitative, environmental and/or social aspects, linked to the subject-matter of the contract in question. Such criteria may comprise, for instance: (a) quality, including technical merit, aesthetic and functional characteristics, accessibility, design for all users, social, environmental and innovative characteristics and trading and its conditions; (b) organisation, qualification and experience of staff assigned to performing the contract, where the quality of the staff assigned can have a significant impact on the level of performance of the contract; or (c) after-sales service and technical assistance, delivery conditions such as delivery date, delivery process and delivery period or period of completion, commitments with regard to parts and security of supply. The cost element may also take the form of a fixed price or cost on the basis of which economic operators will compete on quality criteria only. Member States may provide that contracting entities may not use price only or cost only as the sole award criterion or restrict their use to certain categories of contracting entities or certain types of contracts. 3. Award criteria shall be considered to be linked to the subject-matter of the public contract where they relate to the works, supplies or services to be provided under that contract in any respect and at any stage of their life cycle, including factors involved in: (a) the specific process of production, provision or trading of those works, supplies or services; or (b) a specific process for another stage of their life cycle, even where such factors do not form part of their material substance.

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DIRECTIVE 2014/25/EU 4. Award criteria shall not have the effect of conferring an unrestricted freedom of choice on the contracting entity. They shall ensure the possibility of effective competition and shall be accompanied by specifications that allow the information provided by the tenderers to be effectively verified in order to assess how well the tenders meet the award criteria. In case of doubt, contracting entities shall verify effectively the accuracy of the information and proof provided by the tenderers. 5. The contracting entity shall specify in the procurement documents, the relative weighting which it gives to each of the criteria chosen to determine the most economically advantageous tender, except where this is identified on the basis of price alone. Those weightings may be expressed by providing for a range with an appropriate maximum spread. Where weighting is not possible for objective reasons, the contracting entity shall indicate the criteria in descending order of importance.

Article 83 Life-cycle costing 1. Life-cycle costing shall to the extent relevant cover parts or all of the following costs over the life cycle of a product, service or works (a) costs, borne by the contracting entity or other users, such as: (i) costs relating to acquisition, (ii) costs of use, such as consumption of energy and other resources, (iii) maintenance costs, (iv) end of life costs, such as collection and recycling costs (b) cost imputed to environmental externalities linked to the product, service or works during its life cycle, provided their monetary value can be determined and verified; such costs may include the cost of emissions of greenhouse gases and of other pollutant emissions and other climate change mitigation costs. 2. Where contracting entities assess the costs using a life-cycle costing approach, they shall indicate in the procurement documents the data to be provided by the tenderers and the method which the contract-

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PART II The Utilities Directive 2014/25/EU ing entity will use to determine the life-cycle costs on the basis of those data. The method used for the assessment of costs imputed to environmental externalities shall fulfil all of the following conditions: (a) it is based on objectively verifiable and non-discriminatory criteria. In particular where it has not been established for repeated or continuous application, it shall not unduly favour or disadvantage certain economic operators; (b) it is accessible to all interested parties; (c) the data required can be provided with reasonable effort by normally diligent economic operators, including economic operators from third countries party to the GPA or other international agreements by which the Union is bound. 3. Whenever a common method for the calculation of life-cycle costs has been made mandatory by a legislative act of the Union that common method shall be applied for the assessment of life-cycle costs. A list of such legislative acts, and where necessary the delegated acts supplementing them, is set out in Annex XV. The Commission, shall be empowered to adopt delegated acts in accordance with Article 103 concerning the update of that list, when an update of the list is necessary due to the adoption of new legislation making a common method mandatory or the repeal or modification of existing legal acts.

Article 84 Abnormally low tenders 1. Contracting entities shall require economic operators to explain the price or costs proposed in the tender where tenders appear to be abnormally low in relation to the works, supplies or services. 2. The explanations referred to in paragraph 1 may in particular relate to: (a) the economics of the manufacturing process, of the services provided or of the construction method; (b) the technical solutions chosen or any exceptionally favourable conditions available to the tenderer for the supply of the products or services or for the execution of the work;

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PART II The Utilities Directive 2014/25/EU (c) the originality of the supplies, services or work proposed by the tenderer; (d) compliance with obligations referred to in Article 36(2); (e) compliance with obligations referred to in Article 88; (f) the possibility of the tenderer obtaining State aid. 3. The contracting entity shall assess the information provided by consulting the tenderer. It may only reject the tender where the evidence supplied does not satisfactorily account for the low level of price or costs proposed, taking into account the elements referred to in paragraph 2. Contracting entities shall reject the tender, where they have established that the tender is abnormally low because it does not comply with applicable obligations referred to in Article 36(2). 4. Where a contracting entity establishes that a tender is abnormally low because the tenderer has obtained State aid, the tender may be rejected on that ground alone only after consultation with the tenderer where the latter is unable to prove, within a sufficient time limit fixed by the contracting entity, that the aid in question was compatible with the internal market within the meaning of Article 107 TFEU. Where the contracting entity rejects a tender in those circumstances, it shall inform the Commission thereof. 5. Upon request, Member States shall make available to other Member States by means of administrative cooperation any information at its disposal, such as laws, regulations, universally applicable collective agreements or national technical standards, relating to the evidence and documents produced in relation to details listed in paragraph 2.

Section 4 Tenders comprising products originating in third countries and relations with those countries Article 85 Tenders comprising products originating in third countries 1. This Article shall apply to tenders covering products originating in third coun-

2.

3.

4.

5.

tries with which the Union has not concluded, whether multilaterally or bilaterally, an agreement ensuring comparable and effective access for Union undertakings to the markets of those third countries. It shall be without prejudice to the obligations of the Union or its Member States in respect of third countries. Any tender submitted for the award of a supply contract may be rejected where the proportion of the products originating in third countries, as determined in accordance with Regulation (EU) No 952/2013 of the European Parliament and of the Council,1 exceeds 50 % of the total value of the products constituting the tender. For the purposes of this Article, software used in telecommunications network equipment shall be regarded as products. Subject to the second subparagraph of this paragraph, where two or more tenders are equivalent in the light of the contract award criteria defined in Article 82, preference shall be given to those tenders which may not be rejected pursuant to paragraph 2 of this Article. The prices of those tenders shall be considered equivalent for the purposes of this Article, if the price difference does not exceed 3 %. However, a tender shall not be preferred to another pursuant to the first subparagraph where its acceptance would oblige the contracting entity to acquire equipment having technical characteristics different from those of existing equipment, resulting in incompatibility, technical difficulties in operation and maintenance, or disproportionate costs. For the purposes of this Article, those third countries to which the benefit of this Directive has been extended by a Council Decision in accordance with paragraph 1 shall not be taken into account for determining the proportion, referred to in paragraph 2, of products originating in third countries. By 31 December 2015 and every year thereafter, the Commission shall submit an annual report to the Council, on progress made in multilateral or bilateral negotiations regarding access for Union undertakings to the markets of third countries in the fields covered by this Di-

1 Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code (OJ L 269, 10.10.2013, p. 1).

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DIRECTIVE 2014/25/EU rective, on any result which such negotiations may have achieved, and on the implementation in practice of all the agreements which have been concluded.

Article 86 Relations with third countries as regards works, supplies and service contracts 1. Member States shall inform the Commission of any general difficulties, in law or in fact, encountered and reported by their undertakings in securing the award of service contracts in third countries. 2. The Commission shall report to the Council by 18 April 2019, and periodically thereafter, on the opening up of service contracts in third countries and on progress in negotiations with these countries on this subject, particularly within the framework of the World Trade Organisation (WTO). 3. The Commission shall endeavour, by approaching the third country concerned, to remedy any situation whereby it finds, on the basis either of the reports referred to in paragraph 2 or of other information, that, in the context of the award of service contracts, a third country: (a) does not grant Union undertakings effective access comparable to that granted by the Union to undertakings from that country; (b) does not grant Union undertakings national treatment or the same competitive opportunities as are available to national undertakings; or (c) grants undertakings from other third countries more favourable treatment than Union undertakings. 4. Member States shall inform the Commission of any difficulties, in law or in fact, encountered and reported by their undertakings and which are due to the non-observance of the international labour law provisions listed in Annex XIV when those undertakings have tried to secure the award of contracts in third countries. 5. In the circumstances referred to in paragraphs 3 and 4, the Commission may at any time propose that the Council adopt an implementing act to suspend or restrict, over a period to be laid down in that implementing act, the award of service contracts to:

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PART II The Utilities Directive 2014/25/EU (a) undertakings governed by the law of the third country in question; (b) undertakings affiliated to the undertakings specified in point (a) and having their registered office in the Union but having no direct and effective link with the economy of a Member State; (c) undertakings submitting tenders which have as their subject-matter services originating in the third country in question. The Council shall act, by qualified majority, as soon as possible. The Commission may propose those measures on its own initiative or at the request of a Member State. 6. This Article shall be without prejudice to the commitments of the Union in relation to third countries ensuing from international agreements on public procurement, particularly within the framework of the WTO.

Chapter IV Contract performance Article 87 Conditions for performance of contracts Contracting entities may lay down special conditions relating to the performance of a contract, provided that they are linked to the subject-matter of the contract within the meaning of Article 82(3) and indicated in the call for competition or in the procurement documents. Those conditions may include economic, innovation-related, environmental, social or employment-related considerations.

Article 88 Subcontracting 1. Observance of the obligations referred to in Article 36(2) by subcontractors is ensured through appropriate action by the competent national authorities acting within the scope of their responsibility and remit. 2. In the procurement documents, the contracting entity may ask, or may be required by a Member State to ask, the tenderer to indicate in its tender any share of the contract it may intend to subcontract to third parties and any proposed subcontractors. 3. Member States may provide that at the request of the subcontractor and where the

PART II The Utilities Directive 2014/25/EU nature of the contract so allows, the contracting entity shall transfer due payments directly to the subcontractor for services, supplies or works provided to the economic operator to whom the contract has been awarded (the main contractor). Such measures may include appropriate mechanisms permitting the main contractor to object to undue payments. The arrangements concerning that mode of payment shall be set out in the procurement documents. 4. Paragraphs 1 to 3 shall be without prejudice to the question of the main contractor’s liability. 5. In the case of works contracts and in respect of services to be provided at a facility under the direct oversight of the contracting entity, after the award of the contract and at the latest when the performance of the contract commences, the contracting entity shall require the main contractor to indicate to the contracting entity the name, contact details and legal representatives of its subcontractors, involved in such works or services, insofar as known at this point in time. The contracting entity shall require the main contractor to notify the contracting entity of any changes to this information during the course of the contract as well as of the required information for any new subcontractors which it subsequently involves in such works or services. Notwithstanding the first subparagraph, Member States may impose the obligation to deliver the required information directly on the main contractor. Where necessary for the purposes of point (b) of paragraph 6 of this Article, the required information shall be accompanied by the subcontractors’ self-declarations as referred to in Article 80(3). The implementing measures pursuant to paragraph 8 of this Article may provide that subcontractors which are presented after the award of the contract shall provide the certificates and other supporting documents instead of the self-declaration. The first subparagraph shall not apply to suppliers. Contracting entities may extend or may be required by Member States to extend the obligations provided for in the first subparagraph to for instance:

DIRECTIVE 2014/25/EU (a) supply contracts, to services contracts other than those concerning services to be provided at the facilities under the direct oversight of the contracting entity or to suppliers involved in works or services contracts; (b) subcontractors of the main contractor’s subcontractors or further down the subcontracting chain. 6. With the aim of avoiding breaches of the obligations referred to in Article 36(2), appropriate measures may be taken, such as: (a) Where the national law of a Member State provides for a mechanism of joint liability between subcontractors and the main contractor, the Member State concerned shall ensure that the relevant rules are applied in compliance with the conditions set out in Article 36(2). (b) Contracting authorities may, in accordance with Article 80(3) of this Directive, verify or may be required by Member States to verify whether there are grounds for exclusion of subcontractors pursuant to Article 57 of Directive 2014/24/EU. In such cases, the contracting authority shall require that the economic operator replaces a subcontractor in respect of which the verification has shown that there are compulsory grounds for exclusion. The contracting authority may require or may be required by a Member State to require that the economic operator replaces a subcontractor in respect of which the verification has shown that there are non-compulsory grounds for exclusion. 7. Member States may provide for more stringent liability rules under national law or to go further under national law on direct payments to subcontractors, for instance by providing for direct payments to subcontractors without it being necessary for them to request such direct payment. 8. Member States having chosen to provide for measures pursuant to paragraphs 3, 5 or 6 shall, by law, regulation or administrative provisions and having regard for Union law, specify the implementing conditions for those measures. In so doing, Member States may limit their applicability, for instance in respect of certain types of contracts, certain categories of con-

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Article 89 Modification of contracts during their term 1. Contracts and framework agreements may be modified without a new procurement procedure in accordance with this Directive in any of the following cases: (a) where the modifications, irrespective of their monetary value, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses, which may include price revision clauses, or options. Such clauses shall state the scope and nature of possible modifications or options as well as the conditions under which they may be used. They shall not provide for modifications or options that would alter the overall nature of the contract or framework agreement; (b) for additional works, services or supplies by the original contractor, irrespective of their value, that have become necessary and were not included in the initial procurement where a change of contractor: (i) cannot be made for economic or technical reasons such as requirements of interchangeability or interoperability with existing equipment, software, services or installations procured under the initial procurement; and (ii) would cause significant inconvenience or substantial duplication of costs for the contracting entity; (c) where all of the following conditions are fulfilled: (i) the need for modification has been brought about by circumstances which a diligent contracting entity could not foresee; (ii) the modification does not alter the overall nature of the contract; (d) Where a new contractor replaces the one to which the contracting entity had initially awarded the contract as a consequence of either:

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an unequivocal review clause or option in conformity with point (a), (ii) universal or partial succession into the position of the initial contractor, following corporate restructuring, including takeover, merger, acquisition or insolvency, of another economic operator that fulfils the criteria for qualitative selection initially established provided that this does not entail other substantial modifications to the contract and is not aimed at circumventing the application of this Directive; or (iii) in the event that the contracting entity itself assumes the main contractor’s obligations towards its subcontractors where this possibility is provided for under national legislation pursuant to Article 88; (e) where the modifications, irrespective of their value, are not substantial within the meaning of paragraph 4. Contracting entities having modified a contract in the cases set out under points (b) and (c) of this paragraph shall publish a notice to that effect in the Official Journal of the European Union. Such notice shall contain the information set out in Annex XVI and shall be published in accordance with Article 71. 2. Furthermore, and without any need to verify whether the conditions set out under points (a) to (d) of paragraph 4 are met, contracts may equally be modified without a new procurement procedure in accordance with this Directive being necessary where the value of the modification is below both of the following values: (i) the thresholds set out in Article 15; and (ii) 10 % of the initial contract value for service and supply contracts and below 15 % of the initial contract value for works contracts. However, the modification may not alter the overall nature of the contract or framework agreement. Where several successive modifications are made, the value shall be assessed on the basis of the net cumulative value of the successive modifications.

PART II The Utilities Directive 2014/25/EU 3. For the purpose of the calculation of the price referred to in paragraph 2, the updated price shall be the reference value when the contract includes an indexation clause. 4. A modification of a contract or a framework agreement during its term shall be considered to be substantial within the meaning of point (e) of paragraph 1, where it renders the contract or the framework agreement materially different in character from the one initially concluded. In any event, without prejudice to paragraphs 1 and 2, a modification shall be considered to be substantial where one or more of the following conditions is met: (a) the modification introduces conditions which, had they been part of the initial procurement procedure, would have allowed for the admission of other candidates than those initially selected or for the acceptance of a tender other than that originally accepted or would have attracted additional participants in the procurement procedure; (b) the modification changes the economic balance of the contract or the framework agreement in favour of the contractor in a manner which was not provided for in the initial contract or framework agreement; (c) the modification extends the scope of the contract or framework agreement considerably; (d) where a new contractor replaces the one to which the contracting entity had initially awarded the contract in other cases than those provided for under point (d) of paragraph 1. 5. A new procurement procedure in accordance with this Directive shall be required for other modifications of the provisions of a works, supply or service contract or a framework agreement during its term than those provided for under paragraphs 1 and 2.

Article 90 Termination of contracts Member States shall ensure that contracting entities have the possibility, at least under the following circumstances and under the conditions determined by the applicable national

DIRECTIVE 2014/25/EU law, to terminate a works, supply or service contract during its term, where: (a) the contract has been subject to a substantial modification which would have required a new procurement procedure pursuant to Article 89; (b) the contractor has, at the time of contract award, been in one of the situations referred to in Article 57(1) of Directive 2014/24/EU and should therefore have been excluded from the procurement procedure pursuant to the second subparagraph of Article 80(1) of this Directive; (c) the contract should not have been awarded to the contractor in view of a serious infringement of the obligations under the Treaties and this Directive that has been declared by the Court of Justice of the European Union in a procedure under Article 258 TFEU.

TITLE III PARTICULAR PROCUREMENT REGIMES Chapter I Social and other specific services Article 91 Award of contracts for social and other specific services Contracts for social and other specific services, listed in Annex XVII shall be awarded in accordance with this Chapter where the value of the contracts is equal to or greater than the threshold indicated in point (c) Article 15.

Article 92 Publication of notices 1. Contracting entities intending to award a contract for the services referred to in Article 91 shall make known their intention by any of the following means: (a) by means of a contract notice; or (b) by means of a periodic indicative notice, which shall be published continuously. The periodic indicative notice shall refer specifically to the types of services that will be the subject of the contracts to be awarded. It shall indicate that the contracts will be awarded without further publication and invite interested economic operators to express their interest in writing; or (c) by means of a notice on the existence of a qualification system, which shall be published continuously.

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The first subparagraph shall, however, not apply where a negotiated procedure without prior call for competition could have been used in conformity with Article 50 for the award of a service contract. 2. Contracting entities that have awarded a contract for the services referred to in Article 91 shall make known the results by means of contract award notice. They may, however, group such notices on a quarterly basis. In that case, they shall send the grouped notices within 30 days of the end of each quarter. 3. The notices referred to in paragraphs 1 and 2 of this Article shall contain the information referred to in Annex XVIII, respectively in parts A, B, C or D, in accordance with the standard model notices. The Commission shall establish the standard forms by means of implementing acts. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 105. 4. The notices referred to in this Article shall be published in accordance with Article 71.

Article 94 Reserved contracts for certain services

Article 93 Principles of awarding contracts 1. Member States shall put in place national rules for the award of contracts subject to this Chapter, in order to ensure contracting entities comply with the principles of transparency and equal treatment of economic operators. Member States are free to determine the procedural rules applicable as long as such rules allow contracting entities to take into account the specificities of the services in question. 2. Member States shall ensure that contracting entities may take into account the need to ensure quality, continuity, accessibility, affordability, availability and comprehensiveness of the services, the specific needs of different categories of users, including disadvantaged and vulnerable groups, the involvement and empowerment of users and innovation. Member States may also provide that the choice of the service provider shall be made on the basis of the tender presenting the best price-quality ratio, taking into account quality and sustainability criteria for social services.

1. Member States may provide that contracting entities which are contracting authorities may reserve the right for organisations to participate in procedures for the award of public contracts exclusively for those health, social and cultural services referred to in Article 91, which are covered by CPV codes 75121000-0, 75122000-7, 75123000-4, 79622000-0, 79624000-4, 79625000-1, 80110000-8, 80300000-7, 80420000-4, 80430000-7, 80511000-9, 80520000-5, 80590000-6, from 85000000-9 to 85323000-9, 92500000-6, 92600000-7, 98133000-4, 98133110-8. 2. An organisation referred to in paragraph 1 shall fulfil all of the following conditions: (a) its objective is the pursuit of a public service mission linked to the delivery of the services referred to in paragraph 1; (b) profits are reinvested with a view to achieving the organisation’s objective. Where profits are distributed or redistributed, this should be based on participatory considerations; (c) the structures of management or ownership of the organisation performing the contract are based on employee ownership or participatory principles, or require the active participation of employees, users or stakeholders; and (d) the organisation has not been awarded a contract for the services concerned by the contracting authority concerned pursuant to this Article within the past three years. 3. The maximum duration of the contract shall not be longer than three years. 4. The call for competition shall make reference to this Article. 5. Notwithstanding Article 108, the Commission shall assess the effects of this Article and report to the European Parliament and the Council by 18 April 2019.

Chapter II Rules governing design contests Article 95 Scope 1. This Chapter shall apply to design contests organised as part of a procurement

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PART II The Utilities Directive 2014/25/EU procedure for a service contract, provided that the estimated value of the contract, net of VAT, and including any possible prizes or payments to participants, is equal to or greater than the amount set out in point (a) of Article 15. 2. This Chapter shall apply to all design contests where the total amount of contest prizes and payments to participants, including the estimated value net of VAT of the service contract which might subsequently be concluded under point (j) of Article 50 if the contracting entity does not exclude such an award in the contest notice, is equal to or greater than the amount set out in point (a) of Article 15.

Article 96 Notices 1. Contracting entities that intend to organise a design contest shall call for competition by means of a contest notice. Where they intend to award a subsequent service contract pursuant to point (j) of Article 50, this shall be indicated in the design contest notice. Contracting entities that have held a design contest shall make the results known by means of a notice. 2. The call for competition shall include the information set out in Annex XIX and the notice of the results of a design contest shall include the information set out in Annex XX in the format of standard forms. The Commission shall establish those standard forms by means of implementing acts. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 105. The notice of the results of a design contest shall be forwarded to the Publication Office of the European Union within 30 days of the closure of the design contest. Where the release of information on the outcome of the contest would impede law enforcement, would be contrary to the public interest or would prejudice the legitimate commercial interests of a particular economic operator, whether public or private, or might prejudice fair competition between economic operators, such information may be withheld from publication. 3. Article 71(2) to (6) shall also apply to notices relating to design contests.

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Article 97 Rules on the organisation of design contests, the selection of participants and the jury 1. When organising design contests, contracting entities shall apply procedures which are adapted to Title I and this Chapter. 2. The admission of participants to design contests shall not be limited: (a) by reference to the territory or part of the territory of a Member State; (b) on the grounds that, under the law of the Member State in which the contest is organised, they would be required to be either natural or legal persons. 3. Where design contests are restricted to a limited number of participants, contracting entities shall establish clear and nondiscriminatory selection criteria. In any event, the number of candidates invited to participate shall be sufficient to ensure genuine competition. 4. The jury shall be composed exclusively of natural persons who are independent of participants in the contest. Where a particular professional qualification is required of participants in a contest, at least a third of the jury members shall have that qualification or an equivalent qualification.

Article 98 Decisions of the jury 1. The jury shall be autonomous in its decisions or opinions. 2. The jury shall examine the plans and projects submitted by the candidates anonymously and solely on the basis of the criteria indicated in the contest notice. 3. The jury shall record its ranking of projects in a report, signed by its members, made according to the merits of each project, together with its remarks and any points that may need clarification. 4. Anonymity shall be observed until the jury has reached its opinion or decision. 5. Candidates may be invited, if need be, to answer questions that the jury has recorded in the minutes to clarify any aspects of the projects. 6. Complete minutes shall be drawn up of the dialogue between jury members and candidates.

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TITLE IV GOVERNANCE Article 99 Enforcement 1. In order to effectively ensure correct and efficient implementation, Member States shall make sure that at least the tasks set out in this Article are performed by one or more authorities, bodies or structures. They shall indicate to the Commission all authorities or structures competent for those tasks. 2. Member States shall ensure that the application of public procurement rules is monitored. Where monitoring authorities or structures identify by their own initiative or upon the receipt of information specific violations or systemic problems, they shall be empowered to indicate those problems to national auditing authorities, courts or tribunals or other appropriate authorities or structures, such as the ombudsman, national parliaments or committees thereof. 3. The results of the monitoring activities pursuant to paragraph 2 shall be made available to the public through appropriate means of information. Those results shall also be made available to the Commission. For instance, they may be integrated in the monitoring reports referred to in the second subparagraph of this paragraph. By 18 April 2017 and every three years thereafter Member States shall submit to the Commission, a monitoring report covering, where applicable, information on the most frequent sources of wrong application or of legal uncertainty, including possible structural or recurring problems in the application of the rules, on the level of SME participation in public procurement and about prevention, detection and adequate reporting of cases of procurement fraud, corruption, conflict of interest and other serious irregularities. The Commission may, not more than every three years, request Member States to provide information on the practical implementation of national strategic procurement policies. For the purposes of this paragraph, ‘SME’ shall be understood as defined in Commission Recommendation 2003/361/EC.1

PART II The Utilities Directive 2014/25/EU On the basis of the data received under this paragraph, the Commission shall regularly issue a report on the implementation and best practices of national procurement policies in the internal market. 4. Member States shall ensure that: (a) information and guidance on the interpretation and application of the Union public procurement law is available free of charge to assist contracting authorities and economic operators, in particular SMEs, in correctly applying the Union public procurement rules; and (b) support is available to contracting authorities with regard to planning and carrying out procurement procedures. 5. Member States shall, without prejudice to the general procedures and working methods established by the Commission for its communications and contacts with Member States, designate a point of reference for cooperation with the Commission as regards the application of public procurement legislation. 6. Contracting authorities shall, at least for the duration of the contract, keep copies of all concluded contracts with a value equal to or greater than: (a) 1 000 000 EUR in the case of supply contracts or service contracts; (b) 10 000 000 EUR in the case of works contracts. Contracting authorities shall grant access to those contracts; however, access to specific documents or items of information may be denied to the extent and on the conditions provided for in the applicable Union or national rules on access to documents and data protection.

Article 100 Individual reports on procedures for the award of contracts 1. Contracting entities shall keep appropriate information on each contract or framework agreement covered by this Directive and each time a dynamic purchasing system is established. This information shall be sufficient to permit them at a later date to justify decisions taken in connection with:

1 Commission Recommendation of 6 May 2003 concerning the definition of micro, small and mediumsized enterprises, (OJ L 124, 20.5.2003, p. 36).

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PART II The Utilities Directive 2014/25/EU (a) the qualification and selection of economic operators and the award of contracts; (b) the use of negotiated procedures without a call for competition by virtue of Article 50; (c) the non-application of Chapters II to IV of Title II by virtue of the derogations provided for in Chapters II and III of Title I; (d) where necessary, the reasons why other means of communication than electronic means for the electronic submission have been used. To the extent that the contract award notice drawn up pursuant to Article 70 or Article 92(2) contains the information required in this paragraph, contracting entities may refer to that notice. 2. Contracting entities shall document the progress of all procurement procedures, whether or not the procedures are conducted by electronic means. To that end, they shall ensure that they keep sufficient documentation to justify decisions taken in all stages of the procurement procedure, such as documentation on communications with economic operators and internal deliberations, preparation of the procurement documents, dialogue or negotiation if any, selection and award of the contract. The documentation shall be kept for at least three years from the date of award of the contract. 3. The information or documentation, or the main elements thereof, shall be communicated to the Commission or the national authorities, bodies or structures referred to in Article 99 where they so request.

Article 101 National reporting and statistical information 1. The Commission shall review the quality and completeness of data that can be extracted from the notices, referred to in Articles 67 to 71, 92 and 96, which are published in accordance with Annex IX.

DIRECTIVE 2014/25/EU Where the quality and completeness of the data referred to in the first subparagraph of this paragraph is not compliant with the obligations stipulated in Articles 67(1), Article 68(1), Article 69, Article 70(1), Article 92(3) and Article 96(2), the Commission shall request complementary information from the Member State concerned. Within a reasonable time, the Member State concerned shall supply the missing statistical information requested by the Commission. 2. By 18 April 2017 and every three years thereafter, Member States shall forward to the Commission a statistical report for procurement which would have been covered by this Directive if its value had exceeded the relevant threshold laid down in Article 15, indicating an estimation of the aggregated total value of such procurement during the period concerned. That estimation may, in particular, be based on data available under national publication requirements or on sample-based estimates. That report may be included in the report referred to in Article 99(3).

Article 102 Administrative cooperation 1. Member States shall provide mutual assistance to each other, and shall put in place measures for effective cooperation with one another, in order to ensure exchange of information on issues referred to in Articles 62, 81 and 84. They shall ensure the confidentiality of the information which they exchange. 2. The competent authorities of all Member States concerned shall exchange information in compliance with personal data protection rules provided for in Directive 95/46/EC of the European Parliament and of the Council1 and Directive 2002/58/EC of the European Parliament and of the Council.2 3. To test the suitability of using the Internal Market Information System (IMI) established by Regulation (EU) No 1024/2012

1 Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (OJ L 281, 23.11.1995, p. 31). 2 Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications) (OJ L 201, 31.7.2002, p. 37).

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DIRECTIVE 2014/25/EU for the purpose of exchanging information covered by this Directive, a pilot project shall be launched by 18 April 2015.

TITLE V DELEGATED POWERS, IMPLEMENTING POWERS AND FINAL PROVISIONS Article 103 Exercise of the delegation 1. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article. 2. The power to adopt delegated acts referred to in Articles 4, 17, 40, 41, 76 and 83 shall be conferred on the Commission for an indeterminate period of time from 17 April 2014. 3. The delegation of power referred to in Articles 4, 17, 40, 41, 76 and 83 may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force. 4. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council. 5. A delegated act adopted pursuant to Articles 4, 17, 40, 41, 76 and 83 shall enter into force only if no objection has been expressed either by the European Parliament or by the Council within a period of two months of notification of the act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or of the Council.

Article 104 Urgency procedure 1. Delegated acts adopted under this Article shall enter into force without delay and shall apply as long as no objection is ex-

PART II The Utilities Directive 2014/25/EU pressed in accordance with paragraph 2. The notification of a delegated act to the European Parliament and to the Council shall state the reasons for the use of the urgency procedure. 2. Either the European Parliament or the Council may object to a delegated act in accordance with the procedure referred to in Article 103(5). In such a case, the Commission shall repeal the act without delay following the notification of the decision to object by the European Parliament or by the Council.

Article 105 Committee procedure 1. The Commission shall be assisted by the Advisory Committee on Public Procurement established by Council Decision 71/306/EEC.1 That committee shall be a committee within the meaning of Regulation (EU) No 182/2011. 2. Where reference is made to this paragraph, Article 4 of Regulation (EU) No 182/2011 shall apply. 3. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

Article 106 Transposition and transitional provisions 1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 18 April 2016. They shall forthwith communicate to the Commission the text of those measures. 2. Notwithstanding paragraph 1 of this Article, Member States may postpone the application of Article 40(1) until 18 October 2018, except where use of electronic means is mandatory pursuant to Articles 52, 53, 54, Article 55(3), Article 71(2) or Article 73. Notwithstanding paragraph 1 of this Article, Member States may postpone the application of Article 40(1) for central purchasing bodies pursuant to Article 55(3) until 18 April 2017. Where a Member State chooses to postpone the application of Article 40(1), that Member State shall provide that contract-

1 Council Decision 71/306/EEC of 26 July 1971 setting up an Advisory Committee for Public Works Contracts (OJ L 185, 16.8.1971, p. 15).

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PART II The Utilities Directive 2014/25/EU ing entities may choose between the following means of communication for all communication and information exchange: (a) electronic means in accordance with Article 40; (b) post or other suitable carrier; (c) fax; (d) a combination of those means. 3. When Member States adopt the measures referred to in paragraphs 1 and 2, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 107 Repeal Directive 2004/17/EC is repealed with effect from 18 April 2016. References to the repealed Directive shall be construed as being made to this Directive and shall be read in accordance with the correlation table in Annex XXI.

DIRECTIVE 2014/25/EU in terms of factors such as the cross-border award of contracts and transaction costs, resulting from the application of the thresholds set in Article 15 and report thereon to the European Parliament and the Council by 18 April 2019. The Commission shall, where possible and appropriate, consider suggesting an increase of the threshold amounts applicable under the GPA during the next round of negotiations. In the event of any change to the threshold amounts applicable under the GPA, the report shall, if appropriate, be followed by a legislative proposal amending the thresholds set out in this Directive.

Article 109 Entry into force This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 110 Addressees This Directive is addressed to the Member States.

Article 108 Review The Commission shall review the economic effects on the internal market, in particular

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TITLE I SCOPE, DEFINITIONS AND GENERAL PRINCIPLES Chapter I Subject-matter and definitions Article 1 Subject matter and scope 1. This Directive establishes rules on the procedures for procurement by contracting entities with respect to contracts as well as design contests, whose value is estimated to be not less than the thresholds laid down in Article 15. 2. Procurement within the meaning of this Directive is the acquisition by means of a supply, works or service contract of works, supplies or services by one or more contracting entities from economic operators chosen by those contracting entities, provided that the works, supplies or services are intended for the pursuit of one of the activities referred to in Articles 8 to 14. 3. The application of this Directive is subject to Article 346 of TFEU. 4. This Directive does not affect the freedom of Member States to define, in conformity with Union law, what they consider to be services of general economic interest, how those services should be organised and financed, in compliance with the State aid rules, and what specific obligations they should be subject to. Equally, this Directive does not affect the decision of public authorities whether, how and to what extent they wish to perform public functions themselves pursuant to Article 14 TFEU and Protocol No 26. 5. This Directive does not affect the way in which the Member States organise their social security systems. 6. The scope of this Directive shall not include non-economic services of general interest. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, pp. 128; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 137; Peter A. Trepte, Public Procurement in the EU, A Practitioners Guide, 2 nd ed 2007, pp. 136; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 841.

1

The history of the Utilities Directive is distinctive from that of directive 2014/24/EU on public procurement. In connection with the adoption of the first directives on the procedures for entering into public contracts in the 1970 s, it was decided that these directives should not govern the utilities sectors. It was not until 1988 that steps were taken to regulate the award of contracts in the utilities sectors, and a directive governing these sectors was adopted in 1990.1 The purpose of the Utilities Directive was thus to extend the application of the EU’s rules on the award of public contracts to sectors which had hitherto been exempt from such regulation.2 An enforcement directive was adopted

1 Directive 90/531/EEC on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors. 2 Case C-283/00 Commission v Spain (SIEPSA), para. 76.

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in 1992.3 The Utilities Directive was amended in 1993 with directive 93/38/EEC 4 and again in 2004 with directive 2004/17/EC.5 It has been debated whether there was a need for a separate directive covering the 2 Utilities sectors. Without a separate directive for the Utilities sectors Contracting Authorities would nonetheless be subjected to directive 2014/24/EU and obliged to use the procurement procedures set out in that directive when entering into public contracts or conducting design contests. On the other hand, Public undertakings would only under the fulfilment of certain conditions be subject to the procedures of directive 2014/24 and private undertakings would not very often be subject to the procedures of the directive. It can therefore be helpful to highlight the main reasons for having a separate directive for the Utilities sectors. – Activities in the utilities sectors are carried on not only by public authorities, but also by publicly owned companies and privately owned companies. This implies that only some entities in these sectors would be subject to the use of procurement procedures if a separate directive was not issued. – The utilities sectors concern services that are of special social importance, both for the State and for consumers, and which cannot be expected to be provided to a sufficient extent by the market (energy, water, transport and postal services). – The activities of the Utilities sectors do also have a significant impact on the industrial and economic development of society as they provide important infrastructure which is most clearly seen in the energy and transport sectors. – Activities in the sectors subject to the Utilities Directive are often subject to special public regulations including requirements for prior permission to carry on such activities, price controls, and the carrying out of public service obligations. This is seen, e.g., in the energy supply and transport sectors. – A number of physical factors are also relevant to the regulation. Part of the activities of utilities undertakings are linked to physical infrastructures (water pipes, railway track, the electricity grid etc.), to which access can be controlled by the owner of the infrastructure. Establishing the physical infrastructure is very costly and it is usually difficult to duplicate. – A number of special financial circumstances also apply. Starting up a utility undertaking requires significant investment, whereas in some cases the costs of operating the activity are marginal. This means there are often major advantages associated with being the first mover in a market, and there can often be significant economies of scale. – There can also be advantages from using the same infrastructure for different purposes. This is, e.g., seen in the postal services sector, where the same personnel, equipment and buildings are used both for the delivery of letters and household distribution of advertising leaflets. These factors imply that to a certain extent contracting entities in these sectors are dependent on and closely connected with the State. Together, these factors mean that such contracting entities are not fully subject to market conditions and competition, and in some cases not at all subject to them.6 On this basis it is assumed that these contracting Directive 92/13/EEC. Directive 93/38/EEC coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors. 5 Directive 2004/17/EC coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors. 6 Recitals 2 and 3 of Directive 2004/17/EC (the former Utilities Directive). 3

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entities are not solely influenced by economic considerations when awarding contracts. There is thus a risk that these contracting entities may discriminate against some economic operators and award contracts to economic operators from the same Member State as the contracting entity. It is against this background that there is a special directive covering a number of listed activities in the utilities sectors. 3 Most of these factors were still present in 2014 and for this reason a separate Utilities Directive was adopted. In the preamble to the Utilities Directive the reasons are stated as follows: “… it appears appropriate to maintain rules on procurement by entities operating in the water, energy, transport and postal services sectors, since national authorities continue to be able to influence the behaviour of those entities, including participation in their capital and representation in the entities’ administrative, managerial or supervisory bodies. Another reason to continue to regulate procurement in those sectors is the closed nature of the markets in which the entities in those sectors operate, due to the existence of special or exclusive rights granted by the Member States concerning the supply to, provision or operation of networks for providing the service concerned.”7

4

It is an important element of the Utilities Directive that there is only a need for subjecting contracting entities to the rules of the directive if there is not sufficient competition in a concrete Utilities sector. For this reason only some sectors are covered by the Utilities Directive as it is only the Utilities sectors set out in articles 8 to 14 of the Utilities Directive that are subjected to the rules of the directive. In its 2014 version, the Utilities Directive covers the energy, water, transport, and postal services sectors and there has not been any major change to the sectors covered when compared with directive 2004/17/EC (the former and now repealed Utilities Directive). The telecommunications sector was also subject to the now repealed Directive 93/38/EEC,8 but because of the development of competition in this sector it was considered that there was no longer a need for it to be bound by the procurement rules of the Utilities Directive. The importance of competition in the individual sector for the application of the Utilities Directive can be observed in Article 4 setting out the contracting entities that are subject to the directive as private undertakings (entities which are not contracting authorities or public undertakings) holding special or exclusive rights are not subject to the directive if these rights are granted by the use of a competitive award procedure. Under this condition competition is present when awarding the contract and granting the special or exclusive right although the market might be closed for competition under the duration of the contract. The importance of competition can also be observed in Article 34 and 35 where a sector can be exempt from the directive if an activity is directly exposed to competition. A number of the activities covered are undergoing significant change. For many years the sectors covered by the Utilities Directive were characterised by being national monopolies, and these have increasingly been liberalised and opened up to new economic operators and to cross-border activities in the EU. When an activity in a sector covered by the Utilities Directive is directly exposed to competition and access to the market is not restricted whereby the entity will be disciplined by market forces when entering into contracts or conducting design contests a Member State might send a request to the Commission accompanied with appropriate proof that the Commission decides that there is no more a need to subject the entity to the rules and procedures of the Utilities Directive. Recital 1 of directive 2014/25/EC. Council Directive 93/38/EEC coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors. 7

8

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There are significant overlaps between the rules of the Utilities Directive and the rules 5 of the Public Sector Directive. Both Directives require the contracting entities covered by them to apply special procedures when awarding contracts, and for the two main procedures of the directives, open procedures and restricted procedures, the procedures are identical. The directives also have essentially the same structure. This can be seen as related to the nature of the two directives that subject contracting authorities to the Public Sector Directive and contracting entities including some private undertakings to the Utilities Directive when entering into contracts. With respect to the 2014 revision of the directives it was also intended that the provisions of the two directives should be harmonised to a higher extent than hitherto.9 The fundamental principles of the Treaty on the Functioning of the European Union also apply in full as aids to the interpretation of the provisions of both directives as well as supplementary conditions for the award of contracts. In addition, the Treaty rules on freedom of movement naturally apply in full. However, there are a number of differences between the two directives, arising from the need to issue two independent directives. Three differences in particular are highlighted: – Subject to certain conditions, the Utilities Directive covers privately owned undertakings which are thus required to follow a procurement procedure prior to awarding a contract if it relates to an activity subject to Articles 7 to 14 of the Utilities Directive. – The Utilities Directive allows contracting entities the possibility of using negotiated procedures on an equal footing with open procedures and restricted procedures. – The Utilities Directive has higher thresholds than the Public Sector Directive, and thus more contracts fall outside the scope of the obligations in the Directive because of their value. There are also a number of minor differences so that, taken together, in many situations the Utilities Directive gives contracting entities greater flexibility when awarding contracts (the conditions for making direct purchases, qualification systems, framework agreements, selection/pre-qualification criteria).

1.1. The Scope of the Utilities Directive The purpose of this provision is to determine that contracting entities are subject to 6 this directive when entering into contracts or design contests but only if the value of the contract or contest is above the monetary thresholds set out in Article 15.

1.2. Activities and contracts covered by the Utilities Directive Contracting entities are according to Article 1 subject to the rules of the Utilities Di- 7 rective when entering into contracts or conducting design contests intended for the pursuit of one of the activities referred to in Articles 8 to 14 and on the condition that the contract or design contest is above the thresholds laid down in Article 15. The implication of this is, that the Utilities Directive on the one hand widens the scope for the use of procurement procedures to cover contracting entities which not necessarily are part of the public sector, but on the other hand the field of application of the Utilities Directive is limited in two respects: The rules of the directive applies only to specific sectors and they apply only to contracts or design contests intended for the pursuit of activities within one of these sectors. 9

See e.g. with respect to the notion on procurement recital 6 to the Utilities Directive (2014/25/EU).

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1.3. Reference to Article 346 TFEU 8

This provision is identical to the Public Sector Directive Article 1 (3). For a commentary, see this provision.

1.4. Member State organisation of services of general economic interest 9

This provision is identical to the Public Sector Directive Article 1 (4). For a commentary, see this provision.

1.5. Member State organisation of the social security systems 10

This provision is identical to the Public Sector Directive Article 1 (5). For a commentary, see this provision.

1.6. Exclusion of non-economic services of general interest. 11

The freedom of the Member States to organise their services as non-economic services are not affected by the Utilities Directive and if a Member State chooses to organise a service as a non-economic service then such a service will not be covered by the Utilities Directive.10

Article 2 Definitions For the purposes of this Directive, the following definitions apply: (1) ‘supply, works and service contracts’ means contracts for pecuniary interest concluded in writing between one or more contracting entities and one or more economic operators and having as their object the execution of works, the supply of products or the provision of services; (2) ‘works contracts’ means contracts having as their object one of the following: (a) the execution, or both the design and execution, of works related to one of the activities within the meaning of Annex I; (b) the execution, or both the design and execution, of a work; (c) the realisation by whatever means of a work corresponding to the requirements specified by the contracting entity exercising a decisive influence on the type or design of the work; (3) ‘a work’ means the outcome of building or civil engineering works taken as a whole which is sufficient in itself to fulfil an economic or technical function; (4) ‘supply contracts’ means contracts having as their object the purchase, lease, rental or hire-purchase, with or without an option to buy, of products. A supply contract may include, as an incidental matter, siting and installation operations; (5) ‘service contracts’ means contracts having as their object the provision of services other than those referred to in point 2; (6) ‘economic operator’ means any natural or legal person, or a contracting entity, or a group of such persons and/or entities, including any temporary association of undertakings, which offers the execution of works and/or a work, the supply of products or the provision of services on the market; 10 8th recital to the Utilities Directive. See also Annex XVII, footnote 1, to the Utilities Directive. Similarly is provided for the Public Sector Directive. Even though not stated in the text of the Directive, it is stated in recital 6.

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(7) ‘tenderer’ means an economic operator that has submitted a tender; (8) ‘candidate’ means an economic operator that has sought an invitation or has been invited to take part in a restricted or negotiated procedure, in a competitive dialogue or in an innovation partnership; (9) ‘procurement document’ means any document produced or referred to by the contracting entity to describe or determine elements of the procurement or the procedure, including the contract notice, the periodic indicative notice or the notices on the existence of a qualification system where they are used as a means of calling for competition, the technical specifications, the descriptive document, proposed conditions of contract, formats for the presentation of documents by candidates and tenderers, information on generally applicable obligations and any additional documents; (10)‘centralised purchasing activities’ means activities conducted on a permanent basis, in one of the following forms: (a) the acquisition of supplies and/or services intended for contracting entities, (b) the award of contracts or the conclusion of framework agreements for works, supplies or services intended for contracting entities; (11)‘ancillary purchasing activities’ means activities consisting in the provision of support to purchasing activities, in particular in the following forms: (a) technical infrastructure enabling contracting entities to award public contracts or to conclude framework agreements for works, supplies or services; (b) advice on the conduct or design of procurement procedures; (c) preparation and management of procurement procedures on behalf and for the account of the contracting entity concerned; (12)‘central purchasing body’ means a contracting entity within the meaning of Article 4(1) of this Directive or a contracting authority within the meaning of point 1 of Article 2(1) of Directive 2014/24/EU providing centralised purchasing activities and, possibly, ancillary purchasing activities. Procurement carried out by a central purchasing body in order to perform centralised purchasing activities shall be deemed to be procurement for the pursuit of an activity as described in Articles 8 to 14. Article 18 shall not apply to procurement carried out by a central purchasing body in order to perform centralised purchasing activities; (13)‘procurement service provider’ means a public or private body, which offers ancillary purchasing activities on the market; (14)‘written’ or ‘in writing’ means any expression consisting of words or figures which can be read, reproduced and subsequently communicated, including information transmitted and stored by electronic means; (15)‘electronic means’ means electronic equipment for the processing (including digital compression) and storage of data which is transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means; (16)‘life cycle’ means all consecutive and/or interlinked stages, including research and development to be carried out, production, trading and its conditions, transport, use and maintenance, throughout the existence of the product or the works or the provision of the service, from raw material acquisition or generation of resources to disposal, clearance and end of service or utilisation; (17)‘design contests’ means those procedures which enable the contracting entity to acquire, mainly in the fields of town and country planning, architecture, engineering or data processing, a plan or design selected by a jury after being put out to competition with or without the award of prizes;

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(18)‘innovation’ means the implementation of a new or significantly improved product, service or process, including but not limited to production, building or construction processes, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations, inter alia, with the purpose of helping to solve societal challenges or to support the Europe 2020 strategy for smart, sustainable and inclusive growth; (19)‘label’ means any document, certificate or attestation confirming that the works, products, services, processes or procedures in question meet certain requirements; (20)‘label requirements’ means the requirements to be met by the works, products, services, processes or procedures in question in order to obtain the label concerned. 1

This provision is identical to the Public Sector Directive Article 2, paragraph 5 to 24. For a commentary see this provision. With respect to the definition set out in Article 2, no. 12, on ‘central purchasing body’, the exception related to Article 18 is commented upon in the commentary to Article 18.

Article 3 Contracting authorities 1. For the purpose of this Directive ‘contracting authorities’ means State, regional or local authorities, bodies governed by public law or associations formed by one or more such authorities or one or more such bodies governed by public law. 2. ‘Regional authorities’ includes all authorities of the administrative units, listed non-exhaustively in NUTS 1 and 2, as referred to in Regulation (EC) No 1059/2003 of the European Parliament and of the Council.1 3. ‘Local authorities’ includes all authorities of the administrative units falling under NUTS 3 and smaller administrative units, as referred to in Regulation (EC) No 1059/2003. 4. ‘Bodies governed by public law’ means bodies that have all of the following characteristics: (a) they are established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; (b) they have legal personality; and (c) they are financed, for the most part, by the State, regional or local authorities, or by other bodies governed by public law; or are subject to management supervision by those authorities or bodies; or which have an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law. 1

The definition of ‘contracting authorities’ in Article 3 (1) of the Utilities Directive and the definition on “bodies governed by public law” is identical to the corresponding definition in Article 2, (1) and (4) of the Public Sector Directive. For a commentary on ‘contracting authority’ and “bodies governed by public law”, see these provisions. 1 Regulation (EC) No 1059/2003 of the European Parliament and of the Council of 26 May 2003 on the establishment of a common classification of territorial units for statistics (NUTS) (OJ L 154, 21.6.2003, p. 1). The NUTS classification is regularly amended by Commission regulations.

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Special paragraphs are set up defining “regional authorities” and “local authorities”. 2 When compared to Article 2 of the Public Sector Directive it can be observed that the latter directive distinguishes between “central government authorities” on the one side and “sub-central contracting authorities” on the other side. The reasons for dividing the latter category into “regional” and “local” authorities are not set out in the Utilities Directive and they seem not to be entirely clear as both categories are subject to the Utilities Directive and there are not any special arrangements in the Utilities Directive for one or the other of those two categories. 3.2. “Regional Authorities” are defined by making reference to Council regulation 1059/2003 on the NUTS system.2 3.3. “Local Authorities” are defined by making reference to Council regulation 1059/2003 on the NUTS system.3

Article 4 Contracting entities 1. For the purpose of this Directive contracting entities are entities, which: (a) are contracting authorities or public undertakings and which pursue one of the activities referred to in Articles 8 to 14; (b) when they are not contracting authorities or public undertakings, have as one of their activities any of the activities referred to in Articles 8 to 14, or any combination thereof and operate on the basis of special or exclusive rights granted by a competent authority of a Member State. 2. ‘Public undertaking’ means any undertaking over which the contracting authorities may exercise directly or indirectly a dominant influence by virtue of their ownership of it, their financial participation therein, or the rules which govern it. A dominant influence on the part of the contracting authorities shall be presumed in any of the following cases in which those authorities, directly or indirectly: (a) hold the majority of the undertaking’s subscribed capital; (b) control the majority of the votes attaching to shares issued by the undertaking, (c) can appoint more than half of the undertaking’s administrative, management or supervisory body. 3. For the purposes of this Article, ‘special or exclusive rights’ means rights granted by a competent authority of a Member State by way of any legislative, regulatory or administrative provision the effect of which is to limit the exercise of activities defined in Articles 8 to 14 to one or more entities, and which substantially affects the ability of other entities to carry out such activity. Rights which have been granted by means of a procedure in which adequate publicity has been ensured and where the granting of those rights was based on objective criteria shall not constitute special or exclusive rights within the meaning of the first subparagraph. Such procedures include: (a) procurement procedures with a prior call for competition in conformity with Directive 2014/24/EU, Directive 2009/81/EC, Directive 2014/23/EU or this Directive; 2 Regulation (EC) No 1059/2003 of the European Parliament and of the Council of 26 May 2003 on the establishment of a common classification of territorial units for statistics (NUTS). 3 Regulation (EC) No 1059/2003 of the European Parliament and of the Council of 26 May 2003 on the establishment of a common classification of territorial units for statistics (NUTS).

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(b) procedures pursuant to other legal acts of the Union listed in Annex II, ensuring adequate prior transparency for granting authorisations on the basis of objective criteria. 4. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 concerning the modification of the list of Union legal acts set out in Annex II, when on the basis of the adoption of new legal acts, repeal or modification of such legal acts, such amendments prove necessary. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed 2012, pp. 133; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 143; Peter A. Trepte, Public Procurement in the EU, A Practitioners Guide, 2 nd ed. 2007, pp. 137 and 144; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 842.

The Utilities Directive requires three different kinds of contracting entities to comply with its rules when awarding contracts. The definition on contracting entities is identical to that of directive 2004/17/EC, Article 2 (2) supplemented by a special provision on special or exclusive rights granted by a competitive procurement procedure. 2 The notion of “Special and Exclusive Rights” in Article 4(3) has been clarified but on all other aspects subparagraphs 1, 2 and 3 are identical with the definitions set out in Article 2 of the former Utilities Directive (2004/17). This clarification is of considerable importance as the interplay between the grant of special and exclusive rights and the obligation to use the procurements rules of the Utilities Directive had led to uncertainty under the former Utilities Directive. 3 It is a condition for being subjected to the rules of the directive that a contracting entity carries out activities subject to Articles 8 to 14 of the Utilities Directive, and that the entity contemplates entering into a contract relating to one of these activities. 1

4.1. Definition of contracting entities Article 4(1)(a) of the Utilities Directive covers Contracting authorities and public undertakings, and under Article 4(1)(b) also contracting entities not being one of the two former categories but which operate on the basis of special or exclusive rights granted by a competent authority of a Member State, are defined as contracting entities. 5 The obligation to follow a procurement procedure pursuant to the Utilities Directive is based on the presence of public influence on the performance of the activities that are subject to the Directive, either directly, through a publicly owned or publicly controlled company, or because the activities are carried out on the basis of a special or exclusive right which gives the holder of the right significant competitive advantages.1 The Court of Justice of the European Union (CJ) has established that a purpose-oriented approach must be used to determine which kinds of entities are subject to the requirements in the Utilities Directive. This makes it possible to ensure that all contracting entities within the sectors subject to the Utilities Directive fall within the scope of the Directive.2 On the other hand, the legal form of a contracting entity or whether it is a privately owned company is irrelevant to whether it is subject to the Utilities Directive. 3 However, non-public contracting entities must fulfil certain criteria which are set out in Article 4, paragraph 3. 4

Recital 1 of the Utilities Directive (2014/25/EU). Case C-283/00 Commission v Spain (SIEPSA), para. 76. 3 Recital 10 of the former Utilities Directive (2004/17/EC). This is in accordance with TFEU 345 (neutrality of ownership.). 1

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The Utilities Directive applies to contracting entities that are contracting authorities. 6 The definition of ‘contracting authorities’ is given in Article 3 of the Utilities Directive. This definition is identical to the corresponding definition in the Public Sector Directive. Thus an independent analysis of what is meant by a ‘contracting authority’ will not be made here.4 Within the area subject to the Utilities Directive a distinction must be made between contracting authorities on the one side and public undertakings and other contracting entities subject to the Utilities Directive on the other side. For contracting authorities, any activity concerned with the supply of gas, heat, electricity or water, including as a byproduct, will automatically lead to the activity being subject to the Utilities Directive. For contracting entities other than public authorities, i.e. public undertakings and other contracting entities subject to the Utilities Directive, a de minimis threshold applies before activities connected with the supply of gas, heat, electricity or water are subject to the Utilities Directive.5 The distinction between contracting authorities on the one side and public undertakings and other contracting entities subject to the Utilities Directive on the other side is also relevant to the obligation to make certain forms of criminal activity result in the disqualification of tenderers.6 Entities which are neither contracting authorities nor public undertakings can be 7 contracting entities subject to the Utilities Directive. The effect of this is that also privately-owned undertakings might be subject to the Utilities Directive. However, there are a number of supplementary conditions for this. It is a condition that an undertaking carries on one or more of the activities referred to in Articles 8 to 14 of the Utilities Directive, and that these activities are carried out on the basis of special or exclusive rights granted by a public authority. While this is a necessary condition, it is not sufficient for concluding that an undertaking is subject to the Utilities Directive. For this, according to Article 4(3) of the Utilities Directive, there is the further condition that the exercise of activities as set out in article 8 to 14 is limited to one or more entities, and that the opportunities for other undertakings to carry on the activity in question should have been significantly affected. Finally the procedure for granting such rights can also be decisive for determining whether a special or exclusive right exists in the sense of the Utilities Directive.

4.2. Public undertakings The Utilities Directive applies to contracting entities that are public undertakings. A 8 public undertaking is an undertaking that is owned or controlled by a contracting authority as set out in article 3 of the Utilities Directive. The ownership or control implies that the contracting authority may exercise a dominant influence over the public undertaking. Furthermore the public undertaking will usually have to carry out activities with a primarily commercial aim as it otherwise might qualify as a “body governed by public law” and thereby itself be a contracting authority. The reason why public undertakings are subject to the Utilities Directive is founded on a combination of factors. Firstly, a limited number of companies often carries out the supply activities using physical networks. Moreover, these activities are often carried on with a commercial aim and the company will therefore often not fulfil the conditions for being a body governed by public law, and will thus not be bound by the rules of the PubSee article 2, paragraph (1) and (4) of the Public Sector Directive. Articles 8(2)(b), 9(2)(b) and 10(3)(b) of the Utilities Directive. 6 Article 80(1), second paragraph, of the Utilities Directive. 4

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lic Sector Directive when entering into contracts. Finally, the public ownership or control of the undertaking might give reason to the same concerns with regard to opening up the market for competition, equal treatment of economic operators and lack of transparency that were the reasons for the adoption of the Public Sector Directive. If a public undertaking carries on both commercial and non-commercial activities the undertaking will usually fulfil the conditions for being a contracting authority as it might qualify as a “body governed by public law.” A public undertaking will be a body governed by public law, even if it carries on commercial activities, if the two forms of activity are carried on by the same legal entity.7 In many situations there is no need to make a distinction once the existence of public influence has been established, whether directly or indirectly, but as the obligations under the Utilities Directive differ in part for bodies governed by public law and public undertakings, for example in the rules on byproducts in Article 8 to 10 of the Utilities Directive, the distinction is relevant. This assessment must take into account that the reason for expanding the group of those subject to the requirements of the Utilities Directive to include public undertakings was to ensure that all contracting entities on whose decisions public authorities can have an influence are subject to the Utilities Directive, regardless of whether their activities are carried on directly by a contracting authority or through a publicly owned or controlled company.8 By analogy, it must therefore be assumed that if a public company fulfils the conditions for being a body governed by public law, then it must in all respects fulfil the supplementary conditions of the Utilities Directive that are applicable to bodies governed by public law.9 9 A number of criteria are laid down in the Utilities Directive in order to determine if an undertaking is public. An undertaking is public if a contracting authority can have dominant influence over it. According to the wording, it must be assumed to be sufficient if there is the possibility of exerting influence. 10 In relation to the Utilities Directive, indirect influence is sufficient as long as it can be dominant. Finally, it will be sufficient that the influence is held jointly with other contracting authorities. The Utilities Directive does not stipulate what the influence must concern, but it must be assumed that guidance as to what the influence must consist in can be drawn from the rules in the EC Merger Regulation (Regulation (EC) No 139/2004). Thus, if there is influence over the appointment of the management, the adoption of the budget, investments or strategic decisions, the influence must be assumed to be dominant. The means of influence are stated as being ownership, capital investment or the statutes or rules of the undertaking.11 Thus, in the first instance company law rules can lead to the classification of an undertaking as public so that the Utilities Directive applies to the award of contracts. In the Utilities Directive the following presumptive rule for the existence of dominant influence are laid down: ‘A dominant influence on the part of the contracting authorities shall be presumed when these authorities, directly or indirectly, in relation to an undertaking: a) hold the majority of the undertaking’s subscribed capital; b) control the majority of the votes attaching to shares issued by the undertaking,

Case C-44/96, Mannesmann. Case C-283/00 Commission v Spain (SIEPSA), para. 76. 9 Case C-44/96, Mannesmann. 10 See Article 3 of Regulation (EC) No 139/2004 on the control of concentrations between undertakings (the EC Merger Regulation). 11 Article 4(2), first paragraph, of the Utilities Directive. 7

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c) can appoint more than half of the undertaking’s administrative, management or supervisory body.’ 12

In any of the above mentioned cases it will be assumed that a contracting authority has a dominant influence over the undertaking and that it for this reason is presumed to be a “public undertaking” for the purposes of the Utilities Directive. Public co-ownership, public investment or publicly appointed board members on the other hand will not in itself be sufficient for an undertaking to be classified as a ‘public undertaking’. An analysis must be made of whether these factors lead to public dominant influence in fact. A public undertaking might fall within the definition of a ‘contracting authority’ if it 10 fulfils the three conditions in Article 3(4) of the Utilities Directive for being a ‘body governed by public law’. The distinction between bodies governed by public law, on the one hand, and public undertakings, on the other hand, is based on the nature of the activity carried on by the company. If, among other things, the activity is carried on in a competitive situation, and has a commercial or industrial character, the public undertaking will usually not qualify as a “body governed by public law.”13 If a public undertaking carries on one or a few secondary activities which fulfil the three conditions for classifying it as a body governed by public law, it must be assumed that it will be classified as a body governed by public law with regard to all its contracts. This is relevant to the company’s awards of contracts outside the scope of the Utilities Directive, which must then be awarded in accordance with the rules in the Public Sector Directive.14

4.3. Special or exclusive rights15 The Utilities Directive defines what is meant by ‘special or exclusive rights’. Article 11 4(3) states: ‘“special or exclusive rights” mean rights granted by a competent authority of a Member State by way of any legislative, regulatory or administrative provision the effect of which is to limit the exercise of activities defined in Articles 8 to 14 to one or more entities, and which substantially affects the ability of other entities to carry out such activity.’

According to this definition also privately-owned undertakings (entities which are neither contracting authorities nor public undertakings) can be contracting entities subject to the Utilities Directive. Private undertakings and other non-public entities will only be subject to the Utilities Directive, if the following cumulative conditions are met: – The undertaking must carry on its activities on the basis of a right granted by a public authority, – the right must limit the exercise of the activities in article 8 to 14 to one or more entities, and – such restriction of competition must in fact substantially affect the ability of others to carry out such activity.

12 Article 4(2), second paragraph, of the Utilities Directive. In addition, the conditions in Article 3(4) on ‘bodies governed by public law’ might provide guidance with respect to the sort of influence that can be relevant in assessing the public impact. 13 Case C-393/06 Ing. Aigner, Wasser-Wärme-Umwelt, on the supply of district heating to homes. 14 Case C-393/06 Ing. Aigner, Wasser-Wärme-Umwelt, para. 59. 15 Commission Explanatory Note – Utilities Directive, Definition of Exclusive or Special Rights. See Totis Kotsonis, ‘The definition of special or exclusive rights in the Utilities Directive: Leased Lines or crossed wires?’, in: PPLR, 2007, pp. 68-94.

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In brief, the undertaking must exercise a right granted by a public authority, but this is not sufficient for a non-public entity to be subject to the Utilities Directive. 12 The exercise of activities must be limited to one or more entities. Even if an undertaking has been granted a right by a public authority, this is not sufficient for a non-public undertaking to be subject to the Utilities Directive. The preamble to the former Utilities Directive contained an important aid to the interpretation of when a right is to be considered special or exclusive: ‘The consequence of the definition is that the fact that, for the purpose of constructing networks or port or airport facilities, an entity may take advantage of a procedure for the expropriation or use of property or may place network equipment on, under or over the public highway will not in itself constitute exclusive or special rights within the meaning of this Directive.’16

As a consequence, it is necessary to assess in each case both whether the publicly granted right limits the activities to one or more entities, and also whether it significantly affects the ability of other entities to carry on the activity in question.17 Thus the nature of the right is not decisive for the assessment, as an assessment must be made of the actual effects of the right. Specifically, the condition in Article 4(3) can be fulfilled even if an undertaking is only given expropriation rights etc., and the converse can also be the case. 13 The key to the assessment is whether, by the grant of special or exclusive rights, the beneficiary undertaking obtains a significant actual or potential competitive advantage. A non-public undertaking is subject to the Utilities Directive if, because of a right granted by a public authority, it obtains a competitive advantage in the form of the reservation of activities in the area in question to the undertaking or undertakings in question, and the abilities of other undertakings to carry on such activities are significantly affected thereby. It is not a requirement that the activities of other undertakings should be prevented, merely that they should be significantly affected. 14 It is not every activity connected with the Utilities sectors that lead to the conclusion that a non-public undertaking is subject to the Utilities Directive. The fact that an entity supplies drinking water, electricity, gas or heat to a network which is itself operated by an entity enjoying special or exclusive rights does not in itself necessitate the conclusion, that the entity for this reason alone should be considered as having special or exclusive rights.18 This situation might arise with respect to activities related to water, electricity, gas or heat where an entity supplies this to a fixed network. Such an activity is for nonpublic entities subject to a de minimis rule whereby activities below the threshold will not be subjected to the Utilities Directive. The reason for the de minimis rule must be assumed to be based on the concept of by-products, whereby waste of resources should be avoided. 4.3.1. Rights awarded under a competitive procedure 15

Even if a special or exclusive right has both the aim and effect of significantly affecting the abilities of other undertakings to carry on the activity in question this does not necessarily lead to the conclusion that the beneficiary undertaking will be subject to the Utilities Directive. This is made clear in article 4(3)(2) of the Utilities Directive where it is stated: 16 Recital 25, second sentence, of the former Utilities Directive (Directive 2004/17/EC). On this point the preamble was influenced by a judgment of the CJEU which interpreted a corresponding provision in the telecommunications sector; case C-302/94, The Queen v Secretary of State for Trade and Industry, ex parte British Telecommunications plc., paras. 40 and 41. 17 Explanatory Note – Utilities Directive, Definition of Exclusive or Special Rights, section 5 and 6. 18 Recital 25, third sentence, of the former Utilities Directive (2004/17/EC).

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“Rights which have been granted by means of a procedure in which adequate publicity has been ensured and where the granting of those rights was based on objective criteria shall not constitute special or exclusive rights within the meaning of the first subparagraph.” It must be assumed that what is essential to this assessment is whether consideration for competition is sufficiently taken into account in connection with the grant of the right. If there is competition for the contract, then contracting entities will be forced to take account of purely financial considerations, and this will be reflected in the performance of the contract, and there will not be scope for taking account of considerations other than those set out in the procurement conditions.

This interpretation is in accordance with the wording of Article 4(3)(1) of the Utilities Directive, according to which a right is only special or exclusive if its grant ‘substantially affects the ability of other entities to carry out such activity’. This interpretation is also in accordance with the usual understanding of the contracting entities’ interests on the one hand and regard for open markets, equal treatment and competition on the other hand, according to which the latter considerations are regarded as having been fully ensured if a contract is put out to tender at regular intervals. It is well known that the award of a public contract can significantly affect the com- 16 mercial opportunities of other undertakings during the contract period. This situation arises for example in the market for defence equipment, the State’s purchases of IT services, the train transport sector etc., where purchases are centralised and contracts are only put out to tender at intervals of years. The grant of a contract with special or exclusive rights can presumably affect the commercial opportunities of competing undertakings to an even greater extent as the undertaking obtaining a special or exclusive right might hold a significant position in the market. In the Utilities sector where special or exclusive rights are granted by a public authority competition for the contract is substituted with competition for the market and the market might be closed for competition for the duration of the contract without the entity holding the contract being subject to the Utilities Directive. It is this situation that the Utilities Directive has as its aim to rectify by subjecting a contracting entity to the rigours of the directive if competition for the contract has not been observed to a sufficient extent. The Utilities Directive sets out a number of award procedures which will lead to the 17 conclusion that a non-public entity will not be subject to the Utilities Directive even though it benefits from the grant by a public authority of a special or exclusive right. The key elements are, that the procedure should be based on objective criteria, which should be non-discriminatory and proportionate, and that adequate publicity with respect to the procedure has been ensured. In short there should be a prior call for competition and the procedure should be competitive and the Treaty principles of equality and transparency should be adhered to when conducting the procedure and awarding the contract. Such procedures include not surprisingly the EU procurement directives, the Public Sector Directive ((2014/24/EU), the Defence and Security Directive (2009/81/EC) and the Concessions Directive (2014/23/EU). A number of other EU rules might also provide a presumption that the contract is awarded under a competitive procurement procedure. In Annex II to the Utilities Directive a number of legal acts are listed which ensures adequate transparency and objective criteria: “Rights which have been granted by means of a procedure in which adequate publicity has been ensured and where the granting of those rights was based on objective criteria do not constitute ‘special or exclusive rights’ within the meaning of Article 4 of this Directive. The following lists procedures, ensuring adequate prior transparency, for granting authorisations on the basis of other legal acts of the Union which do not constitute ‘special or exclusive rights’ within the meaning of Article 4 of this Directive:

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(a) granting authorisation to operate natural gas installations in accordance with the procedures laid down in Article 4 of Directive 2009/73/EC; (b) authorisation or an invitation to tender for the construction of new electricity production installations in accordance with Directive 2009/72/EC; (c) the granting in accordance with the procedures laid down in Article 9 of Directive 97/67/EC of authorisations in relation to a postal service which is not or shall not be reserved; (d) a procedure for granting an authorisation to carry on an activity involving the exploitation of hydrocarbons in accordance with Directive 94/22/EC; (e) public service contracts within the meaning of Regulation (EC) No 1370/2007 for the provision of public passenger transport services by bus, tramway, rail or metro which have been awarded on the basis of a competitive tendering procedure in accordance with Article 5(3) thereof, provided that its length is in conformity with Article 4(3) or (4) of that Regulation.”

Also other procedures than those set out in the Utilities Directive and Annex II might provide the necessary guarantees leading to the conclusion that a non-public undertaking being granted a right by a public authority which limits the activities to one or more undertakings and thereby affecting competition will not be subject to the Utilities Directive. This implies that also national or international procedures might suffice in this respect. This is explicitly set out in the preamble to the Utilities Directive: “It should also be clarified that that listing of legislation is not exhaustive and that rights in any form, including by way of acts of concession, which have been granted by means of other procedures based on objective criteria and for which adequate publicity has been ensured do not constitute special or exclusive rights for the purposes of defining the scope of this Directive ratione personae.” 19

On this basis it can be concluded, that if there is publicity about and competition for the award of the contract the holder of the contract will not be subject to the Utilities Directive even if the contract includes special or exclusive rights that might substantially affect competition on the relevant market under the duration of the contract. On the other hand, if a special or exclusive right is granted without sufficient publicity as well as other guarantees for competition, the beneficiary undertaking will be subject to the Utilities Directive.20 18 Carrying out a procurement procedure under the rules of the EU procurement directives or the legal acts set out in Annex II to the Utilities Directive will be sufficient. Also national or international procedures might suffice. However, it is probably not even necessary to carry out an actual procurement procedure in order to avoid being subjected to the Utilities Directive. The Commission has stated that it will be sufficient if the award of the contract has been open to competition, in other words that some form of public notification must have been given, and the award must have been based on objective, proportionate and non-discriminatory principles.21 It presumably follows from this that procedures based on the principles of the Treaty on the Functioning of the European Union, especially the principles of equal treatment and transparency, will suffice. As to the substantive content of the contract, a special situation arises for contracts of an unlimited duration. It must be presumed that if the contract is not open to competition at intervals that reflect the nature of the contract, the investments made etc. then the contract cannot be assumed to have been open to competition and thereby avoid being subjected to the Utilities Directive. Although this imposes some limitations on the award of special or exclusive rights there can be seen to be wide discretion within the

Recital 20, paragraph 3, to the Utilities Directive. This can, e.g., be the case if the right is granted pursuant to Article 29 of the Utilities Directive to an affiliated undertaking. 21 Explanatory Note – Utilities Directive, Definition of Exclusive or Special Rights, point 6. 19

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utilities sectors as to the duration of contracts, the emphasis on security of supply and the possibility to recoup investment etc.22

Article 5 Mixed procurement covering the same activity 1. Paragraph 2 shall apply to mixed contracts which have as their subject-matter different types of procurement all of which are covered by this Directive. Paragraphs 3 to 5 shall apply to mixed contracts which have as their subject-matter procurement covered by this Directive and procurement covered by other legal regimes. 2. Contracts which have as their subject-matter two or more types of procurement (works, services or supplies) shall be awarded in accordance with the provisions applicable to the type of procurement that characterises the main subject of the contract in question. In the case of mixed contracts consisting partly of services within the meaning of Chapter I of Title III and partly of other services or of mixed contracts consisting partly of services and partly of supplies, the main subject shall be determined in accordance with which of the estimated values of the respective services or supplies is the highest. 3. Where the different parts of a given contract are objectively separable, paragraph 4 shall apply. Where the different parts of a given contract are objectively not separable, paragraph 5 shall apply. Where part of a given contract is covered by Article 346 TFEU or Directive 2009/81/EC Article 25 of this Directive shall apply. 4. In the case of contracts which have as their subject-matter procurement covered by this Directive as well as procurement not covered by this Directive, contracting entities may choose to award separate contracts for the separate parts or to award a single contract. Where contracting entities choose to award separate contracts for separate parts, the decision as to which legal regime applies to any one of such separate contracts shall be taken on the basis of the characteristics of the separate part concerned. Where contracting entities choose to award a single contract, this Directive shall, unless otherwise provided in Article 25, apply to the ensuing mixed contract, irrespective of the value of the parts that would otherwise fall under a different legal regime and irrespective of which legal regime those parts would otherwise have been subject to. In the case of mixed contracts containing elements of supply, works and service contracts and of concessions, the mixed contract shall be awarded in accordance with this Directive, provided that the estimated value of the part of the contract which constitutes a contract covered by this Directive, calculated in accordance with Article 16, is equal to or greater than the relevant threshold set out in Article 15. 5. Where the different parts of a given contract are objectively not separable, the applicable legal regime shall be determined on the basis of the main subject-matter of that contract.

22 Generally it can be questioned whether it is in accordance with the Utilities Directive to have contracts that are not limited in time. See to this Case C-451/08, Helmuth Müller, paragraph 79.

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Article 5 (1-5) is identical to Article 3 (1-6) of the Public Sector Directive. For a commentary on Article 5 (1-5), see Article 3 of the Public Sector Directive. 2 Article 3(5) of the Public Sector Directive is distinctive for this directive. Article 3(5) states: 1

“In the case of contracts which have as their subject both procurement covered by this Directive and procurement for the pursuit of an activity which is subject to Directive 2014/25/EU, the applicable rules shall, notwithstanding paragraph 4 of this Article, be determined pursuant to Articles 5 and 6 of Directive 2014/25/EU.”

The implication of this is that a contract containing procurement contracts covered by the Public Sector Directive and the Utilities Directive which, after an analysis, will be subject to the procedures of the latter directive will be subject to the threshold of the Utilities Directive.

Article 6 Procurement covering several activities 1. In the case of contracts intended to cover several activities, contracting entities may choose to award separate contracts for the purposes of each separate activity or to award a single contract. Where contracting entities choose to award separate contracts, the decision as to which rules apply to any one of such separate contracts shall be taken on the basis of the characteristics of the separate activity concerned. Notwithstanding Article 5, where contracting entities choose to award a single contract, paragraphs 2 and 3 of this Article shall apply. However, where one of the activities concerned is covered by Article 346 TFEU or Directive 2009/81/EC, Article 26 of this Directive shall apply. The choice between awarding a single contract or awarding a number of separate contracts shall not, however, be made with the objective of excluding the contract or contracts from the scope of application either of this Directive or, where applicable, Directive 2014/24/EU or Directive 2014/23/EU. 2. A contract which is intended to cover several activities shall be subject to the rules applicable to the activity for which it is principally intended. 3. In the case of contracts for which it is objectively impossible to determine for which activity the contract is principally intended, the applicable rules shall be determined in accordance with points (a), (b), and (c): (a) the contract shall be awarded in accordance with Directive 2014/24/EU, if one of the activities for which the contract is intended is subject to this Directive and the other to Directive 2014/24/EU; (b) the contract shall be awarded in accordance with this Directive, if one of the activities for which the contract is intended is subject to this Directive and the other to Directive 2014/23/EU; (c) the contract shall be awarded in accordance with this Directive, if one of the activities for which the contract is intended is subject to this Directive and the other is not subject to either this Directive, Directive 2014/24/EU or 2014/23/EU. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, p. 139; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 170; Peter A. Trepte, Public Procurement in the EU, A Practitioners Guide, 2 nd ed. 2007, pp. 168; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 908.

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A contracting entity might be responsible for purchasing goods, services or works, 1 some of which are covered by the Utilities Directive and some are covered by other procurement rules or by no rules at all. Furthermore, a contracting entity might choose to make a purchase for more than one of these activities under a single contract. This article sets out rules for determining which of the procurement directives a contracting entity will have to use when awarding a single contract covering several activities of which some are subject to the Utilities Directive and others are not.1 Article 3(5) of the Public Sector Directive provides that in the case of a contract cov- 2 ering mixed activities some of which are covered by the Public Sector Directive and some of which are covered by the Utilities Directive, then the applicable rules shall be determined pursuant to Article 5 and 6 of the Utilities Directive.

6.1. A single contract or multiple contracts The starting point is that it is for the contracting entity to decide whether more con- 3 tracts should be entered into individually or they should be merged into a single contract. The contracting entity should be able to state valid reasons for its choice of either entering into separate contracts or a single contract as it is prohibited for a contracting entity to base its choice on the intent to avoid the use of a specific directive. The applicable procurement rules will be determined under article 26 of the Utilities Directive if a single contract at the same time covers activities subject to the Utilities Directive and the directive on defence procurement (Directive 2009/81) or article 346 TFEU.

6.2. Contracts for mixed activities2 A contracting entity can carry out various kinds of activities. Some of these activities 4 can be covered by the Utilities Directive, and contracts entered into for these purposes are subject to the rules of this Directive. If the contracting entity’s other activities do not have such a connection with activities covered by the Utilities Directive as to be subject to the Directive, procurement contracts associated with these activities need not be open to tender under the rules of the Utilities Directive.3 A contracting entity that carries out various kinds of activities, some of which are covered by the Utilities Directive and some of which are not, can have the intention of carrying out procurement for the purposes of more than one of these activities. If a contracting entity enters into a single contract for a purchase which is to be used for several activities, the question arises as to which rules should apply to the contract. Should the contracting entity apply the rules of the Public Sector Directive or the Utilities Directive, or can the contracting entity award the contract without it being subject to either directive?

1 The rules of this article are identical to article 9 of the former Utilities Directive (2004/17) with the amendments necessary to adjust for the issuance of the defence procurement directive (2009/81) and the concessions directive (2014/23). 2 The Commission has issued an explanatory note on Article 9 of the former Utilities Directive (2004/17): Explanatory Note – Utilities Directive, Contracts Involving More Than One Activity (CC/ 2004/33 of 18 June 2004). 3 The Treaty rules and principles of equal treatment and transparency must be assumed to be binding on all contracting entities that are subject to the Utilities Directive, but presumably the Treaty is not binding on contracting entities that are not contracting authorities in relation to activities that fall outside the scope of the Directive.

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The choice between regulation under the Public Sector Directive and regulation under the Utilities Directive can arise, for example, when a municipality carries on activities in the water supply sector, a regional authority carries on activities in the transport sector, or the State carries on activities in the energy sector. The choice between regulation under the Utilities Directive and no regulation by procurement rules can arise, for example, if for instance a public company awards contracts as part of its provision of postal services on the one hand, and as part of its courier services on the other hand. 5 The Utilities Directive has established that if it can be determined for which activity the contract is principally intended then the rules applicable to this activity should apply. It can give rise to doubt what is to be seen as ‘the principal intention of the contract’. The preamble to the Utilities Directive contains the following aid to interpretation: “… contracts might be awarded for the purpose of meeting the requirements of several activities, possibly subject to different legal regimes. It should be clarified that the legal regime applicable to a single contract intended to cover several activities should be subject to the rules applicable to the activity for which it is principally intended. Determination of the activity for which the contract is principally intended can be based on an analysis of the requirements which the specific contract must meet, carried out by the contracting entity for the purposes of estimating the contract value and drawing up the procurement documents.”4

The assessment of what is the principal intention of the contract in a specific situation can be a matter of considerable doubt when a contract covers several activities. However, if it is clear that the procurement is to be used for several activities and that there are financial and technical reasons for entering into a single contract, an assessment must be made of what constitutes the principal intention of the contract. In such a situation the circumstances and expectations existing at the time of planning the procurement will be decisive. The background for and purpose of the procurement will be the key criteria for this assessment. If several different goods are to be procured at the same time, for example a framework agreement for the supply of electricity or fuel for several activities, or if a collective insurance contract is entered into for all of the activities of a contracting entity given the internal connections between the activities, and if some of the activities are exempt from the provisions of the Utilities Directive, it must be a valid option to make a monetary assessment of the individual parts of the procurement relating to each activity and for this to be included as one of the criteria for determining what constitutes the principal object of the contract.5 6 If, on the basis of the purpose, background, use etc. of the intended procurement, a contracting entity has a sufficient and reasonable basis for determining the principal intention of the contract, and if the contracting entity has adequate technical and financial grounds for entering into a single contract, this will be decisive for the choice of the set of rules which is to govern the award of the contract. However, if this has meant that the contract has not been subject to procurement rules at all, and if immediately following fulfilment of the procurement the contract is largely used for the purposes of an activity that is covered by the Utilities Directive, then the decision of the contracting entity can be expected to be open for challenge before the courts or complaints boards.

6.3. Contracts where the principal activity cannot be determined 7

If, in an actual situation a procurement is to be carried out which can or must be used for different activities, and the contracting entity cannot determine what constitutes the 4 5

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principal intention of the contract on the basis of objective criteria, the Utilities Directive contains three presumptive rules for determining whether the contract is subject to the procedures of the directive on concessions contracts (2014/23), the Public Sector Directive (2014/24) or those of the Utilities Directive. The basic principle for making this determination is, that in case of doubt the contracting entity must apply the rules, which best guarantee open markets, equal treatment and competition. This principle is derived from the hierarchy of rules as set out in this article. Such a situation may occur, for example, where something procured can or must be used for several purposes, but where, at the time when the procurement decision is taken, there is insufficient information available to make an objective evaluation of the principal object of the contract.

Chapter II Activities Article 7 Common provisions For the purposes of Articles 8, 9 and 10, ‘supply’ shall include generation/production, wholesale and retail sale. However, production of gas in the form of extraction falls within the scope of Article 14. A contracting entity that is covered by Article 4 of the Utilities Directive is only sub- 1 ject to the procurement rules in respect of the activities that are listed in the Directive. It is thus essential to determine which activities fall within the scope of the Utilities Directive and which activities fall outside its scope. The Utilities Directive can thus be characterised as a ‘special directive’ and the Public Sector Directive as a ‘general directive’. In the case Ing. Aigner1 this led to the adoption of a restrictive interpretation for determining the scope of the Utilities Directive. Thus, the procedures laid down in the Utilities Directive cannot be extended beyond the scope of the Directive.2 The Utilities Directive requires its procedures to be applied to the award of contracts if a contract concerns activities in one or more of the sectors referred to in Articles 8 to 14 of the Directive. It is thus of key importance to first determine which activities are covered by the Utilities Directive and, second, which activity forms the basis of a specific contract. In recital 23 of the Utilities Directive it has been set out that there is a need to clarify 2 the scope of the directive with respect to electricity: “Without in any way extending the scope of this Directive, it should be clarified that production, wholesale and retail sale of electricity are covered when this Directive refers to the supply of electricity.”

As it can be observed from the wording of Article 7 this clarification is not limited to electricity and covers as well gas, heat and water. In the Ing. Aigner case, the key criterion for the CJ seems to have been that competi- 3 tion must be ensured as far as possible. It must have been this assessment that led to the 1 2

Case C-393/06 Ing. Aigner, Wasser-Wärme-Umwelt. Case C-393/06 Ing. Aigner, Wasser-Wärme-Umwelt, paras. 27 and 29.

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restrictive interpretation of the Utilities Directive. The possibility under the Utilities Directive of negotiating with tenderers means that the award of contracts is less transparent than under the Public Sector Directive, so that there is less regard for the creation of the internal market with freedom of movement for goods and services, less certainty of equal treatment of tenderers, and thus less competition for contracts. Under both the Public Sector Directive and the Utilities Directive the starting point is that each legal person as well as each activity must be assessed separately. For example, a municipality will generally be subject to the procedures of the Public Sector Directive, but it will be subject to the Utilities Directive when entering into a contract if the activity covered by the contract is subject to the Utilities Directive. This should be contrasted with the situation of a company that is 100 % owned by the municipality which will only be subject to the procedures in the Public Sector Directive if it fulfils the conditions for being considered a body governed by public law and it will only be subject to the rules of the Utilities Directive if it either fulfils the conditions for being classified as a body governed by public law or can be characterised as a public undertaking and is carrying out activities covered by the Utilities Directive. The Utilities Directive covers the provision and operation of fixed networks. However, it is not clear from Articles 8 to 14 of the Utilities Directive whether the start-up of an activity in a sector covered by the Directive is subject to its provisions, so that a public works contract which is to form the basis for subsequently carrying on the activity must comply with the rules in the Utilities Directive. Such a question arises both in the preparation for an activity covered by the Utilities Directive and in the construction of buildings etc.3 4 For contracts of the State and contracting authorities for the construction of infrastructure, for example the purchase of rolling stock, or with a view to starting a new activity covered by the Utilities Directive, it must be assumed that there is an obligation to carry out a procurement procedure. This view is supported by the fact that if this were not so, then very important contracts relating to activities covered by the Utilities Directive would fall outside its scope. Such an interpretation is also implied in the case law of the CJ related to procurement activities.4 Such an interpretation is also in accordance with the EU State Aid rules in article 107 TFEU where the construction of an infrastructure cannot be seen separately from the intended use of that infrastructure. 5

Article 8 Gas and heat 1. As far as gas and heat are concerned, this Directive shall apply to the following activities: (a) the provision or operation of fixed networks intended to provide a service to the public in connection with the production, transport or distribution of gas or heat; (b) the supply of gas or heat to such networks. 2. The supply, by a contracting entity other than a contracting authority, of gas or heat to fixed networks which provide a service to the public shall not be consid-

3 If activities such as construction of a runway, a bridge or a fixed network subject to the Utilities Directive are put out to tender by the State, a private undertaking that wins the contract will not be subject to the Utilities Directive. 4 Case C-337/98, Commission v France, on the Rennes urban district light railway project. 5 Case T-443/08 and T-455/08, Flughafen Leipzig-Halle, paragraph 95.

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ered to be a relevant activity within the meaning of paragraph 1 where all of the following conditions are met: (a) the production of gas or heat by that contracting entity is the unavoidable consequence of carrying out an activity other than those referred to in paragraph 1 of this Article or in Articles 9 to 11; (b) the supply to the public network is aimed only at the economic exploitation of such production and amounts to not more than 20 % of the contracting entity’s turnover on the basis of the average for the preceding three years, including the current year. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, pp. 135; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 158; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2 nd ed. 2007, pp. 152; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 859.

The supply of energy is of major importance to society. Both private citizens and un- 1 dertakings are dependent on energy for carrying on their activities. Society thus has an essential interest in ensuring stable, high quality supplies of energy at a price that reflects its cost. At the same time, energy supplies are linked to physical distributions networks (pipelines and grids) which are often difficult to duplicate, so there can be an effective monopoly of the supply of customers. Together, these factors have led to the situation where the supply of energy is subject to wide-ranging public control. This public control means that operators in this area are required to follow the procurement procedures of the Utilities Directive when awarding contracts as part of these activities. In the present version of the Utilities Directive (2014/25) the supply of energy is divided into two articles, article 8 on gas and heat and article 9 on electricity. Article 8 is identical to Article 3 (1–2), of the former Utilities Directive (2004/17). There have not been any substantive amendments to the wording of article 8 and 9 when compared with the former Utilities Directive (2004/17) but when article 8 and 9 are read in conjunction with article 7, 14 and 23 it can be observed, that some clarifications have been provided as to the types of activities in the energy sector which are covered by the Utilities Directive. The Utilities Directive only applies to the activities listed in the gas and heating sectors. Therefore, article 8 must read in conjunction with article 7 that states that “For the purposes of articles 8, 9 and 10, ‘supply’ shall include generation/production, wholesale and retail sale”. According to article 7 the extraction of gas is covered by article 14 of the Utilities Directive. Article 8 must also be read in conjunction with article 23 which excludes the award of some contracts for the supply of energy from the Utilities Directive. 1 It has been debated whether activities related to cooling should be treated in the same way as activities in the field of heating. This was also the background to the judgment of the CJ in the Ing. Aigner case. In the preamble to the Utilities Directive it is set out that activities related to cooling should not be treated in the same manner as activities in the field of heating. This is also in accordance with the interpretation of a former Utilities Directive which should be narrowly interpreted and only the specifically listed activities should be subject to the directive.2 Recital 21 to the Utilities Directive reads as follows: “It should therefore be clarified that contracting authorities, public undertakings and private companies, which are active in the heating sector are subject to this Directive, however, in the case of 1 2

Please refer to article 7, 14 and 23 respectively for an interpretation of those articles. Case C-393/06, Ing. Aigner, Wasser-Wärme-Umwelt, GmbH, paragraph 27.

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private undertakings, on the additional condition of operating on the basis of special or exclusive rights. On the other hand, contracting authorities operating in the cooling field are subject to the rules of Directive 2014/24/EU, whereas public undertakings and private undertakings, irrespectively of whether these latter operate on the basis of special or exclusive rights, are not subject to procurement rules. It should finally be clarified that contracts awarded for the pursuit of both heating and cooling contracts should be examined under the provisions on contracts for the pursuit of several activities to determine which procurement rules, if any, will govern their award.”

The Commission foresees that it will examine at a later stage whether activities within the cooling sector should be subject to the Utilities Directive.3

8.1. The provision of gas or heating 2

The Utilities Directive covers the provision or operation of fixed networks for the provision of services to the public in connection with the production, transport or distribution of gas or heat. Thus, in the first instance the Utilities Directive covers the physical infrastructure necessary for supplying gas or heat to consumers. It is a characteristic of gas or heat that it can only exceptionally be supplied without the use of an infrastructure (for example, in the form of bottle gas). An undertaking’s internal network is not, in principle, covered by the Utilities Directive. A network used for transmitting gas from where it is produced to the producer’s stockholdings is also not covered. On the other hand, transmission networks that are available to the market are covered by the Utilities Directive.

8.2. Supplying a network with gas or heat as a by-product The Utilities Directive covers activities for the supply of fixed networks with gas or heat. According to article 7 of the Utilities Directive the term “supply” includes generation/production, wholesale and retail sale. Heat generating stations will therefore be covered. Waste incinerators will usually generate both power and heat, and such installations are thus also covered. 4 If a contracting authority supplies gas or heat to a fixed network which serves the public, such supply will mean that the activity is covered by the Utilities Directive. According to the wording of Article 8(2) of the Utilities Directive, the special rule on supplies as a by-product does not apply to contracting authorities. The activities of contracting authorities in the field of “supply of gas or heat to such networks” will therefore be subject to the Utilities Directive no matter how tiny the supply will be. In some cases a contracting entity (which is not a contracting authority) supplies gas or heat to a public fixed network as a by-product of another production. Unless a number of conditions are met, such activities are subject to the Utilities Directive and purchases made in connection with such activities are subject to the procurement rules of the Utilities Directive.4 The conditions can be set out as follows: 3

– The main or principal activity, which has as its outcome the productin of gas or heat, must not be subject to the Utilities Directive.

Recital 22 to the Utilities Directive. Private undertakings, for example a brewery, a steel works or some other production facility, will usually not fulfil the criteria for being a contracting entity and their supply of excess heat to a fixed public network will therefore not be subject to the Utilities Directive. 3

4

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Art. 9

– The production of the gas or heat must be the unavoidable consequence of the main activity. – The production must result from rational operation of the production such as economic exploitation of the value of excess heat. This can be the case with regard to the supply of excess heat, for example. – The supplies must amount to less than 20 % of the contracting entity’s turnover, calculated as an average over a three-year period. These conditions are cumulative.

Article 9 Electricity 1. As far as electricity is concerned, this Directive shall apply to the following activities: (a) the provision or operation of fixed networks intended to provide a service to the public in connection with the production, transport or distribution of electricity; (b) the supply of electricity to such networks. 2. The supply, by a contracting entity other than a contracting authority, of electricity to fixed networks which provide a service to the public shall not be considered to be a relevant activity within the meaning of paragraph 1 where all of the following conditions are met: (a) the production of electricity by that contracting entity takes place because its consumption is necessary for carrying out an activity other than those referred to in paragraph 1 of this Article or in Articles 8, 10 and 11; (b) supply to the public network depends only on that contracting entity’s own consumption and has not exceeded 30 % of that contracting entity’s total production of energy, on the basis of the average for the preceding three years, including the current year. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, p. 136; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 159; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2 nd ed. 2007, pp. 152; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 858.

In the present version of the Utilities Directive (2014/25/EU) the supply of energy is 1 divided into two articles, Article 8 on gas and heat, and Article 9 on electricity. Article 9 is identical to Article 3 (3-4), of the former Utilities Directive (2004/17). There have not been any substantive amendments to the wording of Article 8 and 9 when compared with the former Utilities Directive but some clarifications as to the types of activities in the energy sector covered by the Utilities Directive have been provided when Article 8 and 9 are read in conjunction with Articles 7, 14 and 23. The Utilities Directive only applies to the activities listed with regard to the electricity sector. Therefore article 9 must be read in conjunction with article 7 that states that “For the purposes of articles 8, 9 and 10, ‘supply’ shall include generation/production, wholesale and retail sale”. Article 9 must also be read in conjunction with article 23 which excludes the award of some contracts for the supply of energy from the Utilities Directive. 1

1

Please refer to article 7 and 23 respectively for an interpretation of those articles.

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9.1. The provision of electricity 2

The Utilities Directive covers the provision or operation of fixed networks for the provision of services to the public in connection with the production, transport or distribution of electricity. Thus, in the first instance the Utilities Directive covers the physical infrastructure necessary for supplying electricity to consumers. It is a characteristic of electricity that it can only exceptionally be supplied without the use of an infrastructure (for example, in the form of batteries). An undertaking’s internal network is not, in principle, covered by the Utilities Directive. A network used for distributing electricity from where it is produced to the producer’s production plants is also not covered. On the other hand, transmission networks that are available to the market are covered by the Utilities Directive.

9.2. Supplying a network with electricity as a by-product The Utilities Directive covers activities for the supply of fixed networks with electricity. According to article 7 of the Utilities Directive the term “supply” includes generation/ production, wholesale and retail sale.2 Power generating stations will therefore be covered. Waste incinerators will usually generate both power and heat, and such installations are thus also covered. If a contracting authority supplies electricity to a fixed network which serves the public, such supply will mean that the activity is covered by the Utilities Directive. According to the wording of Article 9(2) of the Utilities Directive, the special rule on supplies as a by-product does not apply to contracting authorities. The activities of contracting authorities in the field of “supply of electricity to such networks” will therefore be subject to the Utilities Directive no matter how tiny the supply will be. 4 In some cases a contracting entity (which is not a contracting authority) supplies electricity to a public fixed network as a by-product of other production. Unless a number of conditions are met, such activities are subject to the Utilities Directive and purchases made in connection with such activities are subject to the procurement rules of the Utilities Directive.3 The conditions for the activities being exempted from the Utilities Directive are: 3

An undertaking’s generation of electricity must be necessary for the performance of its main or principal activity, which must not itself be covered by the Utilities Directive. Moreover, the supply of electricity must be subordinate meaning that its production must be related to the undertaking’s own electricity consumption. It must be assumed that, since electricity cannot be stored, there will be a right to supply electricity to a fixed network when an undertaking cannot make use of all its electricity generating capacity and it is not possible to shut down its generators temporarily. Finally, there is an upper limit to the supplies, as they must amount to less than 30 % of the undertaking’s total energy production averaged over a three-year period.

See also 23 recital to the Utilities Directive. Private undertakings, for example a brewery, a steel works or some other production facility, will usually not fulfil the criteria for being a contracting entity and their supply of excess electricity to a fixed public network will therefore not be subject to the Utilities Directive. 2

3

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Art. 10

Article 10 Water 1. As far as water is concerned, this Directive shall apply to the following activities: (a) the provision or operation of fixed networks intended to provide a service to the public in connection with the production, transport or distribution of drinking water; (b) the supply of drinking water to such networks. 2. This Directive shall also apply to contracts or design contests awarded or organised by contracting entities which pursue an activity referred to in paragraph 1 and which are connected with one of the following: (a) hydraulic engineering projects, irrigation or land drainage, provided that the volume of water to be used for the supply of drinking water represents more than 20 % of the total volume of water made available by such projects or irrigation or drainage installations, (b) the disposal or treatment of sewage. 3. The supply, by a contracting entity other than a contracting authority, of drinking water to fixed networks which provide a service to the public shall not be considered to be a relevant activity within the meaning of paragraph 1 where all of the following conditions are met: (a) the production of drinking water by that contracting entity concerned takes place because its consumption is necessary for carrying out an activity other than those referred to in Articles 8 to 11; (b) the supply to the public network depends only on that contracting entity’s own consumption and has not exceeded 30 % of that contracting entity’s total production of drinking water, on the basis of the average for the preceding three years, including the current year. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, pp. 136; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 160; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2 nd ed. 2007, pp. 150; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 854.

Activities related to drinking water are subject to the Utilities Directive. Other activi- 1 ties related to water are, as a point of departure, not covered by the Utilities Directive. A number of concrete activities such as land drainage and the disposal or the treatment of sewage (waste water) are also subject to the Utilities Directive if a contracting entity undertakes both activities related to drinking water and a activity enlisted in article 10(2). The provision is unaltered when compared with article 4 of the former Utilities Directive (2004/17/EC). The Utilities Directive only applies to the activities listed with regard to the water sec- 2 tor. Therefore article 10 must be read in conjunction with article 7 that states that “For the purposes of articles 8, 9 and 10, ‘supply’ shall include generation/production, wholesale and retail sale”. Article 10 must also be read in conjunction with article 23 which excludes the award of contracts for the supply of water from the Utilities Directive. 1 Some concession contracts related to water are excluded from the Concessions Direc- 3 tive (2014/23/EU). According to article 12 of the Concessions directive concessions to provide or operate fixed networks intended to provide a service to the public in connection with the production, transport or distribution of drinking water, and concessions to 1

Please refer to article 7 and 23 respectively for an interpretation of those articles.

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supply drinking water to such networks are excluded from the directive. Furthermore, a number of concrete activities such as land drainage and the disposal or treatment of sewage (waste water) are also excluded from the directive on the award of concession contracts if they are connected to one of the specified water concession activities. 4 The reasons for exempting water concessions from the Concessions directive are: “Concessions in the water sector are often subject to specific and complex arrangements which require a particular consideration given the importance of water as a public good of fundamental value to all Union citizens. The special features of those arrangements justify exclusions in the field of water from the scope of this Directive.”2

This reasoning will presumably also be determinant for the specified concessions for water also being excluded from the Utilities Directive. This is also in accordance with the reason for issuing a concrete directive for concessions which was to clarify the rules on concessions and attempt to provide legal certainty.3

10.1. Fixed networks 5

Activities whereby a fixed network is made available or is operated in connection with the production, transport or distribution of drinking water are subject to the Utilities Directive if the network is used to serve the public. This means that, for example, neither the transportation of water for agricultural irrigation nor private networks are covered by the directive. Land drainage and the disposal and treatment of sewage are also not covered. Thus the Utilities Directive covers activities associated with the physical infrastructure necessary for delivering water to consumers. For financial, practical and sanitary reasons, water is only exceptionally supplied other than by means of an infrastructure (for example in bottles, barrels or by tanker). 10.1.1. Supplying drinking water to a network

6

Activities associated with the production of drinking water are covered by the Utilities Directive if the water is supplied to a public drinking water network. If a contracting entity provides drinking water to a fixed network which serves the public, such supplies will be covered by the Utilities Directive.

10.2. Sewage and other water-related activities 7

A number of activities relating to water fall outside the scope of the Utilities Directive. This applies, e.g., to hydraulic engineering, irrigation, land drainage or the disposal and treatment of sewage. However, if such an activity is carried on by a contracting authority, such activities are subject to the Public Sector Directive. The Utilities Directive sets out the highly practical rule that if one of the following concrete activities relating to water (hydraulic engineering, irrigation, land drainage or the disposal and treatment of sewage) are carried out by a contracting entity in connection with its drinking water activities, both forms of activity can be subject to the Utilities Directive.4 The same contracting entity must carry out both forms of activity. The contracting entity must be the same legal person, but it is not relevant if separate accounts are kept for the two activities.5 40 recital to the Concessions Directive (2014/23). 1st recital to the Concessions Directive (2014/23). 4 Recital 24, paragraph 1 and 2, of the Utilities Directive. 5 Case C-393/06, Ing. Aigner, Wasser-Wärme-Umwelt, para. 53.

2

3

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Art. 11

No further conditions are laid down whereby land drainage or the disposal and treatment of sewage become subject to the Utilities Directive, if these activities are carried out by a contracting entity that carries out drinking water activities.6 Hydraulic engineering, irrigation and land drainage projects are only subject to the Utilities Directive if the volume of water that is intended for the supply of drinking water constitutes more than 20 % of the total volume of water resulting from the activities in question.7

10.3. Supplying drinking water to a fixed network as a by-product If a contracting authority supplies drinking water to a fixed network such an activity 8 will be subject to the Utilities Directive. On the other hand the activities of a contracting entity which is not a contracting authority can lead to the production of drinking water as a by-product of other production. Such activities are subject to the Utilities Directive so that purchases for the purposes of such activities must comply with the procurement rules of the Directive, unless the following cumulative conditions are met: – The main or principal activity must not be subject to the Utilities Directive. – The production of drinking water supplied to a public network takes place because its consumption is necessary for carrying out the main activity. – The production of drinking water supplied to the public drinking water network must be for the purposes of the contracting entity’s own consumption, and must not be governed by public drinking water consumption. – The supplies to the public network must constitute less than 30 % of the contracting entity’s total production of drinking water, averaged over a three-year period.

Article 11 Transport services This Directive shall apply to activities relating to the provision or operation of networks providing a service to the public in the field of transport by railway, automated systems, tramway, trolley bus, bus or cable. As regards transport services, a network shall be considered to exist where the service is provided under operating conditions laid down by a competent authority of a Member State, such as conditions on the routes to be served, the capacity to be made available or the frequency of the service. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, p. 137; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 163; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2 nd ed. 2007, pp. 160; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 871.

The provision of transport services is subject to the Utilities Directive if the service is 1 linked to a network and is offered to the public. The provision is identical to Article 5 (1) of the former Utilities Directive (2004/17).

6 7

Article 10(2)(b) of the Utilities Directive. Article 10(2)(a) of the Utilities Directive.

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PART II The Utilities Directive 2014/25/EU

11.1. Transport services linked to a network 2

3

4

5

6

Services in the field of transport by railway, automated systems, tramway, trolley bus, bus or cable are subject to the Utilities Directive if the transport service takes place by using a network and serves the public. For such activities to be covered by the Directive, they must be linked to a network. According to the Directive, a network is defined in a broader sense than simply referring to a physical infrastructure. A transportation network is considered to exist where a service is made available to the public by a competent authority and where this authority sets up the conditions for the service such as the routes to be served, the capacity to be made available or the frequency of the service. This broader definition reflects that the provision covers not only transportation by railway but also bus transportation by the use of the ordinary roads. Both activities relating to the provision of a network (making the physical railway infrastructure or a bus network available) and activities relating to the operation of a network are subject to the Utilities Directive. This implies that contracts entered into in connection with carrying on such activities are subject to the Utilities Directive. For example, this is the case with regard to contracts for the construction and maintenance of the infrastructure necessary for carrying on activities covered by the Utilities Directive. Also the operation of a network is covered by the Utilities Directive. The meaning of the “operation of a network” is not defined in the Utilities Directive but it will presumably cover such activities as regulating access to the network, overseeing the network and regulating the traffic on a network. A number of transport services are not subject to the Utilities Directive. This applies to air and maritime transport, as they are not referred to in Article 11 of the Directive. In the preamble to the former Utilities Directive it was emphasised that air and maritime transport services were not covered by the Utilities Directive because of the competition in these sectors.1 Taxis and tourist coaches are also outside the scope of the Directive because they are not linked to a network. However, transport services such as maritime, coastal or river transport services might be covered by the Public Sector Directive if undertaken by a contracting authority.2 Service contracts for public passenger transport services by bus or tramway are covered by a mixed regime: Regulation 1370/2007 covers service concessions for these services whereas service contracts according to article 5(1) of regulation 1370/2007 are to be awarded under the Public Sector Directive or the Utilities Directive. 3 However, both the award of service contracts and service concession for public passenger transport services by rail and metro is covered by regulation No. 1370/2007 and excluded from the Utilities Directive as well as the Public Sector Directive.4 Bus services that are part of a public network can also be exempt from the Utilities Directive, subject to certain conditions. There seems to be three possibilities for bus services to be exempt. In Article 5(2) of the former Utilities Directive (2004/17/EC) it was stated that if a bus transport services to the public had been excluded from the scope of Directive 93/38/EEC pursuant to article 2(4) of that directive then such a bus transportation serRecital 4 of the former Utilities Directive (2004/17/EC). Recital 21 to the Public Sector Directive. 3 Case C-292/15, Hörmann Reisen, para. 41. 4 Article 21(g) of the Utilities Directive and article 10(i) oft he Public Sector Directive.

1

2

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Art. 12

vice should neither be covered by directive 2004/17/EC. Article 2(4) of the old Utilities Directive (93/38/EEC) excluded bus transport services where free competition between bus services existed: “The provision of bus transport services to the public shall not be considered to be a relevant activity within the meaning of paragraph 2(c) where other entities are free to provide those services, either in general or in a particular geographical area, under the same condition as the contracting entities.”

This exemption in the old Utilities Directive must be assumed to have been inserted into the directive because other operators were entitled to offer and did in fact have the possibility of offering bus services alongside operators who offer bus services on the same route or in a specific geographical area. This provision must be seen as a transitional rule as it was not until the adoption of directive 2004/17 that the procedure for exempting certain activities from the Utilities Directive was made a part of the Utilities Directive. 5 It is likely that most of the old contracts for bus services have by now expired and this leaves two remaining options for bus services to be excluded from the Utilities Directive. If a bus service is awarded to a contracting entity that is not a contracting authority or a public undertaking by a competitive award procedure then the contracting entity is not subject to the Utilities Directive even if the contracting entity conducts its bus services under a special or exclusive right. It is also a possibility that a bus service might be excluded from the Utilities Directive under article 34 and 35 of this directive due to the presence of active competition on a market to which access is not restricted.

Article 12 Ports and airports This Directive shall apply to activities relating to the exploitation of a geographical area for the purpose of the provision of airports and maritime or inland ports or other terminal facilities to carriers by air, sea or inland waterway. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, p. 139; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, p. 164; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2nd ed. 2007, pp. 161; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 868.

Activities relating to terminal facilities are subject to the Utilities Directive if the ac- 1 tivities are associated with the exploitation of a geographical area. This will typically be the case for ports and airports which provide quays, docking facilities, runways etc. The provision is identical to Article 7(b) of the former Utilities Directive (2004/17). Airports and maritime or inland ports or other terminal facilities for carriers by air, 2 sea or inland waterways are specifically listed in the Utilities Directive. Transport terminals for road freight are not listed in the Utilities Directive and are thus not subject to the procurement rules of the Utilities Directive. Transport facilities will presumably be covered only if they are made available to the 3 public while facilities that are purely internal transport facilities of an undertaking must fall outside of the scope of the Utilities Directive. Also, this type of transport facilities will rarely be accompanied by special or exclusive rights granted by a competent authority of a Member State.

5

See recital 27 of the former Utilities Directive (2004/17/EC).

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Art. 13

PART II The Utilities Directive 2014/25/EU

Article 13 Postal services 1. This Directive shall apply to activities relating to the provision of: (a) postal services; (b) other services than postal services, on condition that such services are provided by an entity which also provides postal services within the meaning of point (b) of paragraph 2 of this Article and provided that the conditions set out in Article 34(1) are not satisfied in respect of the services falling within point (b) of paragraph 2 of this Article. 2. For the purpose of this Article and without prejudice to Directive 97/67/EC of the European Parliament and of the Council:1 (a) ‘postal item’ means an item addressed in the final form in which it is to be carried, irrespective of weight. In addition to items of correspondence, such items also include for instance books, catalogues, newspapers, periodicals and postal packages containing merchandise with or without commercial value, irrespective of weight; (b) ‘postal services’ means services consisting of the clearance, sorting, routing and delivery of postal items. This shall include both services falling within as well as services falling outside the scope of the universal service set up in conformity with Directive 97/67/EC; (c) ‘other services than postal services’ means services provided in the following areas: (i) mail service management services (services both preceding and subsequent to despatch, including mailroom management services); (ii) services concerning postal items not included in point (a), such as direct mail bearing no address. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, p. 138; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 164; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2 nd ed. 2007, pp. 164; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 877.

1

Contracting entities will be subject to the Utilities Directive if they provide postal services. Other services can also be covered by the Utilities Directive if they are provided by an entity that also provides postal services. Postal services were included in the Utilities Directive by the former Utilities Directive (2004/17/EC). Postal services were also prior to the adoption of Directive 2004/17 subject to the EU procurement rules, as in many countries postal services were provided by bodies that were directly part of the State and thus covered by the Public Sector Directive. By including postal services under the Utilities Directive, contracting entities that provide postal services now have the possibility of using the more flexible procurement procedures of the Utilities Directive. However, contracting entities that provide postal services but which are neither contracting authorities nor public undertaking are now also subject to the Utilities Directive. Finally, contracting entities might apply under Article 34 and 35 of the Utilities Directive for being exempted from the directive. 2 1 Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the development of the internal market of Community postal services and the improvement of quality of service (OJ L 15, 21.1.1998, p. 14).

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Art. 13

13.1. Postal services and other services The provision of postal services is covered by the Utilities Directive. A postal service 2 is defined in paragraph 2 and consists of the clearance, sorting, routing and delivery of postal items. Over the years, undertakings in the postal sector have developed new post-related services, such as courier services, electronic dispatch, the distribution of unaddressed communications, logistics services etc. Also other services have been developed such as money transfers and financial services. Such other services are not defined as ‘postal services’ as they are not concerned with postal items as defined in paragraph (2). However, they can be subject to the Directive if they are provided by an entity that also provides postal services. It must be assumed that the provision of such other services by a separate legal entity, as a point of departure, will place such activities outside the scope of the Utilities Directive. With regard to such other services, it is stated that it can be relevant to examine whether there is such a degree of competition on the market that the conditions in Article 34 of the Utilities Directive, on the exemption of certain activities from the rules of the directive, have been met. However, this reference to Article 34 cannot be assumed to mean that a contracting entity can decide for itself whether an activity fulfils the conditions of Article 34. It must be assumed that if one of the activities referred to is carried on by an entity which also provides postal services, the activity will be subject to the Utilities Directive unless the conditions in Article 34 are fulfilled and the procedures laid down in Article 35 are followed.3

13.2. Definitions of postal activities A number of definitions are set out in this paragraph which delimits the types of ac- 3 tivities which are covered by the Utilities Directive. 13.2.1. ‘Postal items’ The definition covers “items addressed in the final form in which they are to be car- 4 ried, irrespective of weight.” Postal items include items of correspondence, books, postal packages containing merchandise, newspapers etc. The definition does not cover unaddressed items, but under certain circumstances services relating to unaddressed items can be subject to the Utilities Directive; see section 13.2.3 below. What is decisive is whether an activity concerns the handling of postal items. If this is the case, then the activity will be subject to the Utilities Directive. However, only the activities of contracting authorities and public undertakings for the provision of postal services are subject to the procurement rules in the Utilities Directive. However, if an activity is carried out by a contracting entity which is not a contracting authority or a public undertaking, for such a contracting entity to be subject to the Utilities Directive a further condition is that the activity must be carried on pursuant to a special or exclusive right. 13.2.2. ‘Postal services’ This includes any activity in connection with the collection and delivery of postal 5 items which are defined as “items addressed in the final form in which it is to be carRecital 28 of the former Utilities Directive (2004/17/EC). A number of activities in the postal sector have already been exempted from the Utilities Directive under this procedure. 2

3

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Art. 14

PART II The Utilities Directive 2014/25/EU

ried.” It is not relevant for the definition of “Postal services” whether a universal service obligation has been set up under directive 97/67/EC. Items which are not addressed in the final form are not covered by this definition but such items are specifically mentioned as one of the “other services than postal services” that might be subject to the Utilities Directive, re 13.2.3 below. 13.2.3. Other services than postal services The provision of “other services than postal services” might be subject to the Utilities Directive if they are provided by an entity that also provides “postal services” as defined in this directive. Only the listed categories of activities are covered by the Utilities Directive and the “other services than postal services” category has been limited considerably when compared with the former Utilities Directive (2004/17/EC). Mail management services and an ancillary category covering services concerning postal items not included under the definition in the directive, re 13.2.1 above. This leaves some leeway for interpretation but it must be assumed that the intent is to subject all activities connected with the handling of “postal items” under the Utilities Directive. 7 Postal items cover according to the definition in article 13(2) “items addressed in the final form in which it is to be carried.” If an item bears no address it is not covered by the definition of postal items and therefore not included as a postal service. However, it is specifically mentioned that one of the types of services which is similar to postal services and therefore subject to the Utilities Directive is “direct mail bearing no address”. This seems also logical as such direct mail is often delivered together with the addressed items to all potential recipients of addressed postal items. 8 On the other hand a number of activities covered by the former Utilities Directive (2004/17/EC) are no longer covered by the definition of “other services than postal services.” This includes electronic added value services, some financial services, philatelic services and some logistic services. Contracts for such services will not be covered by the Utilities Directive no matter whether they are awarded by a contracting authority, a public undertaking or a contracting entity not being covered by one of the two former categories. In principle, contracts for such services would be covered by the Public Sector directive if awarded by a contracting authority but these contracts are also excluded from the Public Sector Directive by article 7 of that directive. 6

Article 14 Extraction of oil and gas and exploration for, or extraction of, coal or other solid fuels This Directive shall apply to activities relating to the exploitation of a geographical area for the purpose of: (a) extracting oil or gas; (b) exploring for, or extracting, coal or other solid fuels. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, p. 138; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, p. 160; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2nd ed. 2007, pp. 153; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, p. 861.

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Art. 15

A number of activities related to the exploitation of a geographical area with the aim 1 of extracting fuels are subject to the Utilities Directive. This provision should therefore be seen in conjunction with Article 8 on activities related to heat and gas, and Article 9 on electricity, which subjects a number of activities related to production, transportation, distribution and supply of heat, gas and electricity to the Utilities Directive, and Article 23 which exempts some contracts related to the purchase of fuels from the Utilities Directive The activities connected with the extraction of oil or gas from a geographical area are 2 subject to the Utilities Directive. In this respect the Utilities Directive in its 2014 version differs from the former Utilities Directive (2004/17/EC) as activities related to exploration for oil or gas are no longer subject to the Utilities Directive. The reasons for this are set out in the recitals: “It is appropriate to exclude procurement made for the purpose of exploring for oil and gas as that sector has consistently been found to be subject to such competitive pressure that the procurement discipline brought about by the Union procurement rules is no longer needed.”1

Contracts connected with the exploration for oil, such as geological surveys, drilling for oil etc., are therefore no longer subject to the Utilities Directive. Conversely, activities related to extraction of oil or gas are subject to the Utilities Directive. It is accordingly necessary to delineate between activities related to exploration and extraction respectively. The recitals to the Utilities Directive set out the following distinction: “‘exploration’ should be considered to include the activities that are undertaken in order to verify whether oil and gas is present in a given zone, and, if so, whether it is commercially exploitable, whereas ‘extraction’ should be considered as the ‘production’ of oil and gas. In line with established practice in merger cases, ‘production’ should be considered also to include ‘development’, i.e. the setting up of adequate infrastructure for future production (oil platforms, pipelines, terminals, etc.). 2

Activities downstream from the extraction activities must be delineated from the ac- 3 tivities covered by the Utilities Directive, the essential point presumably being whether a downstream activity is dependent on a particular geographic area. For example, the laying of pipelines for transportation of oil from an oil field will be assumed to be a relevant activity whereas activities connected with oil refining will be assumed not to be a relevant activity connected to extraction activities and therefore will fall outside the scope of the Utilities Directive. Activities connected with the both the exploration for and the extraction of coal and other solid fuels are subject to the Utilities Directive.

Chapter III Material scope Section 1 Thresholds Article 15 Threshold amounts Save where they are ruled out by the exclusions in Articles 18 to 23 or pursuant to Article 34, concerning the pursuit of the activity in question, this Directive shall ap1 2

Recital 25, 1. paragraph, to the Utilities Directive. Recital 25, paragraph 3 and 4, to the Utilities Directive.

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Art. 16

PART II The Utilities Directive 2014/25/EU

ply to procurements with a value net of value-added tax (VAT) estimated to be equal to or greater than the following thresholds: (a) EUR 414 000 for supply and service contracts as well as for design contests; (b) EUR 5 186 000 for works contracts; (c) EUR 1 000 000 for service contracts for social and other specific services listed in Annex XVII. 1

The thresholds of the EU directives on procurement constitute a compromise between consideration for competition in the internal market and the avoidance of unnecessary formalities when contracting entities are awarding contracts. For this reason contracts below the thresholds are not subject to the procurement directives. The thresholds of the Utilities Directive are considerable higher than those of the Public Sector Directive when a comparison is made between the thresholds for supply and service contracts and design contests, and the threshold for service contracts for social and other specific services. The threshold for works contracts set out in the Utilities Directive is the same as the one set out in the Public Sector Directive. The reason for setting higher thresholds in the Utilities Directive derives from the political history of the directive and the reasons for issuing a separate directive for utilities which is that this sector due to its importance for the economy of the society and its higher technical complexity needs a higher degree of flexibility when entering into contracts. Besides the higher thresholds the provision is similar to that of the Public Sector Directive, Article 4, to which the reader is referred.

Article 16 Methods for calculating the estimated value of procurement 1. The calculation of the estimated value of a procurement shall be based on the total amount payable, net of VAT, as estimated by the contracting entity, including any form of option and any renewals of the contracts as explicitly set out in the procurement documents. Where the contracting entity provides for prizes or payments to candidates or tenderers it shall take them into account when calculating the estimated value of the procurement. 2. Where a contracting entity is comprised of separate operational units, account shall be taken of the total estimated value for all the individual operational units. Notwithstanding the first subparagraph, where a separate operational unit is independently responsible for its procurement or certain categories thereof, the values may be estimated at the level of the unit in question. 3. The choice of the method used to calculate the estimated value of a procurement shall not be made with the intention of excluding it from the scope of this Directive. A procurement shall not be subdivided with the effect of preventing it from falling within the scope of this Directive, unless justified by objective reasons. 4. That estimated value shall be valid at the moment at which the call for competition is sent or, in cases where such call for competition is not foreseen, at the moment at which the contracting entity commences the contract procurement procedure, for instance, where appropriate, by contacting economic operators in relation to the procurement.

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Art. 16

5. With regard to framework agreements and dynamic purchasing systems, the value to be taken into consideration shall be the maximum estimated value net of VAT of all the contracts envisaged for the total term of the agreement or system. 6. In the case of innovation partnerships, the value to be taken into consideration shall be the maximum estimated value net of VAT of the research and development activities to take place during all stages of the envisaged partnership as well as of the supplies, services or works to be developed and procured at the end of the envisaged partnership. 7. For the purposes of Article 15, contracting entities shall include in the estimated value of a works contract both the cost of the works and the total estimated value of any supplies or services that are made available to the contractor by the contracting entities provided that they are necessary for the execution of the works. 8. Where a proposed work or a proposed provision of services may result in contracts being awarded in the form of separate lots, account shall be taken of the total estimated value of all such lots. Where the aggregate value of the lots is equal to or exceeds the threshold laid down in Article 15, this Directive shall apply to the awarding of each lot. 9. Where a proposal for the acquisition of similar supplies may result in contracts being awarded in the form of separate lots, account shall be taken of the total estimated value of all such lots when applying points (b) and (c) of Article 15. Where the aggregate value of the lots is equal to or exceeds the threshold laid down in Article 15, this Directive shall apply to the awarding of each lot. 10. Notwithstanding paragraphs 8 and 9, contracting entities may award contracts for individual lots without applying the procedures provided for under this Directive, provided that the estimated value net of VAT of the lot concerned is less than EUR 80 000 for supplies or services or EUR 1 million for works. However, the aggregate value of the lots thus awarded without applying this Directive shall not exceed 20 % of the aggregate value of all the lots into which the proposed work, the proposed acquisition of similar supplies or the proposed provision of services has been divided. 11. In the case of supply or service contracts which are regular in nature or which are intended to be renewed within a given period, the calculation of the estimated contract value shall be based on the following: (a) either the total actual value of the successive contracts of the same type awarded during the preceding 12 months or financial year adjusted, where possible, to take account of the changes in quantity or value which would occur in the course of the 12 months following the initial contract; (b) or the total estimated value of the successive contracts awarded during the 12 months following the first delivery, or during the financial year where that is longer than 12 months. 12. With regard to supply contracts relating to the leasing, hire, rental or hire purchase of products, the value to be taken as a basis for calculating the estimated contract value shall be as follows: (a) in the case of fixed-term contracts, if that term is less than or equal to 12 months, the total estimated value for the term of the contract or, where the term of the contract is greater than 12 months, the total value including the estimated residual value; (b) in the case of contracts without a fixed term or the term of which cannot be defined, the monthly value multiplied by 48.

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Art. 17

PART II The Utilities Directive 2014/25/EU

13. With regard to service contracts, the basis for calculating the estimated contract value shall, where appropriate, be the following: (a) insurance services: the premium payable, and other forms of remuneration; (b) banking and other financial services: the fees, commissions payable, interest and other forms of remuneration; (c) design contracts: fees, commissions payable and other forms of remuneration. 14. With regard to service contracts which do not indicate a total price, the basis for calculating the estimated contract value shall be the following: (a) in the case of fixed-term contracts, where that term is less than or equal to 48 months: the total value for their full term; (b) in the case of contracts without a fixed term or with a term greater than 48 months: the monthly value multiplied by 48. 1

This provision is identical to the Public Sector Directive Article 5. For a commentary, see this provision.

Article 17 Revision of the thresholds 1. Every two years from 30 June 2013, the Commission shall verify that the thresholds set out in points (a) and (b) of Article 15 correspond to the thresholds established in the World Trade Organisation Agreement on Government Procurement (GPA) and shall, where necessary, revise them in accordance with this Article. In accordance with the calculation method set out in the GPA, the Commission shall calculate the value of those thresholds on the basis of the average daily value of the euro in terms of the special drawing rights (SDRs), over a period of 24 months terminating on 31 August preceding the revision with effect from 1 January. The value of the thresholds thus revised shall, where necessary, be rounded down to the nearest thousand euros so as to ensure that the thresholds in force provided for by the GPA, expressed in SDRs, are observed. 2. Every two years from 1 January 2014, the Commission shall determine the values, in the national currencies of Member States, whose currency is not the euro, of the thresholds referred to in points (a) and (b) of Article 15, revised pursuant to paragraph 1 of this Article. At the same time, the Commission shall determine the value, in the national currencies of the Member States, whose currency is not the euro, of the threshold referred to in point (c) of Article 15. In accordance with the calculation method set out in the GPA, the determination of such values shall be based on the average daily values of those currencies, corresponding to the applicable threshold expressed in euros over the 24 months terminating on 31 August preceding the revision with effect from 1 January. 3. The Commission shall publish the revised thresholds referred to in paragraph 1, their corresponding values in the national currencies referred to in the first subparagraph of paragraph 2, and the value determined in accordance with the second subparagraph of paragraph 2 in the Official Journal of the European Union at the beginning of the month of November following their revision. 4. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 to adapt the methodology set out in the second subparagraph of paragraph 1 of this Article to any change in the methodology provided in the GPA for 950

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Art. 18

the revision of the thresholds referred to in points (a) and (b) of Article 15 and for the determination of the corresponding values in the national currencies of the Member States, whose currency is not the euro, as referred to in paragraph 2 of this Article. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 to revise the thresholds referred to in points (a) and (b) of Article 15 when necessary. 5. Where it is necessary to revise the thresholds referred to in points (a) and (b) of Article 15 and time constraints prevent the use of the procedure set in Article 103 and therefore imperative grounds of urgency so require, the procedure provided for in Article 104 shall apply to delegated acts adopted pursuant to the second subparagraph of paragraph 4 of this Article. This provision is identical to the Public Sector Directive Article 6, paragraph 1, 3, 4, 5 1 and 6. For a commentary, see this provision.

Section 2 Excluded contracts and design contests; special provisions for procurement involving defence and security aspects Subsection 1 Exclusions applicable to all contracting entities and special exclusions for the water and energy sectors Article 18 Contracts awarded for purposes of resale or lease to third parties 1. This Directive shall not apply to contracts awarded for purposes of resale or lease to third parties, provided that the contracting entity enjoys no special or exclusive right to sell or lease the subject of such contracts, and other entities are free to sell or lease it under the same conditions as the contracting entity. 2. The contracting entities shall notify the Commission if so requested of all the categories of products or activities which they regard as excluded under paragraph 1. The Commission may periodically publish in the Official Journal of the European Union, for information purposes, of lists of the categories of products and activities which it considers to be covered by this exclusion. In so doing, the Commission shall respect any sensitive commercial aspects that the contracting entities may point out when forwarding information. 1 This provision is identical to Article 19 of the former Utilities Directive (2004/17). A contracting entity, e.g., in the energy sector might provide households with appli- 2 ances or a contracting entity in the postal sector might sell mail boxes to home owners. Contracts for the acquisition of such supplies might be considered a relevant activity and therefore subject to the provisions of the Utilities Directive. However, this provision exempts such contracts from the Utilities Directive as the market for the supply of these types of goods is believed to be competitive and there is accordingly no reason to subject contracting entities to the rules of the Utilities Directive as the entities will be disciplined by the market forces when entering into supply contracts.

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Art. 19

PART II The Utilities Directive 2014/25/EU

According to Article 18 the exemption is dependent on the fact that the contracting entity does not enjoy any special or exclusive right to sell or lease the subject of such contract, and other entities should be free to sell or lease under the same conditions as the contracting entity. These conditions imply that there should not be any market barriers deriving from the state with respect to the possibility of selling or leasing or the conditions for selling or leasing such goods. It might also be a possibility that a contract for the acquisition of supplies that the contracting entity intends to resell to third parties does not have a sufficient connection with a utility activity covered by Articles 8 to 14 of the Utilities Directive. If this is the case the contract will not be subject to the Utilities Directive, re Article 19 of the Utilities Directive. 3 If a contract is excluded from the Utilities Directive under Article 18 it follows from Article 7 of the Public Sector Directive that the contract is also excluded from the latter directive. 4 If the procurement with the aim of resale or lease to third parties is carried out by a central purchasing body it follows from the definition on centralised purchasing bodies in Article 2, no. 12, that the exemption in Article 18 does not apply.

Article 19 Contracts and design contests awarded or organised for purposes other than the pursuit of a covered activity or for the pursuit of such an activity in a third country 1. This Directive shall not apply to contracts which the contracting entities award for purposes other than the pursuit of their activities as described in Articles 8 to 14 or for the pursuit of such activities in a third country, in conditions not involving the physical use of a network or geographical area within the Union nor shall it apply to design contests organised for such purposes. 2. The contracting entities shall notify the Commission, if so requested, of any activities which they regard as excluded under paragraph 1. The Commission may periodically publish in the Official Journal of the European Union, for information purposes, lists of the categories of activities which it considers to be covered by this exclusion. In so doing, the Commission shall respect any sensitive commercial aspects that the contracting entities may point out when forwarding this information. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, p. 140; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 166; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2 nd ed. 2007, pp. 168; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 892.

1

This article is identical to Article 20 of the former Utilities Directive (2004/17) with the addition that the provision now also covers design contests.

19.1. Non-utility and third country activities 2

If it is established that a contracting entity carries on an activity that is covered by the Utilities Directive, it is then necessary to analyse whether an actual contract concerns such activity. The Utilities Directive covers contracts which contracting entities enter into as part of activities within the sectors listed in Articles 8 to 14 of the directive. Conversely, if it is 952

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Art. 19

found that the contract is not part of such an activity, it will not be subject to the procurement rules of the Utilities Directive. However the contract may be subject to other procurement rules, such as those in the Public Sector Directive, if the contracting entity is a contracting authority and thereby bound by that directive. This means that if a contract is not covered by the Utilities Directive and the contracting entity is subject to the Public Sector Directive, the contracting entity must apply the rules of the latter directive when awarding the contract. However, some contracting entities carry on different kinds of activities, some of which are covered by the Utilities Directive and others which are not. Here the question arises as to which guidelines can be used to determine the associated activities which have such a connection with the activities listed in Articles 8 to 14 of the Utilities Directive that they ought to be covered by the procurement rules in this directive. In the following, a distinction will be made between activities covered by the Utilities Directive in relation to the Public Sector Directive (19.1.1. below) and activities covered by the Utilities Directive in the absence of regulation (19.1.2. below). 19.1.1. Activities covered by the Utilities Directive in relation to the Public Sector Directive The starting point for an assessment must be the purpose of the contract contemplat- 3 ed by the contracting entity. If a contracting entity carries on one of the activities listed in Articles 8 to 14 of the Utilities Directive, there must be an analysis of the procurement proposed by the contracting entity and what it will be used for, so as to determine whether the intended contract for services, works or supply will be part of this activity. 1 The assessment can take into account whether the activity for which the contract is entered into contributes to the principal object of the contracting authority. However, this in turn raises the question of whether an activity will only be covered by the Utilities Directive if its performance is necessary for the activity covered by the Utilities Directive, or whether the scope of the Directive can be extended so as to cover activities whose performance is appropriate to the principal object. In an older case in the transport sector, the CJ has stated that there should not be a restrictive interpretation of ‘transport services’, and that an expanded interpretation should cover activities without which a given activity could not operate. This suggests that a functional approach should be used to determine which activities are covered by the Utilities Directive, and that only such associated activities will be covered as are necessary for carrying out the activity in question.2 It also seems that there is a presumptive rule that where a contracting entity only carries out activities that are subject to the Utilities Directive, all of that contracting entity’s procurements will relate to those activities and must comply with the procurement rules of that Directive. For example, this will include cleaning and catering contracts. When assessing the procurement obligations of a specific contract, an evaluation 4 must be made of the connection between the contracting entity’s activities covered by the Utilities Directive and the procurement to be made.3 This appears from the judgment of the CJ in the Ing. Aigner case, which concerned a choice between applying the procurement rules of the Public Sector Directive and the rules of the Utilities Directive. 4 Joined Cases C-462/03 and C-463/03, Strabag & Kostmann, para. 39. Case 247/89 Commission v Portugal (Lisbon airport). 3 Case 247/89, Commission v Portugal (Lisbon airport), para. 35. 4 Case C-393/06, Ing. Aigner, Wasser-Wärme-Umwelt; and Joined Cases C-462/03 and C-463/03 Strabag & Kostmann, para. 37. 1

2

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The facts of the case were that a company, Fernvärme Wien, had been set up among other things for the purpose of supplying district heating to homes and other premises in Vienna. The company was wholly owned by the City of Vienna. The supply of district heating is covered by the Utilities Directive. In addition to supplying district heating, Fernvärme Wien engaged in the general planning of cooling plants for large real estate projects, and in this activity it competed with other undertakings. The question was whether contracts relating to the installation of cooling plants in a planned commercial office complex were covered by the Utilities Directive. The CJ ruled that the Utilities Directive should only apply to the award of contracts which relate to activities in the sectors listed in Articles 8 to 14 of the directive. The assessment of an actual contract thus depends on whether it was entered into for the purposes of an activity listed in the Utilities Directive. In this connection it is not decisive whether the contract is ‘different in nature’ and would therefore normally be covered by the Public Sector Directive, but what is decisive is whether a contract is associated with an activity which the contracting entity carries on in a sector that is covered by the Utilities Directive. If this is not the case, the contract will either be subject to the Public Sector Directive or it may not be subject to any procurement rules.5 The judgment seems to mean that the starting point is an objective definition of the scopes of the two directives. According to the judgment, a restrictive interpretation must be used to determine the scope of the Utilities Directive. It must follow from this that, if a contracting entity that is also subject to the Public Sector Directive is in doubt about the applicability of the Utilities Directive, it must apply the rules of the Public Sector Directive. 19.1.2. Activities covered by the Utilities Directive in the absence of regulation 5

The Ing. Aigner case concerned a situation in which a choice had to be made between the application of the procurement rules of the Utilities Directive and application of the rules of the Public Sector Directive. Thus, it was not necessary to rule on how to interpret the Utilities Directive if the alternative were that a contracting entity would not be subject to any procurement rules at all, as can be the case for privately owned companies. In this situation it must be assumed that the Utilities Directive must be interpreted expansively, so that in cases of doubt a contract must be assumed to be subject to the Utilities Directive. Thus, if a contracting entity finds that the expansion of an area of activity will lead to the support of an activity that is subject to the Utilities Directive, this is an indication that the new activity is also subject to the Utilities Directive.6 Such an interpretation will promote consideration for equal treatment, the opening up of markets and competition. Even though the Utilities Directive allows for the use of negotiated procedures, the application of the provisions of the Utilities Directive to the award of contracts will be better suited to ensure competition than would be the case if a contracting entity has the possibility of awarding a contract directly. On this basis it must be assumed that, for a company that carries on certain activities pursuant to the Utilities Directive and is not subject to the Public Sector Directive, a contract will be covered by the Utilities Directive unless it is clearly determined that it does not relate to an activity that is subject to this directive.

5 6

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Case C-393/06, Ing. Aigner, Wasser-Wärme-Umwelt, paras. 56-58. This interpretation is supported by article 6(3) of the Utilities Directive.

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Art. 21

Article 20 Contracts awarded and design contests organised pursuant to international rules 1. This Directive shall not apply to contracts or design contests which the contracting entity is obliged to award or organise in accordance with procurement procedures different from those laid down in this Directive established by any of the following: (a) a legal instrument creating international law obligations, such as an international agreement, concluded in accordance with the Treaties, between a Member State and one or more third countries or subdivisions thereof and covering works, supplies or services intended for the joint implementation or exploitation of a project by their signatories; (b) an international organisation. Member States shall communicate all legal instruments referred to in point (a) of the first subparagraph of this paragraph to the Commission, which may consult the Advisory Committee for Public Contracts referred to in Article 105. 2. This Directive shall not apply to contracts and design contests which the contracting entity awards or organises in accordance with procurement rules provided by an international organisation or international financing institution, where the contracts or design contests concerned are fully financed by that organisation or institution; in the case of contracts or design contests co-financed the most part by an international organisation or international financing institution the parties shall agree on applicable procurement procedures. 3. Article 27 shall apply to contracts and design contests involving defence or security aspects which are awarded or organised pursuant to international rules. Paragraphs 1 and 2 of this Article shall not apply to those contracts and design contests. This provision is identical to the Public Sector Directive Article 9. For a commentary, 1 see this provision.

Article 21 Specific exclusions for service contracts This Directive shall not apply to service contracts for: (a) the acquisition or rental, by whatever financial means, of land, existing buildings or other immovable property or concerning rights thereon; (b) arbitration and conciliation services; (c) any of the following legal services: (i) legal representation of a client by a lawyer within the meaning of Article 1 of Council Directive 77/249/EEC1 in: – an arbitration or conciliation held in a Member State, a third country or before an international arbitration or conciliation instance; or

1 Council Directive 77/249/EEC of 22 March 1977 to facilitate the effective exercise by lawyers of freedom to provide services (OJ L 78, 26.3.1977, p. 17).

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– judicial proceedings before the courts, tribunals or public authorities of a Member State or a third country or before international courts, tribunals or institutions; (ii) legal advice given in preparation of any of the proceedings referred to in point (i) of this point or where there is a tangible indication and high probability that the matter to which the advice relates will become the subject of such proceedings, provided that the advice is given by a lawyer within the meaning of Article 1 of Directive 77/249/EEC; (iii) document certification and authentication services which must be provided by notaries; (iv) legal services provided by trustees or appointed guardians or other legal services the providers of which are designated by a court or tribunal in the Member State concerned or are designated by law to carry out specific tasks under the supervision of such tribunals or courts; (v) other legal services which in the Member State concerned are connected, even occasionally, with the exercise of official authority; (d) financial services in connection with the issue, sale, purchase or transfer of securities or other financial instruments within the meaning of Directive 2004/39/EC of the European Parliament and of the Council2 and operations conducted with the European Financial Stability Facility and the European Stability Mechanism; (e) loans, whether or not in connection with the issue, sale, purchase or transfer of securities or other financial instruments; (f) employment contracts; (g) public passenger transport services by rail or metro; (h) civil defence, civil protection, and danger prevention that are provided by nonprofit organisations or associations, and which are covered by CPV codes 75250000-3, 75251000-0, 75251100-1, 75251110-4, 75251120-7, 75252000-7, 75222000-8; 98113100-9 and 85143000-3 except patient transport ambulance services; (i) contracts for broadcasting time or programme provision that are awarded to audiovisual or radio media service providers. For the purposes of this point, ‘media service providers’ shall have the same meaning as pursuant to point (d) of Article 1(1) of Directive 2010/13/EU of the European Parliament and of the Council.3 ‘Programme’ shall have the same meaning as pursuant to point (b) of Article 1(1) of that Directive, but shall also include radio programmes and radio programme materials. Furthermore, for the purposes of this provision, ‘programme material’ shall have the same meaning as ‘programme’. 1

This provision is almost identical to the Public Sector Directive Article 10. For a commentary, see this provision. Some minor differences in the wording can be observed which derives from the fact that the scope of the two directives is different.

2 Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (OJ L 145, 30.4.2004, p. 1). 3 Directive 2010/13/EU of the European Parliament and of the Council of 10 March 2010 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services (Audiovisual Media Services Directive) (OJ L 95, 15.4.2010, p. 1).

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Art. 23

A difference can be observed in Article 21, paragraph d), which excludes some finan- 2 cial services. The corresponding Article 10, paragraph e) of the Public Sector Directive also excludes contracts for Central Bank Services. A difference can be observed in Article 21, paragraph i), which excludes “contracts 3 for broadcasting time or programme provision that are awarded to audiovisual or radio media service providers.” The corresponding Article 10, paragraph b), of the Public Sector Directive additionally excludes contracts which audiovisual and radio media service providers enter into for the acquisition etc. of programme material.

Article 22 Service contracts awarded on the basis of an exclusive right This Directive shall not apply to service contracts awarded to an entity which is itself a contracting authority or to an association of contracting authorities on the basis of an exclusive right which they enjoy pursuant to a law, regulation or published administrative provision which is compatible with the TFEU. This provision is identical to the Public Sector Directive Article 11. For a commen- 1 tary, see this provision.

Article 23 Contracts awarded by certain contracting entities for the purchase of water and for the supply of energy or of fuels for the production of energy This Directive shall not apply: (a) to contracts for the purchase of water if awarded by contracting entities engaged in one or both of the activities relating to drinking water referred to in Article 10(1); (b) to contracts awarded by contracting entities themselves being active in the energy sector by being engaged in an activity referred to in Article 8(1), Article 9(1) or Article 14 for the supply: (i) of energy; (ii) of fuels for the production of energy. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, pp. 143; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 160 and 162; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2 nd ed. 2007, pp. 151 and 153; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 857 and 861.

23.1. Purchase of water and energy Some contracts related to the purchase of water or energy (gas, heat and electricity) 1 are excluded from the Utilities Directive. The reasons for this are very different, as contracts for the supply of water are exempt due to the lack of competition for such contracts whereas contracts for the supply of energy are exempt due to the presence of a sufficient competitive pressure. If a contract is excluded from the Utilities Directive under Article 23 it follows from 2 Article 7 of the Public Sector Directive that the contract is excluded from the latter directive as well. Sune Troels Poulsen

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23.1. Purchase of Water 3

If a contracting entity which is engaged in one or more of the activities set out in Article 10(1) of the Utilities Directive contemplates to enter into a contract for the purchase of water then this contract is excluded from the directive. The reason for this is set out in the recitals: “… procurement rules of the type proposed for supplies of products are inappropriate for purchases of water, given the need to procure water from sources near the area in which it will be used.” 1

23.2. Purchase of Energy 4

Contracts for the supply of energy and for the supply of fuels for the production of energy are excluded from the Utilities Directive on the cumulative conditions that they are entered into by a contracting entity itself and that the contracting entity is active in the energy sector as referred to in Articles 8(1), 9(1) and 14. The terminology “energy” is usually interpreted as covering heat, gas and electricity. “Fuels” cover usually oil, coal and other solid or liquid fuels.

Subsection 2 Procurement involving defence and security aspects Article 24 Defence and security 1. In respect of contracts awarded and design contests organised in the fields of defence and security, this Directive shall not apply to: (a) contracts falling within the scope of Directive 2009/81/EC; (b) contracts to which Directive 2009/81/EC does not apply pursuant to Articles 8, 12 and 13 thereof. 2. This Directive shall not apply to contracts and design contests not otherwise exempted under paragraph 1, to the extent that the protection of the essential security interests of a Member State cannot be guaranteed by less intrusive measures, for instance by imposing requirements aimed at protecting the confidential nature of information which the contracting entity makes available in a contract award procedure as provided for in this Directive. Furthermore, and in conformity with point (a) Article 346(1) TFEU, this Directive shall not apply to contracts and design contests not otherwise exempted under paragraph 1 of this Article to the extent that the application of this Directive would oblige a Member State to supply information the disclosure of which it considers contrary to the essential interests of its security. 3. Where the procurement and performance of the contract or design contest are declared to be secret or must be accompanied by special security measures in accordance with the laws, regulations or administrative provisions in force in a Member State, this Directive shall not apply provided that the Member State has determined that the essential interests concerned cannot be guaranteed by less intrusive measures, such as those referred to in the first subparagraph of paragraph 2. 1

This provision is identical to the Public Sector Directive Article 15. For a commentary, see this provision. 1

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Recital 24, paragraph 3, to the Utilities Directive.

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Art. 26

Article 25 Mixed procurement covering the same activity and involving defence or security aspects 1. In the case of mixed contracts covering the same activity which have as their subject-matter procurement covered by this Directive and procurement or other elements covered by Article 346 TFEU or Directive 2009/81/EC, this Article shall apply. 2. Where the different parts of a given contract are objectively separable, contracting entities may choose to award separate contracts for the separate parts or to award a single contract. Where contracting entities choose to award separate contracts for separate parts, the decision of which legal regime applies to any one of such separate contracts shall be taken on the basis of the characteristics of the separate part concerned. Where contracting entities choose to award a single contract, the following criteria shall apply to determine the applicable legal regime: (a) where part of a given contract is covered by Article 346 TFEU, the contract may be awarded without applying this Directive, provided that the award of a single contract is justified for objective reasons; (b) where part of a given contract is covered by Directive 2009/81/EC, the contract may be awarded in accordance with that Directive, provided that the award of a single contract is justified for objective reasons. This point shall be without prejudice to the thresholds and exclusions for which that Directive provides. The decision to award a single contract shall not, however, be taken for the purpose of excluding contracts from the application of either this Directive or Directive 2009/81/EC. 3. Point (a) of the third subparagraph of paragraph 2 shall apply to mixed contracts to which both point (a) and point (b) of that subparagraph could otherwise apply. 4. Where the different parts of a given contract are objectively not separable, the contract may be awarded without applying this Directive where it includes elements to which Article 346 TFEU applies; otherwise it may be awarded in accordance with Directive 2009/81/EC. This provision is identical to the Public Sector Directive Article 16. For a commen- 1 tary, see this provision.

Article 26 Procurement covering several activities and involving defence or security aspects 1. In the case of contracts intended to cover several activities, contracting entities may choose to award separate contracts for the purposes of each separate activity or to award a single contract. Where contracting entities choose to award separate contracts for separate parts, the decision of which legal regime applies to any one of such separate contracts shall be taken on the basis of the characteristics of the separate activity concerned. Where contracting entities choose to award a single contract, paragraph 2 of this Article shall apply. The choice between awarding a single contract and awarding a

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number of separate contracts shall not be made with the objective of excluding the contract or contracts from the scope of this Directive or Directive 2009/81/EC. 2. In the case of contracts intended to cover an activity which is subject to this Directive and another which is: (a) subject to Directive 2009/81/EC, or (b) covered by Article 346 TFEU, the contract may be awarded in accordance with Directive 2009/81/EC in the cases set out under point (a) and may be awarded without applying this Directive in the cases set out under point (b). This subparagraph is without prejudice to the thresholds and exclusions for which Directive 2009/81/EC provides. Contracts as set out under point (a) of the first subparagraph, which in addition include procurement or other elements which are covered by Article 346 TFEU, may be awarded without applying this Directive. However, it is a condition for the application of the first and second subparagraph that the award of a single contract is justified for objective reasons and the decision to award a single contract is not taken for the purpose of excluding contracts from the application of this Directive. A contracting entity might be responsible for purchasing goods, services or works, some of which are covered by the Utilities Directive and some are covered by other procurement rules or involves defence or security aspects. Furthermore, a contracting entity might choose to make a purchase for more than one of these activities under a single contract. This article sets out rules for determining whether a contracting entity will have to use the Utilities Directive, directive 2009/81 or no rules at all when awarding a single contract covering several activities of which some are subject to the Utilities Directive and others are covered by Directive 2009/81 or are covered by Article 346 TFEU. This article differs from Article 6 of the Utilities Directive covering a similar question as the present article sets out rules for the situation where defence and security aspects are involved. 2 The basic principle of this article is that where defence or security aspects are involved those rules apply to the award of the contract which guarantees the highest degree of secrecy concerning the substance of the contract. 1

26.1. A single contract or multiple contracts 3

It is at the outset for the contracting entity to decide whether more contracts should be entered into individually or they should be compiled into a single contract. The contracting entity should be able to state valid reasons for its choice of either entering into separate contracts or a single contract as it is prohibited for a contracting entity to base its choice on intent to avoid the use of a specific directive. The applicable procurement rules will be determined by Article 26, paragraph 2, if a single contract covers at the same time activities subject to the Utilities Directive and activities covered by the directive on defence procurement (Directive 2009/81) or by Article 346 TFEU.

26.2. Rules for mixed contracts 4

If a contract cover several activities including either defence or security activities it is mandatory to assess whether an activity is covered either by Directive 2009/81/EC or by Article 346 TFEU as this assessment determines which procurement procedures if any that the contract is subjected to. 960

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Art. 27

According to Article 2 of the defence procurement directive (Directive 2009/81), this 5 directive covers the following contracts (see the commentary to Article 2 in the Defence Directive): (a) the supply of military equipment, including any parts, components and/or subassemblies thereof; (b) the supply of sensitive equipment, including any parts, components and/or subassemblies thereof; (c) works, supplies and services directly related to the equipment referred to in points (a) and (b) for any and all elements of its life cycle; (d) works and services for specifically military purposes or sensitive works and sensitive services. Exclusion from the provisions of the defence directive might apply as well as exclusions granted directly in the Treaty of the Functioning of the European Union. According to Article 346(1) TFEU the provisions of the Treaties shall not preclude the 6 application of the following rules: (a) no Member State shall be obliged to supply information the disclosure of which it considers contrary to the essential interests of its security; (b) any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material; such measures shall not adversely affect the conditions of competition in the internal market regarding products which are not intended for specifically military purposes. The rule governing single contracts for mixed activities of which some either are covered by the directive on defence procurement or by Article 346 TFEU is that the contract is covered by the rules which secures the highest level of secrecy concerning the substance of the contract. This implies that if a contract is covered by Article 346 TFEU the contract might possibly be entered into without applying the Utilities Directive or the defence procurement directive. It is set out in the directive that the “usual disclaimer” also applies in this respect 7 which means that the contracting entity should be able to state valid reasons for entering into a single contract as it is prohibited for a contracting entity to base its choice on intent to avoid the use of a specific directive this being the Utilities Directive or the directive on defence procurement.

Article 27 Contracts and design contests involving defence or security aspects which are awarded or organised pursuant to international rules 1. This Directive shall not apply to contracts or design contests involving defence or security aspects which the contracting entity is obliged to award or organise in accordance with procurement procedures different from those laid down in this Directive established by any of the following: (a) an international agreement or arrangement, concluded in accordance with the Treaties, between a Member State and one or more third countries or subdivisions thereof and covering works, supplies or services intended for the joint implementation or exploitation of a project by their signatories;

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(b) an international agreement or arrangement relating to the stationing of troops and concerning the undertakings of a Member State or a third country; (c) an international organisation. All agreements or arrangements referred to in point (a) of the first subparagraph of this paragraph shall be communicated to the Commission, which may consult the Advisory Committee on Public Procurement referred to in Article 105. 2. This Directive shall not apply to contracts and design contests involving defence or security aspects which the contracting entity awards in accordance with procurement rules provided by an international organisation or international financing institution, where the contracts or design contests concerned are fully financed by this organisation or institution. In the case of contracts or design contests co-financed for the most part by an international organisation or international financing institution the parties shall agree on applicable procurement procedures. 1

This provision is identical to the Public Sector Directive Article 17. For a commentary, see this provision.

Subsection 3 Special relations (cooperation, affiliated undertakings and joint ventures) Article 28 Contracts between contracting authorities 1. A contract awarded by a contracting authority to a legal person governed by private or public law shall fall outside the scope of this Directive where all of the following conditions are fulfilled: (a) the contracting authority exercises over the legal person concerned a control which is similar to that which it exercises over its own departments; (b) more than 80 % of the activities of the controlled legal person are carried out in the performance of tasks entrusted to it by the controlling contracting authority or by other legal persons controlled by that contracting authority; (c) there is no direct private capital participation in the controlled legal person with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person. A contracting authority shall be deemed to exercise over a legal person a control similar to that which it exercises over its own departments within the meaning of point (a) of the first subparagraph where it exercises a decisive influence over both strategic objectives and significant decisions of the controlled legal person. Such control may also be exercised by another legal person, which is itself controlled in the same way by the contracting authority. 2. Paragraph 1 also applies where a controlled person which is a contracting authority awards a contract to its controlling contracting authority, or to another legal person controlled by the same contracting authority, provided that there is no direct private capital participation in the legal person being awarded the public contract with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity 962

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Art. 28

with the Treaties, which do not exert a decisive influence on the controlled legal person. 3. A contracting authority, which does not exercise over a legal person governed by private or public law control within the meaning of paragraph 1, may nevertheless award a contract to that legal person without applying this Directive, where all of the following conditions are fulfilled: (a) the contracting authority exercises jointly with other contracting authorities a control over that legal person which is similar to that which they exercise over their own departments; (b) more than 80 % of the activities of that legal person are carried out in the performance of tasks entrusted to it by the controlling contracting authorities or by other legal persons controlled by the same contracting authorities; and (c) there is no direct private capital participation in the controlled legal person with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person. For the purposes of point (a) of the first subparagraph, contracting authorities shall be deemed to exercise joint control over a legal person where all of the following conditions are fulfilled: (i) the decision-making bodies of the controlled legal person are composed of representatives of all participating contracting authorities. Individual representatives may represent several or all of the participating contracting authorities; (ii) those contracting authorities are able to jointly exert decisive influence over the strategic objectives and significant decisions of the controlled legal person; and (iii) the controlled legal person does not pursue any interests which are contrary to those of the controlling contracting authorities. 4. A contract concluded exclusively between two or more contracting authorities shall fall outside the scope of this Directive, where all of the following conditions are met: (a) the contract establishes or implements a cooperation between the participating contracting authorities with the aim of ensuring that public services they have to perform are provided with a view to achieving objectives they have in common; (b) the implementation of that cooperation is governed solely by considerations relating to the public interest; and (c) the participating contracting authorities perform on the open market less than 20 % of the activities concerned by the cooperation. 5. For the determination of the percentage of activities referred to in point (b) of the first subparagraph of paragraph 1, point (b) of the first subparagraph of paragraph 3 and point (c) of paragraph 4, the average total turnover, or an appropriate alternative activity based measure such as costs incurred by the relevant legal person with respect to services, supplies and works for the three years preceding the contract award shall be taken into consideration. Where, because of the date on which the relevant legal person was created or commenced activities or because of a reorganisation of its activities, the turnover, or alternative activity based measure such as costs, are either not available for the preced-

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ing three years or no longer relevant, it shall be sufficient to show that the measurement of activity is credible, particularly by means of business projections. 1

This provision is identical to the Public Sector Directive Article 12. For a commentary, see this provision.

Article 29 Contracts awarded to an affiliated undertaking1 1. For the purposes of this Article, ‘affiliated undertaking’ means any undertaking the annual accounts of which are consolidated with those of the contracting entity in accordance with the requirements of the Directive 2013/34/EU. 2. In the case of entities, which are not subject to Directive 2013/34/EU, ‘affiliated undertaking’ shall mean any undertaking that: (a) may be, directly or indirectly, subject to a dominant influence by the contracting entity; (b) may exercise a dominant influence over the contracting entity; or (c) in common with the contracting entity, is subject to the dominant influence of another undertaking by virtue of ownership, financial participation, or the rules which govern it. For the purposes of this paragraph, ‘dominant influence’ shall have the same meaning as in the second subparagraph of Article 4(2). 3. Notwithstanding Article 28 and provided that the conditions in paragraph 4 of this Article are met, this Directive shall not apply to contracts awarded: (a) by a contracting entity to an affiliated undertaking, or (b) by a joint venture, formed exclusively by a number of contracting entities for the purpose of carrying out activities described in Articles 8 to 14, to an undertaking which is affiliated with one of those contracting entities. 4. Paragraph 3 shall apply to: (a) service contracts provided that at least 80 % of the average total turnover of the affiliated undertaking over the preceding three years, taking into account all services provided by that undertaking, derives from the provision of services to the contracting entity or other undertakings with which it is affiliated; (b) supply contracts provided that at least 80 % of the average total turnover of the affiliated undertaking, taking into account all supplies provided by that undertaking, over the preceding three years derives from the provision of supplies to the contracting entity or other undertakings with which it is affiliated; (c) to works contracts provided that at least 80 % of the average total turnover of the affiliated undertaking, taking into account all works provided by that undertaking, over the preceding three years derives from the provision of works to the contracting entity or other undertakings with which it is affiliated. 5. Where, because of the date on which an affiliated undertaking was created or commenced activities, the turnover is not available for the preceding three years, it shall be sufficient for that undertaking to show that the turnover referred to in points (a), (b) or (c) of paragraph 4 is credible, in particular by means of business projections.

1 The provision is almost identical with Article 23 (1, 2 and 3) of the former Utilities Directive (2004/17).

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Art. 29

6. Where more than one undertaking affiliated with the contracting entity with which they form an economic group provides the same or similar services, supplies or works, the percentages shall be calculated taking into account the total turnover deriving respectively from the provision of services, supplies or works by those affiliated undertakings. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, 141; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 123; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2nd ed. 2007, pp. 252; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 919.

The Utilities Directive has a special rule under which a contracting entity can enter 1 into contracts with affiliated undertakings without following the procurement rules. The background to the rule is that a contracting entity must be able to organise its activities in the most appropriate way, without its activities thereby being subject to the procurement rules. A contracting entity may thus find it appropriate to place special knowhow or particular skills in a separate company. Concerns about management, liability or supervision can lie behind decisions to divide activities between different companies. In the recitals to the Utilities Directive the background to the rule is set out: “Many contracting entities are organised as an economic group which may comprise a series of separate undertakings; often each of these undertakings has a specialised role in the overall context of the economic group. It is therefore appropriate to exclude certain service, supply and works contracts awarded to an affiliated undertaking having as its principal activity the provision of such services, supply or works to the group of which it is part, rather than offering them on the market.” 2

The central element for understanding the rule is that the activities of a contracting entity constitute an economic entity, even though the activities are carried out within the framework of different companies or separate legal entities. In this situation the contracting entity will have dominant influence over its subsidiaries and the decision making authority of each company cannot be regarded as being independent of the decisionmaking authority of the group as a whole. This consideration can also be seen in Article 29(6) where the terminology “economic group” is used. Whether a private undertaking also participates in the group is not relevant as long as the contracting entity directly or indirectly has dominant influence over the affiliated undertaking.3

29.1. Affiliated undertakings with reference to Directive 2013/34/EU The Utilities Directive provides for a rule which is clear and easy to perform when 2 assessing whether an undertaking is affiliated. If the accounts of an undertaking are consolidated with those of the contracting entity within the meaning of Directive 2013/34/EU then the undertaking will be affiliated with the contracting entity. The reasoning behind this rule is that only when an undertaking is under dominant influence by a contracting entity will its accounts be consolidated with the latter.4

Recital 39, paragraph 1 and 2 of the Utilities Directive. Recital 41, paragraph 1 of the Utilities Directive. This logic is very different from the reasoning related to the extended in house rule where private participation in an entity being awarded a contract is disqualifying from the use of the in house rule. See the commentary to Article 12 in the Public Sector Directive. 4 Recital 41, paragraph 3 of the Utilities Directive. 2

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29.2. Other affiliated undertakings 3

The Union rules on consolidated accounts may not apply under certain circumstances due to, e.g., the size or the legal form of the company and therefore the Utilities Directive sets out a supplementary rule for assessing whether a direct or indirect dominant influence over an undertaking is present. Dominant influence can be demonstrated in several ways and the Utilities Directive refers to Article 4(2) where such influence is presumed if the contracting entity directly or indirectly holds the majority of the undertaking´s subscribed capital, controls the majority of the votes attaching to shares issued by the undertaking or can appoint more than half of the undertaking´s administrative, management or supervisory body. It is specifically set out that the dominant influence does not need to be held over the affiliated undertaking as also the affiliated undertaking´s dominant influence over the contracting entity will qualify as well as influence by a third party on both the contracting entity and the affiliated undertaking.

29.3. The exemption for contracts awarded to affiliated undertakings 4

This provision sets out specifically that contracts are excluded from the Utilities Directive if they are awarded by a contracting entity to an affiliated undertaking. The provision is therefore the key to Article 29 and it could be seen as more appropriate if it had been placed in the beginning of the article. Furthermore, also contracts awarded by a joint venture to an affiliated undertaking are excluded from the Utilities Directive. This possibility is limited, though, as it only applies to joint ventures which are formed exclusively by a number of contracting entities for the purpose of carrying out activities as set out in Articles 8 to 14 of the Utilities Directive. This provision supplements Article 30 on contracts awarded by a joint venture as Article 30 does not include contracts awarded by a joint venture to an affiliated undertaking.

29.4. Market services versus “in-house” services – the 80 % rule 5

A contracting entity can only enter into a contract with an affiliated undertaking without inviting tenders if the affiliated undertaking predominantly carries out activities for its owners and does not provide these services to the market. The background to this provision is concern for competition on the internal market and is set out in the recitals to the Utilities Directive: “… However, it is appropriate to ensure that this exclusion does not give rise to distortions of competition to the benefit of the undertakings or joint ventures that are affiliated with the contracting entities; it is appropriate to provide a suitable set of rules, in particular as regards the maximum limits within which the undertakings may obtain a part of their turnover from the market and above which they would lose the possibility of being awarded contracts without calls for competition …”5

6

For practical reasons a turnover limit of 80 % has been established for the assessment of whether the activities of an affiliated undertaking primarily is internal to the group or whether it has a non-trivial market presence. The requirements as to the activity levels of the affiliated undertaking are calculated on the basis of the average turnover for the preceding three years. This rule is established in order to take account of erratic variations in the turnover.

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Recital 39, paragraph 4 to the Utilities Directive.

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Art. 30

The article sets out separate rules for service contracts, supply contracts and works contracts, which on all aspects are identical but for the scope of the rule (services, goods and works). On this basis it is clear that turnover should be calculated for each type of activity. The reason for this is that the provision of services, goods and works often are distinctive from each other and a substantial internal turnover for one kind of these activities should not be able to justify an exemption from the obligation to comply with the procurement rules for some other kind of activity which is primarily provided to the market.

29.5. Calculation of turnover for new firms If the affiliated undertaking has not existed for three years, it is necessary to assess the 7 expected turnover. It is set out that this can be estimated, e.g., by means of a business projection.

29.6. Cumulation of turnover for several affiliated undertakings If the activity (services, goods or works) is carried out by several companies affiliated 8 to the contracting entity, these activities must be accumulated. The reason for this supplementary condition is that the obligation to comply with the procurement rules of the Utilities Directive can only be suspended if there really is an internal division of work within a group. It must be assumed that there is internal turnover, regardless of whether the supply is made to that part of the corporate group that carries out activities covered by the Utilities Directive, or to another part of the group that carries out other activities. On the other hand, if the affiliated undertaking either individually or seen together with other affiliated undertakings has significant market activities, the exception does not apply.

Article 30 Contracts awarded to a joint venture or to a contracting entity forming part of a joint venture1 Notwithstanding Article 28 and provided that the joint venture has been set up in order to carry out the activity concerned over a period of at least three years and that the instrument setting up the joint venture stipulates that the contracting entities, which form it, will be part thereof for at least the same period, this Directive shall not apply to contracts awarded by any of the following: (a) by a joint venture, formed exclusively by a number of contracting entities for the purpose of carrying out activities within the meaning of Articles 8 to 14, to one of those contracting entities; or (b) by a contracting entity to such a joint venture of which it forms part. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, pp. 141; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 124; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2 nd ed. 2007, pp. 254; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 923.

Contracting entities covered by the Utilities Directive might organise themselves so as 1 to carry out certain activities together. Contracts for carrying out works, supplying prod1

The provision is almost identical with Article 23(4) of the former Utilities Directive (2004/17).

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ucts or providing services between contracting entities and joint ventures in which they take part are excluded from the Utilities Directive although this exclusion is contingent on a number of conditions. This exclusion from the Utilities Directive can apply both when a contracting entity awards a contract to the joint venture in which it takes part and when the joint venture awards a contract to a contracting entity taking part in the joint venture. This rule on joint ventures corresponds to Article 29 on affiliated undertakings as it can be appropriate for several contracting entities to carry out certain activities jointly, without their contracts with the joint venture company being subject to the procurement rules of the Utilities Directive. The rule covers both activities which a joint venture carries out for a contracting entity and activities that a contracting entity carries out for a joint venture. Article 30 on contracts awarded by a joint venture is supplemented by Article 29(3)(b) which excludes contracts awarded by a joint venture to an affiliated undertaking from the Utilities Directive.2 Only joint ventures of a more lasting nature are covered by this exemption. This rule is set out as it is found appropriate to ensure that this exclusion does not give rise to distortions of competition to the benefit of the undertakings or joint ventures that are affiliated with the contracting entities. For this reason there are requirements as to the composition of a joint venture and to the stability of links between a joint venture and the contracting entities of which it takes part.3 Only joint ventures whose activities are foreseen to last at least three years and where it is also foreseen that the contracting entities, which form the joint venture, participates in at least the same period can benefit from this exemption. This exclusion applies only if two cumulative conditions are fulfilled, one of them being that the contract is awarded to a joint venture which is formed exclusively by a number of contracting entities, and the other that the joint venture is formed for the purpose of carrying out activities as set out in Articles 8 to 14 of the Utilities Directive. This must be interpreted as meaning that participation by contracting entities which carry out other activities than those set out in Articles 8 to 14 of the Utilities Directive will prevent the application of the exemption in Article 30. The participation of economic operators which are not contracting entities as defined in the Utilities Directive will also prevent the application of the exemption in Article 30. This limitation of Article 30 to contracting entities therefore, presumably, also excludes the possibility of making make use of this exemption if one of the partners to the joint venture is not a contracting authority or public undertaking no matter whether the partner undertakes activities covered by the Utilities Directive if this partner has been awarded its rights to provide the services under a competitive procedure as set out in Article 4(3). When compared with Article 29 on affiliated undertakings it can be observed that there are no limitations as to the level of activities which the contracting entity or the joint venture might provide to other entities, undertakings, economic operators, consumers etc.

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In this situation the 80 % limitation set out in article 29(4) applies. Recital 39, last paragraph, of the Utilities Directive.

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Art. 33

Article 31 Notification of information1 Contracting entities shall notify to the Commission, if so requested, the following information regarding the application of Article 29(2) and (3) and Article 30: (a) the names of the undertakings or joint ventures concerned, (b) the nature and value of the contracts involved, (c) proof deemed necessary by the Commission that the relationship between the undertaking or joint venture to which the contracts are awarded and the contracting entity complies with the requirements of Articles 29 or 30. The purpose of this requirement is to make it possible for the Commission to verify 1 whether or not is has been justified for the utility to make use of this exemption. The means for doing so is to provide the information to the Commission which has been the foundation for the decision of the utility to use this exemption. The utility is only obliged to provide this information if it is specifically requested by the Commission to do so. The information to be provided is related to the conditions for using this exemption and consists of information on the companies involved, the relations between these companies and the contracts which they have entered into.

Subsection 4 Specific situations Article 32 Research and development services This Directive shall only apply to service contracts for research and development services which are covered by CPV codes 73000000-2 to 73120000-9, 73300000-5, 73420000-2 and 73430000-5 provided that both of the following conditions are fulfilled: (a) the benefits accrue exclusively to the contracting entity for its use in the conduct of its own affairs, and (b) the service provided is wholly remunerated by the contracting entity. This provision is identical to the Public Sector Directive Article 14. For a commen- 1 tary, see this provision.

Article 33 Contracts subject to special arrangements 1. Without prejudice to Article 34 of this Directive the Republic of Austria and the Federal Republic of Germany shall ensure, by way of the conditions of authorisation or other appropriate measures, that any entity operating in the sectors men-

1

The provision is almost identical with Article 23(5) of the former Utilities Directive (2004/17).

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tioned in Commission Decision1 2002/205/EC and Commission Decision 2004/73/EC:2 (a) observes the principles of non-discrimination and competitive procurement in respect of the award of supplies, works and service contracts, in particular as regards the information which the entity makes available to economic operators concerning its procurement intentions; (b) communicates to the Commission, under the conditions defined in Commission Decision 93/327/EEC,3 information relating to the contracts they award. 2. Without prejudice to Article 34, the United Kingdom shall ensure, by way of the conditions of authorisation or other appropriate measures, that any entity operating in the sectors mentioned in Decision 97/367/EEC applies points (a) and (b) of paragraph 1 of this Article in respect of contracts awarded for the pursuit of that activity in Northern Ireland. 3. Paragraphs 1 and 2 shall not apply to contracts awarded for the purpose of exploring for oil or gas. Literature: Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, p. 868.

1

This article is similar to Article 27 of the former Utilities Directive although some minor amendments have been made. The purpose of this article is to exempt some activities in the oil and gas sector which under the previous Utilities Directive (93/38)4 have been exempted from that directive. If an exemption for these activities had not been inserted in the Utilities Directive they would have been subjected to the Utilities Directive when entering into contracts unless the activities had qualified under Articles 34 and 35 for an exclusion from the directive. 5

33.1. Exploration of oil and gas 2

Paragraph 3 is new to this article when compared with the former Utilities Directive (2004/17). It clarifies that the special regime set up in this article does not apply to contracts awarded for the purpose of exploring for oil and gas as these activities are not covered by the present Utilities Directive. You are referred to the commentary to article 14 of the Utilities Directive.

1 Commission Decision 2002/205/EC of 4 March 2002 following a request by Austriaapplying for the special regime provided for in Article 3 of Directive 93/38/EEC (OJ L 68, 12.3.2002, p. 31). 2 Commission Decision 2004/73/EC of 15 January 2004 on a request from Germanyto apply the special procedure laid down in Article 3 of Directive 93/38/EEC (OJ L 16, 23.1.2004, p. 57). 3 Commission Decision 93/327/EEC of 13 May 1993 defining the conditions under which contracting entities exploiting geographical areas for the purpose of exploring for or extracting oil, gas, coal or other solid fuels must communicate to the Commission information relating to the contracts they award (OJ L 129, 27.5.1993, p. 25). 4 Also article 12 of Directive 94/22/EC has been relevant for setting up special arrangements in these sectors. 5 The background to the exemption in this article is explained in recital 38 to the former Utilities Directive (2004/17).

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Art. 34

Subsection 5 Activities directly exposed to competition and procedural provisions relating thereto Article 34 Activities directly exposed to competition 1. Contracts intended to enable an activity mentioned in Articles 8 to 14 to be carried out shall not be subject to this Directive if the Member State or the contracting entities having introduced the request pursuant to Article 35 can demonstrate that, in the Member State in which it is performed, the activity is directly exposed to competition on markets to which access is not restricted; nor shall design contests that are organised for the pursuit of such an activity in that geographic area be subject to this Directive. The activity concerned may form a part of a larger sector or be exercised only in certain parts of the Member State concerned. The competition assessment referred to in the first sentence of this paragraph, which will be made in the light of the information available to the Commission and for the purposes of this Directive, is without prejudice to the application of competition law. Such assessment shall be made having regard to the market for the activities in question and the geographical reference market within the meaning of paragraph 2. 2. For the purposes of paragraph 1 of this Article, the question of whether an activity is directly exposed to competition shall be decided on the basis of criteria that are in conformity with the provisions on competition of the TFEU. Those may include the characteristics of the products or services concerned, the existence of alternative products or services considered to be substitutable on the supply side or demand side, the prices and the actual or potential presence of more than one supplier of the products or provider of the services in question. The geographical reference market, on the basis of which exposure to competition is assessed, shall consist of the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because, in particular, conditions of competition are appreciably different in those areas. That assessment shall take account in particular of the nature and characteristics of the products or services concerned, of the existence of entry barriers or of consumer preferences, of appreciable differences of the undertakings’ market shares between the area concerned and neighbouring areas or of substantial price differences. 3. For the purposes of paragraph 1 of this Article, access to a market shall be deemed not to be restricted if the Member State has implemented and applied the Union legislation listed in Annex III. If free access to a given market cannot be presumed on the basis of the first subparagraph, it must be demonstrated that access to the market in question is free de facto and de jure. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, p. 145; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 174; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2 nd ed. 2007, pp. 173; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 879.

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The Utilities Directive requires contracting entities to apply special procedural rules when awarding a contract related to one of the sectors listed in Articles 8 to 14. On the other hand if there is sufficient competition on a market it will not be necessary to subject a contracting entity to the rigors of the Utilities Directive. Competition on a market can be demonstrated if the concrete contract related to an activity covered by the Utilities Directive is awarded under a competitive procurement procedure. If this is the case a contracting entity, not being a contracting authority or public undertaking, which is carrying on activities covered by the Utilities Directive will not be required to apply the procedures of the Directive when awarding a contract even if special or exclusive rights are involved.1 Competition on a market can also be demonstrated more generally and this article establishes the substantive criteria for assessing whether a market, a sector of a market or a geographically separate market, is directly exposed to competition and access to that market is not restricted. A Member State cannot decide for itself to exclude a market from the Utilities Directive and must send an application to the Commission which is empowered to take a decision on the application, although within certain time limits. A request pursuant to Articles 34 and 35 is only necessary if private undertakings carry on their activities on the basis of special or exclusive rights which are not granted under a competitive procurement procedure, or if public undertakings or contracting authorities wish to be exempted from their obligations under the Utilities Directive. When compared with the former Utilities Directive (2004/17) there has been a significant clarification of the conditions for being exempt from the procurement rules of the Utilities Directive and of the mechanism in the following Article 35 for establishing whether these conditions are fulfilled. If a contract is excluded from the Utilities Directive under Articles 34 and 35 it follows from Article 7 of the Public Sector Directive that the contract is also excluded from the latter directive. 2 The reason for the introduction of a special mechanism for excluding certain markets from the scope of the Utilities Directive must be understood in view of the reason for subjecting contracting entities to this directive. The reason for this requirement is that public contracting entities are generally regarded as having a tendency to take into account non-financial considerations, and it is considered possible that private contracting entities may have a corresponding tendency, because the award of special or exclusive rights to carry on their activities in these sectors means that they are protected from competition, and they thus develop a dependent relationship with the State which can induce them to pay attention to the interests of the State when awarding contracts. In the last decades there has been substantial liberalisation of the sectors and activities that are subject to the Utilities Directive, which changes this situation. If the liberalisation means that economic operators in a defined sector of the market are no longer protected from competition, and it can be shown that the competition is real and effective so that contracting by economic operators is subject to the discipline of a competitive market, there is no longer a justification for making non-public undertakings or certain activities subject to the Utilities Directive. Such considerations have led to the telecommunications sector no longer being subject to the Utilities Directive. Corresponding considerations have led to the transfer of postal services so as to fall within the scope of the Utilities Directive, and this sector now has the possibility of being exempted in whole or in part from the procurement requirements. 1

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Article 4(3) of the Utilities Directive.

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Art. 34

A considerable number of activities especially in the postal and energy sectors of sev- 3 eral Member States has been exempted under the procedures of the previous Utilities Directive (2004/17). This includes various postal services, financial services in the postal sector, courier services, electricity production and wholesale, gas storage, exploration for and extraction of coal.2 Also an acitivity related to contracts awarded by contracting entities and intended to enable provision of airport infrastructure for cargo to be carried out in Austria has been exempted.3

34.1. Activities directly exposed to competition The key criterion for assessment is whether the activity in question in the Member 4 State where it is carried on is directly exposed to the ordinary conditions of a competitive market to which there is free access. Direct exposure to competition will be based on objective criteria and in the light of the special characteristics of the sector in question. 4 The assessment of the facts on a market correlate to similar assessments under competition law and for this reason it is specifically stated that any assessment of a market with the aim of excluding a market or a sector from the Utilities Directive is taken without prejudice to the application of competition law. The reason for this is that the assessment under the Utilities Directive is limited by short deadlines and the need to rely on the information supplied to the Commission where under competition law the Commission has wider powers to obtain information.5

34.2. Whether an activity is directly exposed to competition The first part of the substantive assessment is whether an activity is directly exposed 5 to competition. The criteria for this assessment are the same as are being used under the competition provisions of the Treaty. A market analysis will have to be undertaken taking into account all aspects of a market starting with the characteristics of the products or services in question and including demand and supply substitutability, the market structure, prices and profits etc. 6 Also the geographical reference market must be delineated in order to be able to assess whether a market or a sector is directly exposed to competition. A relevant geographical market might coincide with the territory of a Member State but it might also consist of parts of the territory of a Member State. The criteria for assessing the geographical reference market set out in the Utilities Directive is based on similar criteria in other parts of Union law.7

34.3. Whether access to a market is not restricted The second part of the substantive assessment is whether access to a market is not 6 restricted. The Utilities Directive includes a presumptive rule that there is free access to a

2 The Commission has published a number of exemption decisions on its website to which the reader is referred for the details of these decision: https://ec.europa.eu/growth/single-market/public-procurement/ rules-implementation/exempt-markets_en. 3 Commission Implementing Decision (EU) 2017/132 of 24 January 2017 concerning the applicability of Article 34 of Directive 2014/25/EU of the European Parliament and of the Council to contracts awarded for provision of airport infrastructure for cargo in Austria. 4 Recital 44 of the Utilities Directive. 5 Recital 44 of the Utilities Directive. 6 See case T-463/14, Österreichische Post, whereby The General Court partly upheld and partly annulled a decision of the Commission. 7 Recital 45 of the Utilities Directive.

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market if the activity in the market in question has been liberalised in law and in fact on the basis of Union legislation. The implementation and application of appropriate Union legislation opening a given sector, or a part thereof, should be considered to provide sufficient grounds for assuming that there is free access to the market in question.8

A list of the applicable Union laws is set out in Annex III to the Utilities Directive. The reason for this presumptive rule is that the ongoing liberalisation of the sectors covered by the Utilities Directive has led to the inclusion of its Article 34. It is therefore found appropriate to provide a link between the ongoing liberalisation of the markets and activities covered by the Utilities Directive and the possibility of excluding the relevant markets and activities from the scope of the Utilities Directive. 7 In other situations the Commission will assess whether, de jure as well as de facto, there is free access to the market in question. A number of factors must be taken into consideration and the Member State must supply the necessary information in this respect, re. Article 35 of the Utilities Directive. If a Member State has decided to extend the application of Union legislation opening up a given sector to activities not covered by that legal act, the Commission will take this fact into account when assessing whether access to the sector concerned is free.9 The market analysis undertaken with the aim of assessing whether an activity is directly exposed to competition will be applicable also in assessing whether market access is free.

Article 35 Procedure for establishing whether Article 34 is applicable 1. Where a Member State or, where the legislation of the Member State concerned provides for it, a contracting entity considers that, on the basis of the criteria set out in Article 34(2) and (3), a given activity is directly exposed to competition on markets to which access is not restricted, it may submit a request to the Commission to establish that this Directive does not apply to the award of contracts or the organisation of design contests for the pursuit of that activity, where appropriate together with the position adopted by an independent national authority that is competent in relation to the activity concerned. Such requests may concern activities which are part of a larger sector or which are exercised only in certain parts of the Member State concerned. In the request, the Member State or contracting entity concerned shall inform the Commission of all relevant facts, and in particular of any law, regulation, administrative provision or agreement concerning compliance with the conditions set out in Article 34(1). 2. Unless a request coming from a contracting entity is accompanied by a reasoned and substantiated position, adopted by an independent national authority that is competent in relation to the activity concerned, which thoroughly analyses the conditions for the possible applicability of Article 34(1) to the activity concerned in accordance with paragraphs 2 and 3 of that Article, the Commission shall immediately inform the Member State concerned. The Member State concerned shall in such cases inform the Commission of all relevant facts, and in particular of any law, regulation, administrative provision or agreement concerning compliance with the conditions set out in Article 34(1). 8 9

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Recital 46 of the Utilities Directive. Recital 47 of the Utilities Directive.

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Art. 35

3. Upon request submitted in accordance with paragraph 1 of this Article, the Commission may, by means of implementing acts adopted within the periods set out in Annex IV, establish whether an activity referred to in Articles 8 to 14 is directly exposed to competition on the basis of the criteria set out in Article 34. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 105(2). Contracts intended to enable the activity concerned to be carried out and design contests that are organised for the pursuit of such an activity shall cease to be subject to this Directive in any of the following cases: (a) The Commission has adopted the implementing act establishing the applicability of Article 34(1) within the period provided for in Annex IV; (b) has not adopted the implementing act within the period provided for in Annex IV. 4. After the submission of a request, the Member State or the contracting entity concerned may, with the Commission’s agreement, substantially modify its request, in particular as regards the activities or the geographical areas concerned. In that case, a new period for the adoption of the implementing act shall apply, which shall be calculated in accordance with paragraph 1 of Annex IV, unless a shorter period is agreed on by the Commission and the Member State or contracting entity which has presented the request. 5. Where an activity in a given Member State is already the subject of a procedure under paragraphs 1, 2 and 4, further requests concerning the same activity in the same Member State before the expiry of the period opened in respect of the first request shall not be considered as new procedures and shall be treated in the context of the first request. 6. The Commission shall adopt an implementing act establishing detailed rules for the application of paragraphs 1 to 5. That implementing act shall include at least rules relating to: (a) the publication in the Official Journal of the European Union, for information, of the date on which the period set out in paragraph 1 of Annex IV begins and ends, including any prolongations or suspensions of those periods, as provided for in that Annex; (b) publication of the possible applicability of Article 34(1) in accordance with point (b) of the second subparagraph of paragraph 3 of this Article; (c) implementing provisions concerning the form, content and other details of requests pursuant to paragraph 1 of this Article; Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 105(2). The procedure distinguishes between applications from a Member State and applica- 1 tions from a contracting entity. Furthermore, the procedure distinguishes between applications which are accompanied by a reasoned and substantiated opinion adopted by a competent and independent national authority in charge of the activity concerned and other applications. These differences have an impact on the deadlines which are set in Annex IV for the Commission to establish whether the activity in question is directly exposed to competition on a market to which access is not restricted.

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35.1. Application for an exemption 2

A request may concern a sector, parts of a sector or parts of a Member State. The information to be supplied should be tailored to address the concrete request and the markets concerned. The Commission has in 2016 issued an implementing decision. In this decision the Commission sets two models for submitting requests pursuant to Article 34. 1 A Member State must submit information about the relevant product market and the relevant geographical market. Information must also be given about which suppliers are active in the market, and the conditions of supply and demand in the market. Among other things, information must be given about whether, during the preceding five years, a significant number of undertakings have succeeded in gaining entry to the market and an estimation of the market shares of these undertakings, as well as the barriers to entry to the market that may exist.

35.2. Information on the market from a competent regulatory authority 3

In the sectors subject to the Utilities Directive there will often be a special regulatory authority overseeing the activities and competition in that sector and more generally the national competition authority will oversee the activities of all sectors of the national economy. For this reason special emphasis is put on the opinion of such an authority although this is dependent on the authority being both competent and independent of the Member State and that the opinion concerns the request for being excluded from the Utilities Directive. In the recitals to the Utilities Directive the reasons for putting special emphasis on those authorities are set out: “Independent national authorities, such as sectoral regulators or competition authorities, normally possess specialised know-how, information and knowledge that would be pertinent when assessing whether a given activity or parts thereof are directly exposed to competition on markets to which access is not limited. Requests for exemption should therefore where appropriate be accompanied by, or incorporate, a recent position on the competitive situation in the sector concerned, adopted by an independent national authority that is competent in relation to the activity concerned.”2

If a request is not accompanied by such an opinion the Commission will request the necessary information from the Member State. The deadline for the Commission is in this situation prolonged by 15 working days.

35.3. The Commission has the power to grant an exemption 4

A Member State cannot decide for itself to exclude a sector from the scope of the Utilities Directive, as Member States must submit a request to the Commission to this effect. The deadline for the Commission to decide on the application differs as to whether the presumptive rule set out in Article 34(3) first paragraph applies or not. If this rule applies, i.e. that access to at market is deemed not to be restricted, then the Commission has a deadline of 90 working days for deciding on such a request. In other situations it has a deadline of 130 working days. If the Commission has not taken a decision by the expiry of the deadline, the conditions of Article 34(1) are regarded as having been satisfied and the activity in question is no longer subject to the Utilities Directive. 1 Commission Implementing Decision (EU) 2016/1804 of 10 October 2016 on the detailed rules for the application of Articles 34 and 35 of Directive 2014/25/EU of the European Parliament and of the Council on procurement by entities operating in the water, energy, transport and postal services sectors. 2 Recital 48 to the Utilities Directive.

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The deadlines only begin when the information supplied by the Member State is complete. It is for the Commission to decide when information is complete. This corresponds to the situation within the field of merger control under Regulation 139/2004. There is a possibility that the deadlines might be extended with the agreement of the Member State. This could for example be the case where the degree of complexity of the case requires more time to analyse the competitive situation on a market. 3 A deadline can also be suspended if the Commission seeks supplementary information or clarifications from the applicant or the Member State.4 If the Commission decides (or the deadline for taking such a decision has expired) 5 that the Utilities Directive shall no longer apply to a specific activity, the contracting entities need no longer apply the procedural rules of the Utilities Directive when awarding procurement contracts or organising design contests for the specific activities listed in the request. If, for example, a decision made pursuant to Article 30 concerns parcel post activities, it will be possible to make a contract to purchase lorries for this activity without inviting tenders. On the other hand, the procurement of lorries for other postal services should follow the procedures in the Utilities Directive. The Court of Justice of the European Union has the power to review a decision of the Commission on the substance as well as the reasoning of the decision.5 Such a decision will be relevant to public undertakings and to private undertakings that are subject to the Utilities Directive. Contracting authorities that are otherwise subject to the Public Sector Directive are also exempt from this Directive’s procedural rules in respect of activities exempted pursuant to Articles 34 and 35 of the Utilities Directive.6

35.4. Amendments to a request might lead to a new time period Amendments to a request which are substantial will normally lead to that a new 6 deadline for the Commission to decide on the application in accordance with Annex IV.

35.5. Several requests concerning the same activity will not lead to new time periods This paragraph is the mirror image of the preceding paragraph as it states that the 7 Commission will not be entitled to a prolonged deadline in the situation where a request is concerned with the same activity as a previous request.

Chapter IV General principles Article 36 Principles of procurement 1. Contracting entities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner. The design of the procurement shall not be made with the intention of excluding it from the scope of this Directive or of artificially narrowing competition. ComRecital 49 to the Utilities Directive. Se for instance OJ 2015 C 217/23 on provision of airports in Austria. 5 Case T-463/14, Österreichische Post, partly annulling a decision of the Commission. 6 Article 7 of the Public Sector Directive. 3

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petition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators. 2. Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex XIV. 1

This provision is identical to the Public Sector Directive Article 18. For a commentary, see this provision.

Article 37 Economic operators 1. Economic operators that, under the law of the Member State in which they are established, are entitled to provide the relevant service, shall not be rejected solely on the ground that, under the law of the Member State in which the contract is awarded, they would be required to be either natural or legal persons. However, in the case of service and works contracts as well as supply contracts covering in addition services or siting and installation operations, legal persons may be required to indicate, in the tender or the request to participate, the names and relevant professional qualifications of the staff responsible for the performance of the contract in question. 2. Groups of economic operators, including temporary associations, may participate in procurement procedures. They shall not be required by contracting entities to have a specific legal form in order to submit a tender or a request to participate. Where necessary, contracting entities may clarify in the procurement documents how groups of economic operators are to meet the criteria and requirements for qualification and qualitative selection referred to in Articles 77 to 81 provided that this is justified by objective reasons and is proportionate. Member States may establish standard terms for how groups of economic operators are to meet those requirements. Any conditions for the performance of a contract by such groups of economic operators, which are different from those imposed on individual participants, shall also be justified by objective reasons and shall be proportionate. 3. Notwithstanding paragraph 2, contracting entities may require groups of economic operators to assume a specific legal form once they have been awarded the contract, to the extent that such a change is necessary for the satisfactory performance of the contract. 1

This provision is identical to the Public Sector Directive Article 19. For a commentary, see this provision.

Article 38 Reserved contracts 1. Member States may reserve the right to participate in procurement procedures to sheltered workshops and economic operators whose main aim is the social and professional integration of disabled or disadvantaged persons or may provide for 978

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such contracts to be performed in the context of sheltered employment programmes, provided that at least 30 % of the employees of those workshops, economic operators or programmes are disabled or disadvantaged workers. 2. The call for competition shall make reference to this Article. This provision is identical to the Public Sector Directive Article 20. For a commen- 1 tary, see this provision.

Article 39 Confidentiality 1. Unless otherwise provided in this Directive or in the national law to which the contracting entity is subject, in particular legislation concerning access to information, and without prejudice to the obligations relating to the advertising of awarded contracts and to the information to candidates and tenderers set out in Articles 70 and 75, the contracting entity shall not disclose information forwarded to it by economic operators which they have designated as confidential, including, but not limited to, technical or trade secrets and the confidential aspects of tenders. 2. Contracting entities may impose on economic operators requirements aimed at protecting the confidential nature of information which the contracting entities make available throughout the procurement procedure, including information made available in connection with the operation of a qualification system, whether or not this has been the subject of a notice on the existence of a qualification system used as a means of calling for competition. This provision is identical to the Public Sector Directive Article 21. For a commen- 1 tary, see this provision. However a supplementary provision is inserted in Article 39(2) due to the fact that it 2 is open for contracting entities under the Utilities Directive to set up a qualification system and the contracting entity might impose confidentiality obligations upon the economic operators irrespective of whether a qualification system has been used as a means of calling for competition or not.

Article 40 Rules applicable to communication 1. Member States shall ensure that all communication and information exchange under this Directive, in particular electronic submission, are performed using electronic means of communication in accordance with the requirements of this Article. The tools and devices to be used for communicating by electronic means, as well as their technical characteristics, shall be non-discriminatory, generally available and interoperable with the ICT products in general use and shall not restrict economic operators’ access to the procurement procedure. Notwithstanding the first subparagraph, contracting entities shall not be obliged to require electronic means of communication in the submission process in the following situations: (a) due to the specialised nature of the procurement, the use of electronic means of communication would require specific tools, devices or file formats that are not generally available or supported by generally available applications; Sune Troels Poulsen

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(b) the applications supporting file formats that are suitable for the description of the tenders use file formats that cannot be handled by any other open or generally available applications or are under a proprietary licensing scheme and cannot be made available for downloading or remote use by the contracting entity; (c) the use of electronic means of communication would require specialised office equipment that is not generally available to contracting entities; (d) the procurement documents require the submission of physical or scale models which cannot be transmitted using electronic means. In respect of communications for which electronic means of communication are not used pursuant to the second subparagraph, communication shall be carried out by post or other suitable carrier or by a combination of post or other suitable carrier and electronic means. Notwithstanding the first subparagraph of this paragraph, contracting entities are not obliged to require electronic means of communication in the submission process to the extent that the use of means of communication other than electronic means is necessary either because of a breach of security of the electronic means of communications or for the protection of the particularly sensitive nature of information requiring such a high level of protection that it cannot be properly ensured by using electronic tools and devices that are either generally available to economic operators or can be made available to them by alternative means of access within the meaning of paragraph 5. It shall be the responsibility of the contracting entities requiring, in accordance with the second subparagraph of this paragraph, means of communication other than electronic means in the submission process to indicate in the individual report referred to in Article 100 the reasons for this requirement. Where applicable, contracting entities shall indicate in the individual report the reasons why use of means of communication other than electronic means has been considered necessary in application of the fourth subparagraph of this paragraph. 2. Notwithstanding paragraph 1, oral communication may be used in respect of communications other than those concerning the essential elements of a procurement procedure, provided that the content of the oral communication is documented to a sufficient degree. For this purpose, the essential elements of the procurement procedure include the procurement documents, requests for participation and confirmations of interest and tenders. In particular, oral communications with tenderers which could have a substantial impact on the content and assessment of the tenders shall be documented to a sufficient extent and by appropriate means, such as written or audio records or summaries of the main elements of the communication. 3. In all communication, exchange and storage of information, contracting entities shall ensure that the integrity of data and the confidentiality of tenders and requests to participate are preserved. They shall examine the content of tenders and requests to participate only after the time limit set for submitting them has expired. 4. For public works contracts and design contests, Member States may require the use of specific electronic tools, such as of building information electronic modelling tools or similar. In such cases the contracting entities shall offer alternative means of access as provided for in paragraph 5, until such time as those tools become generally available within the meaning of the second sentence of the first subparagraph of paragraph 1. 980

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5. Contracting entities may, where necessary, require the use of tools which are not generally available, provided that the contracting entities offer alternative means of access. Contracting entities shall be deemed to offer suitable alternative means of access in any of the following situations, where they: (a) offer unrestricted and full direct access free of charge by electronic means to those tools and devices from the date of publication of the notice in accordance with Annex IX or from the date on which the invitation to confirm interest is sent. The text of the notice or the invitation to confirm interest shall specify the internet address at which those tools and devices are accessible; (b) ensure that tenderers having no access to the tools and devices concerned, or no possibility of obtaining them within the relevant time limits, provided that the lack of access is not attributable to the tenderer concerned, may access the procurement procedure through the use of provisional tokens made available free of charge online; or (c) support an alternative channel for electronic submission of tenders. 6. In addition to the requirements set out in Annex V, the following rules shall apply to tools and devices for the electronic transmission and receipt of tenders and for the electronic receipt of requests to participate: (a) information on specifications for the electronic submission of tenders and requests to participate, including encryption and time-stamping, shall be available to interested parties; (b) Member States, or contracting entities acting within an overall framework established by the Member State concerned, shall specify the level of security required for the electronic means of communication to be used in the various stages of the specific procurement procedure; that level shall be proportionate to the risks attached; (c) where Member States, or contracting entities acting within an overall framework established by the Member State concerned, conclude that the level of risks, assessed under point (b) of this paragraph, is such that advanced electronic signatures as defined by Directive 1999/93/EC of the European Parliament and of the Council1 are required, contracting entities shall accept advanced electronic signatures supported by a qualified certificate, taking into account whether those certificates are provided by a certificate services provider, which is on a trusted list as provided for in Commission Decision 2009/767/EC,2 created with or without a secure signature creation device, subject to compliance with the following conditions: (i) the contracting entities shall establish the required advanced signature format on the basis of formats established in Commission Decision 2011/130/EU3 and shall put in place necessary measures to be able to process those formats technically; in case a different format of electronic signature is used, the electronic signature or the electronic document carri1 Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures (OJ L 13, 19.1.2000, p. 12). 2 Commission Decision 2009/767/EC of 16 October 2009 setting out measures facilitating the use of procedures by electronic means through the points of single contact under Directive 2006/123/EC of the European Parliament and of the Council on services in the internal market (OJ L 274, 20.10.2009, p. 36). 3 Commission Decision 2011/130/EU of 25 February 2011 establishing minimum requirements for the cross-border processing of documents signed electronically by competent authorities under Directive 2006/123/EC of the European Parliament and of the Council on services in the internal market (OJ L 53, 26.2.2011, p. 66).

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er shall include information on existing validation possibilities, which shall be under the responsibility of the Member State. The validation possibilities shall allow the contracting entity to validate online, free of charge and in a way that is understandable for non-native speakers, the received electronic signature as an advanced electronic signature supported by a qualified certificate. Member States shall notify information on the provider of validation services to the Commission, which shall make the information received from the Member States available to the public on the internet; (ii) where a tender is signed with the support of a qualified certificate that is included on a trusted list, the contracting entities shall not apply additional requirements that may hinder the use of those signatures by tenderers. In respect of documents used in the context of a procurement procedure that are signed by a competent authority of a Member State or by another issuing entity, the competent issuing authority or entity may establish the required advanced signature format in accordance with the requirements set out in Article 1(2) of Decision 2011/130/EU. They shall put in place the necessary measures to be able to process that format technically by including the information required for the purpose of processing the signature in the document concerned. Such documents shall contain in the electronic signature or in the electronic document carrier information on existing validation possibilities that allow the validation of the received electronic signature online, free of charge and in a way that is understandable for non-native speakers. 7. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 to amend the technical details and characteristics set out in Annex V to take account of technical developments. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 to amend the list set out in points (a) to (d) of the second subparagraph of paragraph 1 of this Article where technological developments render continued exceptions from the use of electronic means of communication inappropriate or, exceptionally, where new exceptions must be provided for because of technological developments. To ensure the interoperability of technical formats as well as of process and messaging standards, especially in a cross-border context, the Commission shall be empowered to adopt delegated acts in accordance with Article 103 to establish the mandatory use of such specific technical standards, in particular with regard to the use of electronic submission, electronic catalogues and means for electronic authentication, only where technical standards have been thoroughly tested and proved their usefulness in practice. Before making the use of any technical standard mandatory, the Commission shall also carefully consider the costs that this may entail, in particular in terms of adaptations to existing e-procurement solutions, including infrastructure, processes or software. 1

This provision is identical to the Public Sector Directive Article 22. For a commentary, see this provision.

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Article 41 Nomenclatures 1. Any references to nomenclatures in the context of public procurement shall be made using the Common Procurement Vocabulary (CPV) as adopted by Regulation (EC) No 2195/2002. 2. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 to adapt the CPV codes referred to in this Directive, whenever changes in the CPV nomenclature have to be reflected in this Directive and they do not imply a modification of the scope of this Directive. This provision is identical to the Public Sector Directive Article 23. For a commen- 1 tary, see this provision.

Article 42 Conflicts of interest Member States shall ensure that contracting authorities take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators. The concept of conflicts of interest shall at least cover any situation where staff members of the contracting authority or of a procurement service provider acting on behalf of the contracting authority who are involved in the conduct of the procurement procedure or may influence the outcome of that procedure have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure. This provision is identical to the Public Sector Directive Article 24. For a commen- 1 tary, see this provision.

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TITLE II RULES APPLICABLE TO CONTRACTS Chapter I Procedures Article 43 Conditions relating to the GPA and other international agreements In so far as they are covered by Annexes 3, 4 and 5 and the General Notes to the European Union’s Appendix I to the GPA and by the other international agreements by which the Union is bound, contracting entities within the meaning of Article 4(1) (a) shall accord to the works, supplies, services and economic operators of the signatories to those agreements treatment no less favourable than the treatment accorded to the works, supplies, services and economic operators of the Union. 1

This provision is identical to the Public Sector Directive Article 25. For a commentary, see this provision. The only difference between the two articles is that Article 43 makes reference to some specific annexes to the GPA (Annex 3 on some utilities activities, Annex 4 on some types of services, and Annex 5 on some construction activities) whereas the Public Sector Directive also makes reference to some annexes which are concerned with the definition on Public Authorities (Annex 1 on some agencies which are part of the state, and Annex 2 on Bodies governed by Public law) and excludes reference to Annex 3 on Utilities activities.

Article 44 Choice of procedures 1. When awarding supply, works or service contracts, contracting entities shall apply the procedures adjusted to be in conformity with this Directive, provided that, without prejudice to Article 47, a call for competition has been published in accordance with this Directive. 2. Member States shall provide that contracting entities may apply open or restricted procedures or negotiated procedures with prior call for competition as regulated in this Directive. 3. Member States shall provide that contracting entities may apply competitive dialogues and innovation partnerships as regulated in this Directive. 4. The call for competition may be made by one of the following means: (a) a periodic indicative notice pursuant to Article 67 where the contract is awarded by restricted or negotiated procedure; (b) a notice on the existence of a qualification system pursuant to Article 68 where the contract is awarded by restricted or negotiated procedure or by a competitive dialogue or an innovation partnership; (c) by means of a contract notice pursuant to Article 69. In the case referred to in point (a) of this paragraph, economic operators having expressed their interest following the publication of the periodic indicative notice shall subsequently be invited to confirm their interest in writing by means of an invitation to confirm interest in conformity with Article 74. 984

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5. In the specific cases and circumstances referred to expressly in Article 50, Member States may provide that contracting entities may apply a negotiated procedure without prior call for competition. Member States shall not allow the application of that procedure in any other cases than those referred to in Article 50. The Utilities Directive provides for a greater degree of flexibility when compared with 1 the Public Sector Directive. This is especially seen in the fact that contracting entities are free to use the negotiated procedure with a prior call for competition and that contracting entities have more means for making a call for competition.

44.1. Call for competition as the corner stone of the Utilities Directive It is a hallmark for the procurement directives that a contracting entity is only enti- 2 tled to use the procedures which are set out in the directives. The reason for this is to increase transparency in public contracting as the economic operators thereby know in advance the content of the procedures which the contracting entity might use when procuring supplies etc. It is mandatory for most procedures under the Utilities Directive to make a prior call for competition. This requirement is of the utmost importance for safeguarding the opening of public contracts to competition and thereby achieving smart, sustainable and inclusive growth through increased competition on the Internal Market of the European Union, which is one of the aims of the procurement directives.1 Only where the conditions in Article 50 for using the negotiated procedure without a prior call for competition are fulfilled, a contracting entity may proceed without such a call for competition.

44.2. Choice between open, restricted and negotiated procedures A contracting entity that is subject to the Utilities Directive is free to choose between 3 open procedures, restricted procedures and negotiated procedures. It is a characteristic of the Utilities Directive that contracting entities can use negotiated procedures on an equal footing with open and restricted procedures and this is seen as one of the major advantages by being able to use this directive. For all three procedures it is a condition that the contracting entity makes a prior call for competition.

44.3. Competitive dialogue and innovation partnerships It is a novelty in the 2014 Utilities Directive that a contracting entity may use compet- 4 itive dialogue and innovation partnerships. When compared with the Public Sector Directive it is worth noting that the use of the competitive dialogue is not subject to any special conditions. The possibilities for using innovation partnerships are similar to those of the Public Sector Directive.

44.4. Several means of making a call for competition Under the Utilities Directive there are several means of making a prior call for com- 5 petition. Like under the Public Sector Directive a contracting entity may publish a contract notice. The Utilities Directive also provides for two special ways of making calls for competi- 6 tion which contracting entities are free to choose: Using periodic indicative notices and establishing a qualification system. These variations of the requirements for making calls 1

Recital 4 to the Utilities Directive.

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for competition and thereby of the procurement procedures give contracting authorities a considerable degree of flexibility in arranging their purchases. A periodic indicative notice or a qualification system for making calls for competition can only be used in connection with either the restricted procedure or the negotiated procedure. The implication is that the call for competition will have to contain information on the subject matter of the contract, on the selection requirements etc., as respectively set out in Article 67 with Annex VI with regard to periodic indicative notices and Article 68 with Annex X with regard to qualification systems. When a contracting entity uses a qualification system as a call for competition, detailed information on the acquisition will according to Article 73(1) have to be sent to the economic operators which have been selected for the qualification system at the latest when the invitations to tender or negotiate is sent. When using a periodic indicative notice as a call for competition Articles 44(4) and 74 provide that contracting entities shall invite the economic operators to confirm their continuing interest. When using a qualification system Article 77 provides that tenderers and participants will be selected among the candidates already qualified.

44.5. The negotiated procedure without a call for competition 7

A contracting entity may enter into a contract without making a prior call for competition if the conditions set out in Article 50 are fulfilled. As this procedure in no way safeguards the aims of the Utilities Directive with respect to transparency, equality and competition, this procedure can only be used as an exception.

Article 45 Open procedure 1. In open procedures any interested economic operator may submit a tender in response to a call for competition The minimum time limit for the receipt of tenders shall be 35 days from the date on which the contract notice was sent. The tender shall be accompanied by the information for qualitative selection that is requested by the contracting entity. 2. Where contracting entities have published a periodic indicative notice which was not itself used as a means of calling for competition, the minimum time limit for the receipt of tenders, as laid down in the second subparagraph of paragraph 1 of this Article, may be shortened to 15 days, provided that all of the following conditions are fulfilled: (a) the periodic indicative notice included, in addition to the information required by Section I of Part A of Annex VI, all the information required by Section II of Part A of Annex VI, insofar as the latter information was available at the time the periodic indicative notice was published; (b) the periodic indicative notice was sent for publication between 35 days and 12 months before the date on which the contract notice was sent. 3. Where a state of urgency duly substantiated by the contracting entity renders impracticable the time limit laid down in the second subparagraph of paragraph 1, it may fix a time limit which shall be not less than 15 days from the date on which the contract notice was sent. 4. The contracting entity may reduce by five days the time limit for receipt of tenders set out in the second subparagraph of paragraph 1 of this Article where it accepts

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that tenders may be submitted by electronic means in accordance with first subparagraph of Article 40(4) and Article 40(5) and (6). This provision is identical to the Public Sector Directive Article 27. For a commen- 1 tary, see this provision.

Article 46 Restricted procedure 1. In restricted procedures, any economic operator may submit a request to participate in response to a call for competition by providing the information for qualitative selection that is requested by the contracting entity. The minimum time limit for the receipt of requests to participate shall, as a general rule, be fixed at no less than 30 days from the date on which the contract notice or the invitation to confirm interest was sent and shall in any event not be less than 15 days. 2. Only those economic operators invited to do so by the contracting entity following its assessment of the information provided may submit a tender. Contracting entities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 78(2). The time limit for the receipt of tenders may be set by mutual agreement between the contracting entity and the selected candidates, provided that all selected candidates have the same time to prepare and submit their tenders.In the absence of agreement on the time limit for the receipt of tenders, the time limit shall be at least 10 days from the date on which the invitation to tender was sent. The restricted procedure is a procedure in two phases where the contracting entity 1 first makes a call for competition and the economic operators declare their interest in the contract. The qualifications of the economic operators are then assessed. The procedure is restricted in the sense that among the economic operators who are assessed as qualified by use of the qualification criteria a contracting entity has the possibility of restricting the number of economic operators that can submit a tender. In the second phase the selected candidates are invited to submit their tenders. The requirements in the Utilities Directive for using the restricted procedure mirrors to some extent the requirements for this procedure as set out in the Public Sector Directive, but the conditions and limitations are considerably more limited. For more on the general aspects of the restricted procedure, see the commentary to Article 28 Public Sector Directive.

46.1. Requests to participate in response to a call for competition It is a condition for using the restricted procedure that the contracting entity makes a 2 call for competition and provides the information which it will use for making the qualitative selection. The call for competition should be made in accordance with Article 69 and contain the information requirements set out in Annex XI. If a contracting entity wishes to make use of a quantitative selection the criteria for doing this should also be made available to the economic operators. There are no minimum requirements as to the information which should be included 3 in the call for competition and the Utilities Directive thereby differs from the requirements under the Public Sector Directive.

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The time limits are shorter than those of the Public Sector Directive, as it is stated that the general rule for the time limit for receipt of request to participate should be no less than 30 days from the date on which the contract notice or the invitation to confirm interest was sent but the minimum requirements for the time limit is only 15 days. It is not set out in the directive under which conditions a contracting entity is entitled to shorten the time limit to 15 days.

46.2. Invitations to submit a tender Only economic operators which have declared their interest in the contract and have been assessed as qualified by the contracting entity by using the qualification criteria set out in the call for competition may submit a tender. Among the qualified candidates the contracting entity might limit the number invited to submit a tender. When restricting the number of candidates the contracting entity will have to use objective criteria which are published in the contract notice or made available to the economic operators in accordance with Article 78(2). There is no minimum number of candidates which should be respected as long as the number of candidates selected takes account of the need to ensure adequate competition. 6 The time limits for submitting bids can be negotiated between the selected candidates and the contracting entity. The principle of equality must be respected also under this phase and accordingly all selected candidates must have the same time limit for submitting their tender. Under no circumstance must the time limit be shorter than 10 days from the date on which the invitation to tender was sent. These requirements as to time limits are considerably more flexible when compared with the requirements under the Public Sector directive. 5

Article 47 Negotiated procedure with prior call for competition 1. In negotiated procedures with prior call for competition, any economic operator may submit a request to participate in response to a call for competition by providing the information for qualitative selection that is requested by the contracting entity. The minimum time limit for the receipt of requests to participate shall, as a general rule, be fixed at no less than 30 days from the date on which the contract notice or, where a periodic indicative notice is used as a means of calling for competition, the invitation to confirm interest was sent and shall in any event not be less than 15 days. 2. Only those economic operators invited by the contracting entity following its assessment of the information provided may participate in the negotiations. Contracting entities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 78(2). The time limit for the receipt of tenders may be set by mutual agreement between the contracting entity and the selected candidates, provided that they all have the same time to prepare and submit their tenders.In the absence of agreement on the time limit for the receipt of tenders, the time limit shall be at least 10 days from the date on which the invitation to tender was sent. 1

The negotiated procedure with a prior call for competition is a procedure in two phases where the contracting entity first makes a call for competition and the economic

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operators declare their interest in the contract. The qualifications of the economic operators are then assessed by using the qualification criteria set out in the call for competition. Among the economic operators who are qualified a contracting entity has the possibility of restricting the number of economic operators that can participate in the negotiations. In the second phase the selected candidates are invited to submit their tenders and participate in the negotiations. The requirements in the Utilities Directive for using the negotiated procedure with competition mirrors to some extent the requirements for this procedure as set out in the Public Sector Directive, but the conditions and limitations are considerably more limited. For more on the general aspects of the negotiated procedure with competition, see the commentary to Article 29 in the Public Sector Directive.

47.1. Requests to participate in response to a call for competition It is a condition for using the negotiated procedure with a prior call for competition 2 that the contracting entity makes a call for competition and provides the information which it will use for making the qualitative selection. The call for competition should be made in accordance with Article 69 and contain the information requirements set out in Annex XI. If a contracting entity wishes to make use of a quantitative selection the criteria for doing this should also be made available to the economic operators. There are no minimum requirements as to the information which should be included 3 in the call for competition and the Utilities Directive thereby differs from the requirements under the Public Sector Directive. The time limits are shorter than those of the Public Sector Directive, as it is stated 4 that the general rule for the time limit for receipt of request to participate should be no less than 30 days from the date on which the contract notice or the invitation to confirm interest was sent but the minimum requirements for the time limit is only 15 days. It is not set out in the directive under which conditions a contracting entity is entitled to shorten the time limit to 15 days.

47.2. Invitations to negotiate Only economic operators which have declared their interest in the contract and have 5 been assessed as qualified by the contracting entity according to the qualification criteria set out in the call for competition may submit an initial tender which will provide the basis for the subsequent negotiations. Among the qualified candidates the contracting entity might limit the number invited 6 to submit an initial tender. When restricting the number of candidates the contracting entity will have to use objective criteria which are published in the contract notice or made available to the economic operators in accordance with Article 78(2). There is no minimum number of candidates which should be respected as long as the number of candidates selected takes account of the need to ensure adequate competition. The time limits for submitting bids can be negotiated between the selected candidates and the contracting entity. The principle of equality must be respected also under this phase and accordingly all selected candidates must have the same time limit for submitting their tender. Under no circumstance must the time limit be shorter than 10 days from the date on which the invitation to tender was sent. These requirements as to time limits are considerably more flexible when compared with the requirements under the Public Sector Directive.

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Article 48 Competitive dialogue 1. In competitive dialogues, any economic operator may submit a request to participate in response to a call for competition in accordance with points (b) and (c) of Article 44(4) by providing the information for qualitative selection that is requested by the contracting entity. The minimum time limit for receipt of requests to participate shall, as a general rule, be fixed at no less than 30 days from the date on which the contract notice or, where a periodic indicative notice is used as a means of calling for competition, the invitation to confirm interest was sent and shall in any event not be less than 15 days. Only those economic operators invited by the contracting entity following the assessment of the information provided may participate in the dialogue. Contracting entities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 78(2). The contract shall be awarded on the sole basis of the award criterion of the tender presenting the best price-quality ratio in accordance with Article 82(2). 2. Contracting entities shall set out and define their needs and requirements in the call for competition and/or in a descriptive document. At the same time and in the same documents, they shall also set out and define the chosen award criteria and set out an indicative timeframe. 3. Contracting entities shall open, with the participants selected in accordance with the relevant provisions of Articles 76 to 81, a dialogue the aim of which shall be to identify and define the means best suited to satisfying their needs. They may discuss all aspects of the procurement with the chosen participants during this dialogue. During the dialogue, contracting entities shall ensure equality of treatment among all participants. To that end, they shall not provide information in a discriminatory manner which may give some participants an advantage over others. In accordance with Article 39, contracting entities shall not reveal to the other participants solutions proposed or other confidential information communicated by a participating candidate or tenderer in the dialogue without its agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. 4. Competitive dialogues may take place in successive stages in order to reduce the number of solutions to be discussed during the dialogue stage by applying the award criteria laid down in the call for competition or in the descriptive document. In the call for competition or the descriptive document, the contracting entity shall indicate whether it will use that option. 5. The contracting entity shall continue the dialogue until it can identify the solution or solutions which are capable of meeting its needs. 6. Having declared that the dialogue is concluded and having so informed the remaining participants, contracting entities shall ask them to submit their final tenders on the basis of the solution or solutions presented and specified during the dialogue. Those tenders shall contain all the elements required and necessary for the performance of the project. Those tenders may be clarified, specified and optimised at the request of the contracting entity. However, such clarification, specification, optimisation or additional information may not involve changes to the essential aspects of the tender 990

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or of the procurement, including the needs and requirements set out in the call for competition or in the descriptive document, where variations to those aspects, needs and requirements are likely to distort competition or have a discriminatory effect. 7. Contracting entities shall assess the tenders received on the basis of the award criteria laid down in the call for competition or in the descriptive document. At the request of the contracting entity, negotiations with the tenderer identified as having submitted the tender presenting the best price-quality ratio in accordance with Article 82(2) may be carried out to confirm financial commitments or other terms contained in the tender by finalising the terms of the contract provided such negotiations do not have the effect of materially modifying essential aspects of the tender or of the procurement, including the needs and requirements set out in the call for competition or in the descriptive document and does not risk distorting competition or causing discrimination. 8. Contracting entities may specify prizes or payments to the participants in the dialogue. The requirements for the competitive dialogue mirrors those set out in the Public 1 Sector Directive for this procedure. The reader is referred to Article 30 of the Public Sector Directive for an analysis of the competitive dialogue. Only differences between the two provisions will be mentioned here and they are related to Article 48 (1). It is a novelty in the 2014 Utilities Directive that a contracting entity may use compet- 2 itive dialogue. When compared with the Public Sector Directive it can be seen that no special conditions are set out for using this procedure. In the recitals to the Utilities Directive a number of situations are indicated where the use of competitive dialogue might be relevant: “Experience has shown that the competitive dialogue, which is provided for under Directive 2014/24/EU, has been of use in cases where contracting authorities are unable to define the means of satisfying their needs or of assessing what the market can offer in terms of technical, financial or legal solutions. This situation may arise in particular with innovative projects, the implementation of major integrated transport infrastructure projects, large computer networks or projects involving complex and structured financing. Member States should therefore be allowed to place this tool at the disposal of contracting entities. Where relevant, contracting authorities should be encouraged to appoint a project leader to ensure good cooperation between the economic operators and the contracting authority during the award procedure.”1

48.1. Requests to participate A contracting entity is entitled to make a call for competition by issuing a notice on 3 the existence of a qualification system in accordance with Article 68 or by issuing a contract notice in accordance with Article 69. As set out in Article 69 of the Utilities Directive the contract notice should contain 4 the information required by Annex XI to the Utilities Directive. However, as competitive dialogue is not mentioned in Annex XI it is presumed that the information requirements are the same as those set out in Annex XI for the negotiated procedure with a prior call for competition. The time limits are shorter than those of the Public Sector Directive, as it is stated 5 that the general rule for the time limit for receipt of request to participate should be no 1

Recital 60 to the Utilities Directive.

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less than 30 days from the date on which the contract notice or the invitation to confirm interest was sent but the minimum requirements for the time limit is only 15 days. It is not set out in the directive under which conditions a contracting entity is entitled to shorten the time limit to 15 days. 6 Among the qualified candidates the contracting entity might limit the number invited to participate in the dialogue. When restricting the number of candidates the contracting entity will have to use objective criteria which are published in the contract notice or made available to the economic operators in accordance with Article 78(2). For more on objective criteria, see the commentary to Article 65(2) in the Public Sector Directive. There is no minimum number of candidates which should be respected as long as the number of candidates selected takes account of the need to ensure adequate competition.

Article 49 Innovation partnership 1. In innovation partnerships, any economic operator may submit a request to participate in response to a call for competition in accordance with points (b) and (c) of Article 44(4) by providing the information for qualitative selection that is requested by the contracting entity. In the procurement documents, the contracting entity shall identify the need for an innovative product, service or works that cannot be met by purchasing products, services or works already available on the market. It shall indicate which elements of this description define the minimum requirements to be met by all tenders. The indications shall be sufficiently precise to enable economic operators to identify the nature and scope of the required solution and decide whether to request to participate in the procedure. The contracting entity may decide to set up the innovation partnership with one partner or with several partners conducting separate research and development activities. The minimum time limit for receipt of requests to participate shall, as a general rule, be fixed at no less than 30 days from the date on which the contract notice is sent and shall in any event not be less than 15 days. Only those economic operators invited by the contracting entity following the assessment of the information provided may participate in the procedure. Contracting entities may limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 78(2).The contracts shall be awarded on the sole basis of the award criterion of the tender presenting the best price-quality ratio in accordance with Article 82(2). 2. The innovation partnership shall aim at the development of an innovative product, service or works and the subsequent purchase of the resulting supplies, services or works, provided that they correspond to the performance levels and maximum costs agreed between the contracting entities and the participants. The innovation partnership shall be structured in successive phases following the sequence of steps in the research and innovation process, which may include the manufacturing of the products, the provision of the services or the completion of the works. The innovation partnership shall set intermediate targets to be attained by the partners and provide for payment of the remuneration in appropriate instalments.

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Based on those targets, the contracting entity may decide after each phase to terminate the innovation partnership or, in the case of an innovation partnership with several partners, to reduce the number of partners by terminating individual contracts, provided that the contracting entity has indicated in the procurement documents those possibilities and the conditions for their use. Unless otherwise provided for in this Article, contracting entities shall negotiate with tenderers the initial and all subsequent tenders submitted by them, except for the final tender, to improve the content thereof. The minimum requirements and the award criteria shall not be subject to negotiations. During the negotiations, contracting entities shall ensure the equal treatment of all tenderers. To that end, they shall not provide information in a discriminatory manner which may give some tenderers an advantage over others. They shall inform all tenderers, whose tenders have not been eliminated, pursuant to paragraph 5, in writing of any changes to the technical specifications or other procurement documents other than those setting out the minimum requirements. Following those changes, contracting entities shall provide sufficient time for tenderers to modify and re-submit amended tenders, as appropriate. In accordance with Article 39, contracting entities shall not reveal to the other participants confidential information communicated by a candidate or tenderer participating in the negotiations without its agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. Negotiations during innovation partnership procedures may take place in successive stages in order to reduce the number of tenders to be negotiated by applying the award criteria specified in the contract notice, in the invitation to confirm interest or in the procurement documents. In the contract notice, the invitation to confirm interest or in the procurement documents, the contracting entity shall indicate whether it will use that option. In selecting candidates, contracting entities shall in particular apply criteria concerning the candidates’ capacity in the field of research and development and of developing and implementing innovative solutions. Only those economic operators invited by the contracting entity following its assessment of the requested information may submit research and innovation projects aimed at meeting the needs identified by the contracting entity that cannot be met by existing solutions. In the procurement documents, the contracting entity shall define the arrangements applicable to intellectual property rights. In the case of an innovation partnership with several partners, the contracting entity shall not, in accordance with Article 39, reveal to the other partners solutions proposed or other confidential information communicated by a partner in the framework of the partnership without that partner’s agreement. Such agreement shall not take the form of a general waiver but shall be given with reference to the intended communication of specific information. The contracting entity shall ensure that the structure of the partnership and, in particular the duration and value of the different phases reflect the degree of innovation of the proposed solution and the sequence of the research and innovation activities required for the development of an innovative solution not yet available on the market. The estimated value of supplies, services or works pur-

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chased shall not be disproportionate in relation to the investment for their development. 1

This provision is identical to the Public Sector Directive Article 31. For a commentary, see this provision.

Article 50 Use of the negotiated procedure without prior call for competition Contracting entities may use a negotiated procedure without prior call for competition in the following cases: (a) where no tenders or no suitable tenders or no requests to participate or no suitable requests to participate have been submitted in response to a procedure with a prior call for competition, provided that the initial conditions of the contract are not substantially altered; A tender shall be considered not to be suitable where it is irrelevant to the contract, being manifestly incapable, without substantial changes, of meeting the contracting entity’s needs and requirements as specified in the procurement documents. A request for participation shall be considered not to be suitable where the economic operator concerned is to be or may be excluded pursuant to Articles 78(1) or 80(1), or does not meet the selection criteria laid down by the contracting entity pursuant to Articles 78 or 80; (b) where a contract is purely for the purpose of research, experiment, study or development, and not for the purpose of securing a profit or of recovering research and development costs, and insofar as the award of such contract does not prejudice the competitive award of subsequent contracts which do seek, in particular, those ends; (c) where the works, supplies or services can be supplied only by a particular economic operator for any of the following reasons: (i) the aim of the procurement is the creation or acquisition of a unique work of art or artistic performance; (ii) competition is absent for technical reasons; (iii) the protection of exclusive rights, including intellectual property rights. The exceptions set out in points (ii) and (iii) shall only apply when no reasonable alternative or substitute exists and the absence of competition is not the result of an artificial narrowing down of the parameters of the procurement; (d) in so far as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting entity, the time limits laid down for open procedures, restricted procedures and negotiated procedures with prior call for competition cannot be complied with. The circumstances invoked to justify extreme urgency shall not in any event be attributable to the contracting entity; (e) in the case of supply contracts for additional deliveries by the original supplier which are intended either as a partial replacement of supplies or installations or as the extension of existing supplies or installations, where a change of supplier would oblige the contracting entity to acquire supplies having different technical characteristics which would result in incompatibility or disproportionate technical difficulties in operation and maintenance;

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(f) for new works or services consisting in the repetition of similar works or services assigned to the contractor to which the same contracting entities awarded an earlier contract, provided that such works or services conform to a basic project for which a first contract was awarded according to a procedure in accordance with Article 44(1). The basic project shall indicate the extent of possible additional works or services and the conditions under which they will be awarded. As soon as the first project is put up for tender, the possible use of this procedure shall be disclosed and the total estimated cost of subsequent works or services shall be taken into consideration by the contracting entities when they apply Articles 15 and 16; (g) for supplies quoted and purchased on a commodity market; (h) for bargain purchases, where it is possible to procure supplies by taking advantage of a particularly advantageous opportunity available for a very short time at a price considerably lower than normal market prices; (i) for purchases of supplies or services under particularly advantageous conditions from either a supplier which is definitively winding up its business activities or the liquidator in an insolvency procedure, an arrangement with creditors or a similar procedure under national laws or regulations; (j) where the service contract concerned follows a design contest organised in accordance with this Directive and is to be awarded, under the rules provided for in the design contest, to the winner or to one of the winners of that contest; in the latter case, all the winners shall be invited to participate in the negotiations. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, pp. 179; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 345; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2 nd ed. 2007, pp. 386 and 456; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 972.

The negotiated procedure without a prior call for competition is similar to direct con- 1 tracting where a contracting entity makes contact to and enters into a contract with an economic operator at the choice of the contracting entity. The use of this procedure is according to Article 44(5) limited to the specific cases and circumstances expressly set out in Article 50. The possibility of using a negotiated procedure without a prior call for competition is a necessary release from contracting entities obligations under the procurement directive. This can for instance be the case in urgent needs of the contracting entity, or where a procurement procedure is meaningless or if it is certain that there will be only one tenderer. Neither will it be necessary to conduct a procurement procedure if consideration for competition and for opening up contracts has been observed at an earlier stage of the contract award, or by some other means.1 On the other hand, the scope for using this procedure must be interpreted restrictively as negotiation without prior publication of a contract notice or other means of publication does not in any way safeguard the principles of equality and transparency and is clearly contrary to the principal aim of the Utilities Directive of opening public contracts to competition.2 Among other things a restrictive interpretation means that the provision cannot be applied under other circumstances or upon conditions other than those Recital 60, paragraph 1 to the Utilities Directive. Case C-250/07 ,Commission v Greece, para. 35. The case concerned the interpretation of Article 20(2) of the old Utilities Directive (93/38/EEC) which is the corresponding article to Article 50 of the 2014-Utilities Directive. 1

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set out in Article 50.3 The contracting entities must be able to show that the circumstances which justify the direct award of a contract existed at the time the process to award the contract started.4 2 The conditions in the Utilities Directive for using the negotiated procedure without a prior call for competition are in most cases identical to those of the Public Sector Directive. For this reason only the differences between the conditions for using this procedure in the two directives are set out. For a general interpretation of the conditions for using the negotiated procedure without a prior call for competition the reader is accordingly referred to the commentary to Article 32 of the Public Sector Directive. 5

50.a. No tenders or no suitable tenders 3

This provision is identical to the Public Sector Directive Article 32(2)(a). For a commentary, see this provision. In the Public Sector Directive there is an obligation to send a report to the Commission if it so requests. A similar obligation is not found in the Utilities Directive.

50.b. Research, experiment, study or development Public financial support to an economic operator for research and development will most often not be covered by the Utilities Directive or the Public Sector Directive as there is not any acquisition of goods, services or works. However, under certain conditions set out in Article 32 of the Utilities Directive a service contract for research and development services is covered by the Utilities Directive. The reader is referred to Article 32 for a commentary on this provision. For those service contracts on research, experiment, study or development that are covered by the Utilities Directive this provision set out the conditions for entering into a contract making use of the negotiated procedure without prior call for competition. 5 This provision has a much wider scope than the corresponding Article 32(3)(a) of the Public Sector Directive as it can be applied for direct contracting for works contracts and services contracts for research and development and for the special production of goods for research and development purposes. The contract must be awarded in order to fulfil a need of the contracting entity. Accordingly, the contracting entity can enter into close cooperation with an economic operator for example with a view to the use of new materials, production methods, new uses etc. On the other hand financial support for the costs incurred by economic operators in connection with their research and development activities or their purchase of laboratory equipment etc. falls outside the scope of this provision. Furthermore, it is a condition that the direct contracting under this provision does not prejudice the competitive award of subsequent contracts which seek similar ends as the contract entered into directly. In that respect this provision is similar to the aim of articles 58 and 59 of the Utilities Directive on dialogue to which the reader is referred. 4

Case C-84/03, Commission v Spain, para. 48. Case C-394/02, Commission v Greece para. 33. See correspondingly recital 60, paragraph 2 and 3 to the Utilities Directive. 5 The recitals to the Utilities Directive are similar to those of the Public Sector Directive on the use of the negotiated procedure without a prior call for competition. For this reason recital 61 to the Utilities Directive will not be quoted in the commentary to Article 50. 3

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50.c. No competition is possible This provision is identical to the Public Sector Directive Article 32(2)(b). For a com- 6 mentary, see this provision.

50.d. Extreme urgency This provision is identical to the Public Sector Directive Article 32(2)(c). For a com- 7 mentary, see this provision.

50.e. Additional deliveries This provision is identical to the Public Sector Directive Article 32(3)(b). For a com- 8 mentary, see this provision. In the Public Sector Directive there is a 3 year time limit for using this provision. A similar limit is not found in the Utilities Directive.

50.f. New works or services being a repetition of previous works or services This provision is identical to the Public Sector Directive Article 32(5). For a commen- 9 tary, see this provision. However, it can be observed that there are some variations in the wording of the two articles but it is our opinion that there are not any substantial differences between the circumstances in which the two articles might be used.

50.g. Commodity markets This provision is identical to the Public Sector Directive Article 32(3)(c). For a com- 10 mentary, see this provision.6

50.h. Good bargains This provision is special to the Utilities Directive. It can be applicable if a contracting 11 entity receives an offer which is particularly good for example from an economic operator who has excess capacity or needs to liquidate stock.

50.i. Sale related to liquidations or winding up of insolvent activities This provision is identical to the Public Sector Directive Article 32(3)(d). For a com- 12 mentary, see this provision.

50.j. Design contests This provision is identical to the Public Sector Directive Article 32(4). For a commen- 13 tary, see this provision.

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Recital 60, paragraph 4 to the Utilities Directive.

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Chapter II Techniques and instruments for electronic and aggregated procurement Article 51 Framework agreements 1. Contracting entities may conclude framework agreements, provided that they apply the procedures provided for in this Directive. A framework agreement means an agreement between one or more contracting entities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantities envisaged. The term of a framework agreement shall not exceed eight years, save in exceptional cases duly justified, in particular by the subject of the framework agreement. 2. Contracts based on a framework agreement shall be awarded on the basis of objective rules and criteria, which may include reopening the competition among those economic operators party to the framework agreement as concluded. These rules and criteria shall be set out in the procurement documents for the framework agreement. The objective rules and criteria referred to in the first subparagraph shall ensure equal treatment of the economic operators who are parties to the agreement. Where a reopening the competition is included, contracting entities shall set a time limit which is sufficiently long to allow tenders for each specific contract to be submitted and contracting entities shall award each contract to the tenderer that has submitted the best tender on the basis of the award criteria set out in the specifications of the framework agreement. Contracting entities shall not use framework agreements improperly or in such a way as to prevent, restrict or distort competition. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, pp 180; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 248, 398 and 406; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2 nd ed. 2007, pp. 208 and 210; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 1062.

1

The rules on framework agreements in the Utilities Directive are more flexible than those set out in Article 33 of the Public Sector Directive. This mirrors the higher degree of flexibility generally seen in the Utilities Directive. When compared to the previous Utilities Directive (2004/17) the rules on framework agreements are strengthened somewhat. The reasons for this are set out in the recitals: “Recourse to framework agreements can be an efficient procurement technique throughout the Union; however, there is a need to enhance competition by improving the transparency of and access to procurement carried out by means of framework agreements. It is therefore appropriate to revise the provisions applicable to those agreements, in particular by providing that the award of specific contracts based on such agreements take place on the basis of objective rules and criteria, for instance following a mini-competition, and by limiting the duration of framework agreements.”1

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Recital 71 to the Utilities Directive.

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Art. 51

When drafting the provision on framework agreements there was special concern for the use of framework agreements. Under the former Utilities Directive (2004/17) the contracting entity was under no obligation whatsoever with respect to transparency as to how or to whom the individual contracts based on the framework agreement were awarded and therefore there were not any safeguards against arbitrary decisions when a framework agreement was used. The present article, therefore, sets out some conditions as to transparency when awarding contracts under a framework agreement.2 Substantial amendments to the Commissions original proposal were made during the 2 negotiations with the European Parliament.3

51.1. The definition and duration of framework contracts Under the Utilities Directive, framework agreements can be considered in the same 3 way as other contracts, and contracting entities can enter into framework agreements by using all the procedures available under the Utilities Directive. This means that contracting entities can enter into a framework agreement on the basis of negotiated procedures with publication of a contract notice. This possibility of negotiating with tenderers gives contracting entities greater flexibility when compared with the procedures of the Public Sector Directive. The first subparagraph of Article 51 is identical with Article 33 (1) of the Public Sector Directive, except for the duration of a framework agreement. For a commentary, see this provision.4 There is a general time limit of 8 years for framework agreements. 5 As for a general 4 interpretation of this time limit, see the commentary to Article 33(1) of the Public Sector Directive. Under certain circumstances it is foreseen that framework agreements might be longer than 8 years: “It should also be clarified that there might be cases in which the length of the framework agreements themselves should be allowed to be longer than eight years. Such cases, which should be duly justified, in particular by the subject of the framework agreement, might for instance arise where economic operators need to dispose of equipment the amortisation period of which is longer than eight years and which must be available at any time over the entire duration of the framework agreement. In the particular context of utilities providing essential services to the public there may be a need in certain cases for both longer framework agreements and a longer duration of individual contracts; for instance in the case of framework agreements aimed at ensuring ordinary and extraordinary maintenance of networks which may require expensive equipment to be operated by personnel having received highly specialised ad-hoc training aimed at ensuring continuation of the services and minimisation of possible disruptions.”6

2011/0439 COD of 26 June 2012, Issues which are specific to the Utilities Directive. Report of the European Parliament on the proposal for a “Utilities Directive” of 7. February 2013 (A7-0034/2013), pp. 220. 4 The definition on framework agreements in the same as in Article 1 (1)(4) of the former Utilities Directive (2004/17). 5 The Commission had proposed a time limit on 4 years. During the negotiations with the European Parliament the time limit was extended to 8 years as it was found that a shorter time limit would reduce the effect and possible savings that can be made from a long-term framework agreement, on the basis of which suppliers generally make better offers. See Opinion of the committee on Industry, Research and Energy, amendment 19. Report of the European Parliament on the proposal for a “Utilities Directive” of 7. February 2013 (A7-0034/2013), p. 209. 6 Recital 72, paragraph 2 to the Utilities Directive. 2

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Contracts made under the framework agreement may have a duration which is different from that of the framework agreement and they may be shorter as well as longer depending on the concrete circumstances: “In particular, it should be allowed to set the length of individual contracts based on a framework agreement taking account of factors such as the time needed for their performance; where maintenance of equipment with an expected useful life of more than eight years is included or where extensive training of staff to perform the contract is needed.”7

51.2. Flexible rules on awarding contracts based on a framework agreement In contrast to the Public Sector Directive, there is no detailed regulation of the procedure for the award of a specific contract pursuant to a framework agreement. This means that contracting entities have greater flexibility when using framework agreements under the Utilities Directive. Contracting entities are, however, not entirely at liberty in this respect as they are subject to the fundamental principles of equal treatment and transparency. In particular, framework agreements may not be used to hinder, limit or distort competition. Furthermore, it is set out in the directive that not only shall contracts be awarded based on the application of objective rules and criteria, but these must be set out in the procurement documents for the framework agreement. These requirements greatly enhance the transparency of the use of framework agreements. 6 It must be assumed that the award of a contract pursuant to a framework agreement in which all the terms are fixed must follow the same guidelines as apply under the Public Sector Directive. In particular, a contracting entity is not free to choose between economic operators which have a framework agreement when it awards a specific contract as according to the directive the contract will have to be awarded to the best tender on the basis of the award criteria set out in the framework agreement. 7 If a contracting entity has entered into several parallel framework agreements, and not all the terms have been finally fixed, the entity will be entitled to negotiate the outstanding terms with the economic operators with framework agreements. 8 A contracting entity can re-open competition if not all the terms of the works, services or supplies have been laid down in the framework agreement. If a contracting entity decides to re-open competition, it is not bound to follow the procedure set out in the Public Sector Directive. However, in order to comply with the principle of transparency, the entity must set out in advance the procedure to be followed for the re-opening of competition. When re-opening competition, the procedure for doing so and the criteria to be used for awarding the contract must be set out in the framework agreement. Furthermore, sufficient time must be given for tenderers to be able to submit tenders. The time limit must be set taking into consideration the subject matter of the contract, its complexity and the time needed to submit the tenders. The general principle that “Contracting entities shall not use framework agreements improperly or in such a way as to prevent, restrict or distort competition” applies both to the award of a framework agreement and to the use of a framework agreement for the award of a specific contract. Such a case might be present if the tender material or award criteria either is more favourable towards an economic operator or an economic operator is treated unequally without this being justified by the acquisition in question. 5

7

Recital 72, paragraph 1 to the Utilities Directive.

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Art. 52

Article 52 Dynamic purchasing systems 1. For commonly used purchases, the characteristics of which, as generally available on the market, meet the requirements of the contracting entities, they may use a dynamic purchasing system. The dynamic purchasing system shall be operated as a completely electronic process and shall be open throughout the period of validity of the purchasing system to any economic operator that satisfies the selection criteria. It may be divided into categories of products, works or services that are objectively defined on the basis of characteristics of the procurement to be undertaken under the category concerned. Such characteristics may include reference to the maximum allowable size of the subsequent specific contracts or to a specific geographic area in which subsequent specific contracts will be performed. 2. In order to procure under a dynamic purchasing system, contracting entities shall follow the rules of the restricted procedure. All the candidates who satisfy the selection criteria shall be admitted to the system, and the number of candidates to be admitted to the system shall not be limited in accordance with Article 78(2). Where contracting entities have divided the system into categories of products, works or services in accordance with paragraph 1 of this Article, they shall specify the applicable selection criteria for each category. Notwithstanding Article 46, the following time limits shall apply: (a) the minimum time limit for receipt of requests to participate shall, as a general rule, be fixed at no less than 30 days from the date on which the contract notice or, where a periodic indicative notice is used as a means of calling for competition, the invitation to confirm interest is sent and shall in any event not be less than 15 days. No further time limits for receipt of requests to participate shall apply once the invitation to tender for the first specific procurement under the dynamic purchasing system has been sent. (b) The minimum time limit for receipt of tenders shall be at least 10 days from the date on which the invitation to tender is sent. The second and third subparagraphs of Article 46(2) shall apply. 3. All communications in the context of a dynamic purchasing system shall only be made by electronic means in accordance with Article 40(1), (3), (5) and (6). 4. For the purposes of awarding contracts under a dynamic purchasing system, contracting entities shall: (a) publish a call for competition making it clear that a dynamic purchasing system is involved; (b) indicate in the procurement documents at least the nature and estimated quantity of the purchases envisaged, as well as all the necessary information concerning the dynamic purchasing system, including how the dynamic purchasing system operates, the electronic equipment used and the technical connection arrangements and specifications; (c) indicate any division into categories of products, works or services and the characteristics defining them; (d) offer unrestricted and full direct access, as long as the system is valid, to the procurement documents in accordance with Article 73. 5. Contracting entities shall give any economic operator, throughout the entire period of validity of the dynamic purchasing system, the possibility of requesting to participate in the system under the conditions referred to in paragraph 2. Contracting entities shall finalise their assessment of such requests in accordance with

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the selection criteria within 10 working days following their receipt. That deadline may be prolonged to 15 working days in individual cases where justified, in particular because of the need to examine additional documentation or to otherwise verify whether the selection criteria are met. Notwithstanding the first subparagraph, as long as the invitation to tender for the first specific procurement under the dynamic purchasing system has not been sent, contracting entities may extend the evaluation period provided that no invitation to tender is issued during the extended evaluation period. Contracting entities shall indicate in the procurement documents the length of the extended period that they intend to apply. Contracting entities shall inform the economic operator concerned at the earliest possible opportunity of whether or not it has been admitted to the dynamic purchasing system. Contracting entities shall invite all admitted participants to submit a tender for each specific procurement under the dynamic purchasing system, in accordance with Article 74. Where the dynamic purchasing system has been divided into categories of works, products or services, contracting entities shall invite all participants having been admitted to the category corresponding to the specific procurement concerned to submit a tender. They shall award the contract to the tenderer that submitted the best tender on the basis of the award criteria set out in the contract notice for the dynamic purchasing system, in the invitation to confirm interest, or, where the means of calling for competition is a notice on the existence of a qualification system, in the invitation to tender. Those criteria may, where appropriate, be formulated more precisely in the invitation to tender. Contracting entities who, pursuant to Article 80, apply exclusion grounds and selection criteria provided for under Directive 2014/24/EU, may, at any time during the period of validity of the dynamic purchasing system, require admitted participants to submit a renewed and updated self-declaration as provided for in Article 59(1) of that Directive, within five working days from the date on which that request is transmitted. Paragraphs 2 to 4 of Article 59 shall apply throughout the entire period of validity of the dynamic purchasing system. Contracting entities shall indicate the period of validity of the dynamic purchasing system in the call for competition. They shall notify the Commission of any change in period of validity, using the following standard forms: (a) where the period of validity is changed without terminating the system, the form used initially for the call for competition for the dynamic purchasing system; (b) where the system is terminated, a contract award notice referred to in Article 70. No charges may be billed prior to or during the period of validity of the dynamic purchasing system to the economic operators interested in or party to the dynamic purchasing system.

This provision is almost identical to the Public Sector Directive Article 34. For a commentary, see this provision.1 1 Recital 73 and 74 to the Utilities Directive explains some of the background for the revision of this provision.

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However, some minor differences in the wording of two provisions can be observed and will be set out here. The reader is referred to article 34 for a more detailed analysis of the provision.

52.2. Shorter time limits It is stated that the general rule for the minimum time limit for receipt of request to 2 participate should be no less than 30 days from the date on which the contract notice or the invitation to confirm interest was sent but the minimum requirements for the time limit is only 15 days. The directive does not specify under which conditions a contracting entity is entitled to shorten the time limit to 15 days. Only economic operators which have declared their interest in the contract and have 3 been assessed as qualified by the contracting entity by using the qualification criteria set out in the call for competition may submit a tender. The time limits for submitting bids can be negotiated between the selected candidates and the contracting entity. The principle of equality must be respected also during this phase and accordingly all selected candidates must have the same time limit for submitting their tender. Under no circumstance must the time limit be shorter than 10 days from the date on which the invitation to tender was sent. These requirements as to time limits are considerably more flexible when compared with the requirements under the Public Sector directive.

Article 53 Electronic auctions 1. Contracting entities may use electronic auctions in which new prices, revised downwards, and/or new values concerning certain elements of tenders are presented. For this purpose, contracting entities shall structure the electronic auction as a repetitive electronic process, which occurs after an initial full evaluation of the tenders, enabling them to be ranked using automatic evaluation methods. Certain service contracts and certain works contracts having as their subject-matter intellectual performances, such as the design of works, which cannot be ranked using automatic evaluation methods, shall not be the object of electronic auctions. 2. In open or restricted procedures or negotiated procedures with a prior call for competition, the contracting entities may decide that the award of a contract shall be preceded by an electronic auction when the content of the procurement documents, in particular the technical specifications, can be established with precision. In the same circumstances, an electronic auction may be held on the reopening of competition among the parties to a framework agreement as provided for in Article 51(2) and on the opening for competition of contracts to be awarded under the dynamic purchasing system referred to in Article 52. 3. The electronic auction shall be based on one of the following elements of the tenders: (a) solely on prices where the contract is awarded on the basis of price only, (b) on prices and/or on the new values of the features of the tenders indicated in the procurement documents, where the contract is awarded on the basis of the

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best price-quality ratio or to the tender with the lowest cost using a cost-effectiveness approach. Contracting entities which decide to hold an electronic auction shall state that fact in the contract notice, in the invitation to confirm interest or, where a notice on the existence of a qualification system is used as a means of calling for competition, in the invitation to tender. The procurement documents shall include at least the information set out in Annex VII. Before proceeding with the electronic auction, contracting entities shall make a full initial evaluation of the tenders in accordance with the award criterion or criteria and with the weighting fixed for them. A tender shall be considered admissible where it has been submitted by a tenderer, who has not been excluded pursuant to Article 78(1) or 80(1) and who meets the selection criteria laid down pursuant to Articles 78 and 80, and whose tender is in conformity with the technical specifications without being irregular or unacceptable or unsuitable. In particular, tenders which do not comply with the procurement documents, which were received late, where there is evidence of collusion or corruption, or which have been found by the contracting authority to be abnormally low, shall be considered as being irregular. In particular tenders submitted by tenderers that do not have the required qualifications, and tenders whose price exceeds the contracting authority’s budget as determined and documented prior to the launching of the procurement procedure shall be considered as unacceptable. A tender shall be considered not to be suitable where it is irrelevant to the contract, being manifestly incapable, without substantial changes, of meeting the contracting entity’s needs and requirements as specified in the procurement documents. A request for participation shall be considered not to be suitable where the economic operator concerned is to be or may be excluded pursuant to Articles 78(1) or 80(1), or does not meet the selection criteria laid down by the contracting entity pursuant to Articles 78 or 80. All tenderers that have submitted admissible tenders shall be invited simultaneously by electronic means to participate in the electronic auction using, as of the specified date and time, the connections in accordance with the instructions set out in the invitation. The electronic auction may take place in a number of successive phases. The electronic auction shall not start sooner than two working days after the date on which invitations are sent out. The invitation shall be accompanied by the outcome of a full evaluation of the relevant tender, carried out in accordance with the weighting provided for in the first subparagraph of Article 82(5). The invitation shall also state the mathematical formula to be used in the electronic auction to determine automatic re-rankings on the basis of the new prices and/or new values submitted. Except where the most economically advantageous offer is identified on the basis of price alone, that formula shall incorporate the weighting of all the criteria established to determine the most economically advantageous tender, as indicated in the notice used as a means of calling for competition or in other procurement documents. For that purpose, any ranges shall, however, be reduced beforehand to a specified value. Where variants are authorised, a separate formula shall be provided for each variant. Throughout each phase of an electronic auction the contracting entities shall instantaneously communicate to all tenderers sufficient information to enable them

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to ascertain their relative rankings at any moment. They may also communicate other information concerning other prices or values submitted, provided that that is stated in the specifications. They may also at any time announce the number of participants in that phase of the auction. In no case, however, may they disclose the identities of the tenderers during any phase of an electronic auction. 8. Contracting entities shall close an electronic auction in one or more of the following manners: (a) at the previously indicated date and time; (b) when they receive no more new prices or new values which meet the requirements concerning minimum differences, provided that they have previously stated the time which they will allow to elapse after receiving the last submission before they close the electronic auction; or (c) when the previously indicated number of phases in the auction has been completed. Where the contracting entities intend to close an electronic auction in accordance with point (c) of the first subparagraph, possibly in combination with the arrangements laid down in point (b) thereof, the invitation to take part in the auction shall indicate the timetable for each phase of the auction. 9. After closing an electronic auction the contracting entities shall award the contract in accordance with Article 82 on the basis of the results of the electronic auction. This provision is identical to the Public Sector Directive Article 35. For a commen- 1 tary, see this provision.

Article 54 Electronic catalogues 1. Where use of electronic means of communication is required, contracting entities may require tenders to be presented in the format of an electronic catalogue or to include an electronic catalogue. Member States may render the use of electronic catalogues mandatory in connection with certain types of procurement. Tenders presented in the form of an electronic catalogue may be accompanied by other documents, completing the tender. 2. Electronic catalogues shall be established by the candidates or tenderers with a view to participating in a given procurement procedure in accordance with the technical specifications and format established by the contracting entity. Furthermore, electronic catalogues shall comply with the requirements for electronic communication tools as well as with any additional requirements set by the contracting entity in accordance with Article 40. 3. Where the presentation of tenders in the form of electronic catalogues is accepted or required, contracting entities shall: (a) state so in the contract notice, in the invitation to confirm interest, or, where the means of calling for competition is a notice on the existence of a qualification system, in the invitation to tender or to negotiate; (b) indicate in the procurement documents all the necessary information pursuant to Article 40(6) concerning the format, the electronic equipment used and the technical connection arrangements and specifications for the catalogue. Sune Troels Poulsen

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4. Where a framework agreement has been concluded with more than one economic operator following the submission of tenders in the form of electronic catalogues, contracting entities may provide that the reopening of competition for specific contracts takes place on the basis of updated catalogues. In such a case, contracting entities shall use one of the following methods: (a) invite tenderers to resubmit their electronic catalogues, adapted to the requirements of the contract in question; or (b) notify tenderers that they intend to collect from the electronic catalogues which have already been submitted the information needed to constitute tenders adapted to the requirements of the contract in question, provided that the use of that method has been announced in the procurement documents for the framework agreement. 5. Where contracting entities reopen competition for specific contracts in accordance with point (b) of paragraph 4, they shall notify the tenderers of the date and time at which they intend to collect the information needed to constitute tenders adapted to the requirements of the specific contract in question and shall give tenderers the possibility to refuse such collection of information. Contracting entities shall allow for an adequate period between the notification and the actual collection of information. Before awarding the contract, contracting entities shall present the collected information to the tenderer concerned so as to give it the opportunity to contest or confirm that the tender thus constituted does not contain any material errors. 6. Contracting entities may award contracts based on a dynamic purchasing system by requiring that offers for specific contract are to be presented in the format of an electronic catalogue. Contracting entities may also award contracts based on a dynamic purchasing system in accordance with point (b) of paragraph 4 and paragraph 5 provided that the request for participation in the dynamic purchasing system is accompanied by an electronic catalogue in accordance with the technical specifications and format established by the contracting entity. That catalogue shall be completed subsequently by the candidates, when they are informed of the contracting entity’s intention to constitute tenders by means of the procedure set out in point (b) of paragraph 4. 1

This provision is identical to the Public Sector Directive Article 36. For a commentary, see this provision.

Article 55 Centralised purchasing activities and central purchasing bodies 1. Member States may provide that contracting entities may acquire works, supplies and/or services from a central purchasing body offering the centralised purchasing activity referred to in point (a) of point (10) of Article 2. Member States may also provide that contracting entities may acquire works, supplies and services by using contracts awarded by a central purchasing body, by using dynamic purchasing systems operated by a central purchasing body or by using a framework agreement concluded by a central purchasing body offering the centralised purchasing activity referred to in point (b) of point (10) of Article 2. Where a dynamic purchasing system which is operated by a central purchasing

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body may be used by other contracting entities, this shall be mentioned in the call for competition setting up that dynamic purchasing system. In relation to the first and second subparagraphs, Member States may provide that certain procurements are to be made by having recourse to central purchasing bodies or to one or more specific central purchasing bodies. 2. A contracting entity fulfils its obligations pursuant to this Directive when it acquires supplies or services from a central purchasing body offering the centralised purchasing activity referred to in point (a) of point (10) of Article 2. Furthermore, a contracting entity also fulfils its obligations pursuant to this Directive where it acquires works, supplies or services by using contracts awarded by the central purchasing body, by using dynamic purchasing systems operated by the central purchasing body or by using a framework agreement concluded by the central purchasing body offering the centralised purchasing activity referred to in point (b) of point (10) of Article 2. However, the contracting entity concerned shall be responsible for fulfilling the obligations pursuant to this Directive in respect of the parts it conducts itself, such as: (a) awarding a contract under a dynamic purchasing system, which is operated by a central purchasing body; or (b) conducting a reopening of competition under a framework agreement that has been concluded by a central purchasing body. 3. All procurement procedures conducted by a central purchasing body shall be performed using electronic means of communication, in accordance with the requirements set out in Article 40. 4. Contracting entities may, without applying the procedures provided for in this Directive, award a service contract for the provision of centralised purchasing activities to a central purchasing body. Such service contracts may also include the provision of ancillary purchasing activities. This provision is identical to the Public Sector Directive Article 37. For a commen- 1 tary, see this provision. There seems to be a minor difference in the obligations for a contracting entity when 2 using a framework agreement, as article 37(2)(3)(c) of the Public Sector Directive on the award of contracts under a framework agreement has not been inserted in the Utilities Directive. This provision of the Public Sector directive sets out that where a framework agreement is concluded with more than one economic operator, a contracting authority is responsible for determining which of the economic operators, party to the framework agreement, shall perform a given task under a framework agreement that has been concluded by a central purchasing agreement. Although this provision has not been repeated in the Utilities Directive it is presumably also the responsibility of a contracting entity to ensure that the principles of transparency and equality has been adhered to when entering into a contract under a framework agreement whether or not the framework agreement has been entered into by a centralised purchasing body.

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Article 56 Occasional joint procurement 1. Two or more contracting entities may agree to perform certain specific procurements jointly. 2. Where the conduct of a procurement procedure in its entirety is carried out jointly in the name and on behalf of all the contracting entities concerned, they shall be jointly responsible for fulfilling their obligations pursuant to this Directive. This applies also in cases where one contracting entity alone manages the procurement procedure, acting on its own behalf and on the behalf of the other contracting entities concerned. Where the conduct of a procurement procedure is not in its entirety carried out in the name and on behalf of the contracting entities concerned, they shall be jointly responsible only for those parts carried out jointly. Each contracting entity shall have sole responsibility for fulfilling its obligations pursuant to this Directive in respect of the parts it conducts in its own name and on its own behalf. 1

This provision is identical to the Public Sector Directive Article 38. For a commentary, see this provision.

Article 57 Procurement involving contracting entities from different Member States 1. Without prejudice to Articles 28 to 31, contracting entities from different Member States may act jointly in the award of contracts by using one of the means provided for in this Article. Contracting entities shall not use the means provided in this Article for the purpose of avoiding the application of mandatory public law provisions in conformity with Union law to which they are subject in their Member State. 2. A Member State shall not prohibit its contracting entities from using centralised purchasing activities offered by central purchasing bodies located in another Member State. In respect of centralised purchasing activities offered by a central purchasing body located in another Member State than the contracting entity, Member States may, however, choose to specify that their contracting entities may only use the centralised purchasing activities as defined in either point (a) or in point (b) of point (10) of Article 2. 3. The provision of centralised purchasing activities by a central purchasing body located in another Member State shall be conducted in accordance with the national provisions of the Member State where the central purchasing body is located. The national provisions of the Member State where the central purchasing body is located shall also apply to the following: (a) the award of a contract under a dynamic purchasing system; (b) the conduct of a reopening of competition under a framework agreement. 4. Several contracting entities from different Member States may jointly award a contract, conclude a framework agreement or operate a dynamic purchasing system. They may also award contracts based on the framework agreement or on the dynamic purchasing system. Unless the necessary elements have been regulated by

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an international agreement concluded between the Member States concerned, the participating contracting entities shall conclude an agreement that determines: (a) the responsibilities of the parties and the relevant applicable national provisions; (b) the internal organisation of the procurement procedure, including the management of the procedure, the distribution of the works, supplies or services to be procured, and the conclusion of contracts. A participating contracting entity fulfils its obligations pursuant to this Directive when it purchases works, supplies or services from a contracting entity which is responsible for the procurement procedure. When determining responsibilities and the applicable national law as referred to in point (a), the participating contracting entities may allocate specific responsibilities among them and determine the applicable provisions of the national laws of any of their respective Member States. The allocation of responsibilities and the applicable national law shall be referred to in the procurement documents for jointly awarded contracts. 5. Where several contracting entities from different Member States have set up a joint entity, including European Groupings of territorial cooperation under Regulation (EC) No 1082/2006 of the European Parliament and of the Council1 or other entities established under Union law, the participating contracting entities shall, by a decision of the competent body of the joint entity, agree on the applicable national procurement rules of one of the following Member States: (a) the national provisions of the Member State where the joint entity has its registered office; (b) the national provisions of the Member State where the joint entity is carrying out its activities. The agreement referred to in the first subparagraph may either apply for an undetermined period, when fixed in the constitutive act of the joint entity, or may be limited to a certain period of time, certain types of contracts or to one or more individual contract awards. This provision is identical to the Public Sector Directive Article 39. For a commen- 1 tary, see this provision.

Chapter III Conduct of the procedure Section 1 Preparation Article 58 Preliminary market consultations Before launching a procurement procedure, contracting entities may conduct market consultations with a view to preparing the procurement and informing economic operators of their procurement plans and requirements.

1 Regulation (EC) No 1082/2006 of the European Parliament and of the Council of 5 July 2006 on a European grouping of territorial cooperation (EGTC) (OJ L 210, 31.7.2006, p. 19).

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For this purpose, contracting entities may for example seek or accept advice from independent experts or authorities or from market participants. That advice may be used in the planning and conduct of the procurement procedure, provided that such advice does not have the effect of distorting competition and does not result in a violation of the principles of non-discrimination and transparency. 1

This provision is identical to the Public Sector Directive Article 40. For a commentary, see this provision.

Article 59 Prior involvement of candidates or tenderers Where a candidate or tenderer or an undertaking related to a candidate or tenderer has advised the contracting entity, whether in the context of Article 58 or not, or has otherwise been involved in the preparation of the procurement procedure, the contracting entity shall take appropriate measures to ensure that competition is not distorted by the participation of that candidate or tenderer. Such measures shall include the communication to the other candidates and tenderers of relevant information exchanged in the context of or resulting from the involvement of the candidate or tenderer in the preparation of the procurement procedure and the fixing of adequate time limits for the receipt of tenders. The candidate or tenderer concerned shall only be excluded from the procedure where there are no other means to ensure compliance with the duty to observe the principle of equal treatment. Prior to any such exclusion, candidates or tenderers shall be given the opportunity to prove that their involvement in preparing the procurement procedure is not capable of distorting competition. The measures taken shall be documented in the individual report required by to Article 100. 1

This provision is identical to the Public Sector Directive Article 41. For a commentary, see this provision.

Article 60 Technical specifications 1. The technical specifications as defined in point 1 of Annex VIII shall be set out in the procurement documents. The technical specifications shall lay down the characteristics required of a works, service or supply. Those characteristics may also refer to the specific process or method of production or provision of the requested works, supplies or services or to a specific process for another stage of its life cycle even where such factors do not form part of their material substance, provided that they are linked to the subject-matter of the contract and proportionate to its value and its objectives. The technical specifications may also specify whether the transfer of intellectual property rights will be required. For all procurement which is intended for use by natural persons, whether general public or staff of the contracting entity, the technical specifications shall, except in duly justified cases, be drawn up so as to take into account accessibility criteria for persons with disabilities or design for all users.

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Art. 60

Where mandatory accessibility requirements are adopted by a legal act of the Union, technical specifications shall, as far as accessibility criteria for persons with disabilities or design for all users are concerned, be defined by reference thereto. Technical specifications shall afford equal access of economic operators to the procurement procedure and shall not have the effect of creating unjustified obstacles to the opening up of public procurement to competition. Without prejudice to mandatory national technical rules, to the extent that they are compatible with Union law, the technical specifications shall be formulated in one of the following ways: (a) in terms of performance or functional requirements, including environmental characteristics, provided that the parameters are sufficiently precise to allow tenderers to determine the subject-matter of the contract and to allow contracting entities to award the contract; (b) by reference to technical specifications and, in order of preference, to national standards transposing European standards, European Technical Assessments, common technical specifications, international standards, other technical reference systems established by the European standardisation bodies or – when any of those do not exist – national standards, national technical approvals or national technical specifications relating to the design, calculation and execution of the works and use of the supplies; each reference shall be accompanied by the words ‘or equivalent’; (c) in terms of performance or functional requirements referred to in point (a), with reference to the technical specifications referred to in point (b) as a means of presuming conformity with such performance or functional requirements; (d) by reference to the technical specifications referred to in point (b) for certain characteristics, and by reference to the performance or functional requirements referred to in point (a) for other characteristics. Unless justified by the subject-matter of the contract, technical specifications shall not refer to a specific make or source, or to a particular process which characterises the products or services provided by a specific economic operator, or to trade marks, patents, types or a specific origin or production with the effect of favouring or eliminating certain undertakings or certain products. Such reference shall be permitted, on an exceptional basis, where a sufficiently precise and intelligible description of the subject-matter of the contract pursuant to paragraph 3 is not possible. Such reference shall be accompanied by the words ‘or equivalent’. Where a contracting entity uses the option of referring to the technical specifications referred to in point (b) of paragraph 3, it shall not reject a tender on the ground that the works, supplies or services tendered for do not comply with the technical specifications to which it has referred, once the tenderer proves in its tender by any appropriate means, including the means of proof referred to in Article 62, that the solutions proposed satisfy in an equivalent manner the requirements defined by the technical specifications. Where a contracting entity uses the option provided for in point (a) of paragraph 3 to formulate technical specifications in terms of performance or functional requirements, it shall not reject a tender for supplies, services or works which comply with a national standard transposing a European standard, with a European technical approval, a common technical specification, an international standard or a technical reference system established by a European standardisation body,

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where those specifications address the performance or functional requirements which it has laid down. In its tender, the tenderer shall prove by any appropriate means including those referred to in Article 62, that the supplies, service or work in compliance with the standard meets the performance or functional requirements of the contracting entity. 1

This provision is identical to the Public Sector Directive Article 42. For a commentary, see this provision.

Article 61 Labels 1. Where contracting entities intend to purchase works, supplies or services with specific environmental, social or other characteristics they may, in the technical specifications, the award criteria or the contract performance conditions, require a specific label as means of proof that the works, supplies or services correspond to the required characteristics, provided that all of the following conditions are fulfilled: (a) the label requirements only concern criteria which are linked to the subjectmatter of the contract and are appropriate to define the characteristics of the works, supplies or services that are the subject-matter of the contract; (b) the label requirements are based on objectively verifiable and non-discriminatory criteria; (c) the labels are established in an open and transparent procedure in which all relevant stakeholders, including government bodies, consumers, social partners, manufacturers, distributors and non-governmental organisations may participate; (d) the labels are accessible to all interested parties; (e) the label requirements are set by a third party over which the economic operator applying for the label cannot exercise a decisive influence. Where contracting entities do not require the works, supplies or services to meet all of the label requirements, they shall indicate which label requirements are referred to. Contracting entities requiring a specific label shall accept all labels confirm that the works, supplies or services meet equivalent label requirements. Where an economic operator had demonstrably no possibility of obtaining the specific label indicated by the contracting entity or an equivalent label within the relevant time limits for reasons that are not attributable to that economic operator, the contracting entity shall accept other appropriate means of proof, which may include a technical dossier of the manufacturer, provided that the economic operator concerned proves that the works, supplies and services to be provided by it fulfil the requirements of the specific label or the specific requirements indicated by the contracting entity. 2. Where a label fulfils the conditions of provided in points (b), (c), (d) and (e) of paragraph 1 but also sets outs out requirements not linked to the subject-matter of the contract, contracting entities shall not require the label as such but may define the technical specification by reference to those of the detailed specifications of that label, or, if necessary, parts thereof, that are linked to the subject-matter of the contract and are appropriate to define characteristics of this subject-matter.

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Art. 63

This provision is identical to the Public Sector Directive Article 43. For a commen- 1 tary, see this provision.

Article 62 Test reports, certification and other means of proof 1. Contracting entities may require that economic operators provide a test report from a conformity assessment body or a certificate issued by such a body as means of proof of conformity with requirements or criteria set out in the technical specifications, the award criteria or the contract performance conditions. Where contracting entities require the submission of certificates drawn up by a specific conformity assessment body, certificates from equivalent other conformity assessment bodies shall also be accepted by the contracting entities. For the purpose of this paragraph, a conformity assessment body shall be a body that performs conformity assessment activities including calibration, testing, certification and inspection accredited in accordance with Regulation (EC) No 765/2008 of the European Parliament and of the Council.1 2. Contracting entities shall accept other appropriate means of proof than those referred to in paragraph 1, such as a technical dossier of the manufacturer where the economic operator concerned had no access to such certificates or test reports referred to in paragraph 1, or no possibility of obtaining them within the relevant time limits, provided that the lack of access is not attributable to the economic operator concerned and provided that the economic operator concerned thereby proves that the works, supplies or services meet the requirements or criteria set out in the technical specifications, the award criteria or the contract performance conditions. 3. Member States shall make available to other Member States, upon request, any information related to the evidence and documents submitted in accordance with Article 60(6), Article 61 and paragraphs 1 and 2 of this Article. The competent authorities of the Member State of establishment of the economic operator shall provide this information in accordance with Article 102. This provision is identical to the Public Sector Directive Article 44. For a commen- 1 tary, see this provision.

Article 63 Communication of technical specifications 1. On request from economic operators interested in obtaining a contract, contracting entities shall make available the technical specifications regularly referred to in their supply, works or service contracts, or the technical specifications which they intend to apply to contracts for which the call for competition is a periodic indicative notice. Those specifications shall be made available by electronic means through unrestricted and full direct access free of charge. However, the technical specifications shall be transmitted by other means than electronic means where unrestricted and full direct access free of charge by elec1 Regulation (EC) No 765/2008 of the European Parliament and of the Council of 9 July 2008 setting out the requirements for accreditation and market surveillance relating to the marketing of products and repealing Regulation (EEC) No 339/93 (OJ L 218, 13.8.2008, p. 30).

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tronic means to certain procurement documents cannot be offered for one of the reasons set out in the second subparagraph of Article 40(1) or where unrestricted and full direct access free of charge by electronic means to certain procurement documents cannot be offered because contracting entities intend to apply Article 39(2). 2. Where the technical specifications are based on documents available by electronic means through unrestricted and full direct access free of charge to interested economic operators, the inclusion of a reference to those documents shall be sufficient. There is no similar provision under the Public Sector Directive. The provision is to a large extent identical to article 35 of the former Utilities Directive (2004/17). 2 It increases the transparency of contracting under the Utilities Directive that economic operators can approach the contracting entity in order to obtain the technical specification which the entity regularly refers to in their contracts for the provision of services, supplies or works. When a contracting entity has published a periodic indicative notice which according to Articles 44 and 67(2) might provide the foundations for entering into subsequent contracts it is helpful for the economic operators to obtain as early as possible the technical specification that the contracting entity intends to apply. 3 Full electronic access and free of charge should in principle be given to the documents. This reflects Article 73 of the Utilities Directive on electronic availability of procurement documents. However, if for reasons of confidentiality referred to in Article 39(2) or for technical reasons referred to in Article 40(1) full electronic access cannot be given, access might be provided by other means. 1

Article 64 Variants 1. Contracting entities may authorise or require tenderers to submit variants which meet the minimum requirements specified by the contracting entities. Contracting entities shall indicate in the procurement documents whether or not they authorise or require variants and, if so, the minimum requirements to be met by the variants and any specific requirements for their presentation, in particular whether variants may be submitted only where a tender, which is not a variant, has also been submitted. Where variants are authorised or required, they shall also ensure that the chosen award criteria can be applied to variants meeting those minimum requirements as well as to conforming tenders which are not variants. 2. In procedures for awarding supply or service contracts, contracting entities that have authorised or required variants shall not reject a variant on the sole ground that it would, where successful, lead either to a service contract rather than a supply contract or to a supply contract rather than a service contract. 1

This provision is identical to the Public Sector Directive Article 45. For a commentary, see this provision. However, when comparing the two provisions some minor variations as to the wording and the structure of the articles can be observed but in our opinion there cannot be seen to be any differences as to the content of the two articles.

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Art. 66

Article 65 Division of contracts into lots 1. Contracting entities may decide to award a contract in the form of separate lots and may determine the size and subject-matter of such lots. Contracting entities shall indicate, in the contract notice, in the invitation to confirm interest, or, where the means of calling for competition is a notice on the existence of a qualification system, in the invitation to tender or to negotiate, whether tenders may be submitted for one, for several or for all of the lots. 2. Contracting entities may, even where tenders may be submitted for several or all lots, limit the number of lots that may be awarded to one tenderer provided that the maximum number of lots per tenderer is stated in the contract notice or in the invitation to confirm interest, to tender or to negotiate. Contracting entities shall indicate in the procurement documents the objective and non-discriminatory criteria or rules they intend to apply for determining which lots will be awarded where the application of the award criteria would result in one tenderer being awarded more lots than the maximum number. 3. Member States may provide that, where more than one lot may be awarded to the same tenderer, contracting entities may award a contract combining several or all lots where they have specified in the contract notice or in the invitation to confirm interest, to tender or to negotiate that they reserve the possibility of doing so and indicate the lots or groups of lots that may be combined. 4. Member States may render it obligatory to award contracts in the form of separate lots under conditions to be specified in accordance with their national law and having regard for Union law. The second subparagraph of paragraph 1 and, where appropriate, paragraph 3 shall apply. This provision is identical to the Public Sector Directive Article 46. For a commen- 1 tary, see this provision. However, under the Utilities Directive a contracting entity is not obliged to state the reasons for not dividing a contract into lots.

Article 66 Setting time limits 1. When fixing the time limits for requests to participate and the receipt of tenders, contracting entities shall take particular account of the complexity of the contract and the time required for drawing up tenders, without prejudice to the minimum time limits set out in Articles 45 to 49. 2. Where tenders can be made only after a visit to the site or after on-the-spot inspection of the documents supporting the procurement documents, the time limits for the receipt of tenders, which shall be longer than the minimum time limits set out in Articles 45 to 49, shall be fixed, so that all economic operators concerned may be aware of all the information needed to produce tenders. 3. Contracting entities shall extend the time limits for the receipt of tenders so that all economic operators concerned may be aware of all the information needed to produce tenders in the following cases: (a) where, for whatever reason, additional information, although requested by the economic operator in good time, is not supplied at the latest six days before the time limit fixed for the receipt of tenders. In the event of an acceleratSune Troels Poulsen

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ed open procedure as referred to in Article 45(3), that period shall be four days; (b) where significant changes are made to the procurement documents. The length of the extension shall be proportionate to the importance of the information or change. Where the additional information has either not been requested in good time or its importance with a view to preparing responsive tenders is insignificant, contracting entities shall not be required to extend the time limits. 1

This provision is identical to the Public Sector Directive Article 47. For a commentary, see this provision.

Section 2 Publication and Transparency Article 67 Periodic indicative notices 1. Contracting entities may make known their intentions of planned procurement through the publication of a periodic indicative notice. Those notices shall contain the information set out in part A, section I of Annex VI. They shall be published either by the Publications Office of the European Union or by the contracting entities on their buyer profiles in accordance with point 2(b) of Annex IX. Where the periodic indicative notice is published by the contracting entities on their buyer profile, they shall send a notice of the publication of the periodic indicative notice on a buyer profile to the Publications Office of the European Union in accordance with point 3 of Annex IX. Those notices shall contain the information set out in Annex VI Part B. 2. When a call for competition is made by means of a periodic indicative notice in respect of restricted procedures and negotiated procedures with prior call for competition, the notice shall meet all the following requirements: (a) it refers specifically to the supplies, works or services that will be the subject of the contract to be awarded; (b) it indicates that the contract will be awarded by restricted or negotiated procedure without further publication of a call for competition and invites interested economic operators to express their interest; (c) it contains, in addition to the information set out in part A, section I of Annex VI, the information set out in part A, section II of Annex VI; (d) it has been sent for publication between 35 days and 12 months prior to the date on which the invitation to confirm interest is sent. Such notices shall not be published on a buyer profile. However, the additional publication at national level pursuant to Article 72, if any, may be made on a buyer profile. The period covered by the periodic indicative notice shall be a maximum of 12 months from the date the notice is transmitted for publication. However, in the case of contracts for social and other specific services, the periodic indicative notice referred to in point (b) of Article 92(1) may cover a period which is longer than 12 months.

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This provision is identical to the Public Sector Directive Article 48. For a commen- 1 tary, see this provision. However, Article 67 does not limit the use of Periodic Indicative Notices to sub-central contracting authorities as any contracting entity according to Article 44 of the Utilities Directive can use a Periodic Indicative Notice as a means for calling competition.

Article 68 Notices on the existence of a qualification system 1. Where contracting entities choose to set up a qualification system in accordance with Article 77, the system shall be the subject of a notice as referred to in Annex X, indicating the purpose of the qualification system and how to have access to the rules concerning its operation. 2. Contracting entities shall indicate the period of validity of the qualification system in the notice on the existence of the system. They shall notify the Publications Office of the European Union of any change in period of validity, using the following standard forms: (a) where the period of validity is changed without terminating the system, the form for notices on the existence of qualification systems; (b) where the system is terminated, a contract award notice referred to in Article 70. Under Article 44 of the Utilities Directive a qualification system may be a means of 1 making a call for competition. The present provision sets out, that the contracting entity must publish a notice about the qualification system, containing the information set out in Annex X to the Utilities Directive, which, among other requirements, in point 7 specifies that the notice must contain the information that it constitutes a call for competition.

68.1. Information on the requirements for obtaining access to the system Among the information requirements, a contracting entity must state the purpose of 2 the qualification system, how to have access to the rules concerning its operation, the CPV (Common Procurement Vocabulary) numbers for the works etc. that are to be purchased via the system, and the ‘Conditions to be fulfilled by the economic operators in view of their qualification pursuant to the system and the methods according to which each of those conditions will be verified’ etc.

68.2. Information on the duration of the system The time period for the duration of the qualification system must be set out in the 3 notice. It is not a requirement of the Utilities Directive that a qualification system is set up for a limited time period and such a system may therefore be of an unlimited duration. The collateral is that all interested and qualified economic operators must be given access to the system in accordance with the rules set up by the contracting entity for such access. The contracting entity must publish a notice when amending the duration of the qualification system or when it is terminated. Although a qualification system may be set up for a longer time period or without a fixed date for its termination there is no requirement as to regularly publication of the

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existence of the system. In article 77(3) it is set out that any economic operator on request must have access to the information on the system.

Article 69 Contract notices Contract notices may be used as a means of calling for competition in respect of all procedures. They shall contain the information set out in the relevant part of Annex XI and shall be published in accordance with Article 71. 1

This provision is identical to the Public Sector Directive Article 49. For a commentary, see this provision. However, Article 69 is more flexible than Article 49 of the Public Sector Directive as under Article 69 contract notices are only one means among several for making a call for competition while under Article 44(4) of the Utilities Directive a call for competition may also be made by a periodic indicative notice or a notice on the existence of a qualification system.

Article 70 Contract award notices 1. Not later than 30 days after the conclusion of a contract or of a framework agreement following the decision to award or conclude it, contracting entities shall send a contract award notice on the results of the procurement procedure. Such notice shall contain the information set out in Annex XII and shall be published in accordance with Article 71. 2. Where the call for competition for the contract concerned has been made in the form of a periodic indicative notice and the contracting entity has decided that it will not award further contracts during the period covered by the periodic indicative notice, the contract award notice shall contain a specific indication to that effect. In the case of framework agreements concluded in accordance with Article 51, contracting entities shall not be bound to send a notice of the results of the procurement procedure for each contract based on that agreement. Member States may provide that contracting entities shall group notices of the results of the procurement procedure for contracts based on the framework agreement on a quarterly basis. In that case, contracting entities shall send the grouped notices within 30 days of the end of each quarter. Contracting entities shall send a contract award notice within 30 days after the award of each contract based on a dynamic purchasing system. They may, however, group such notices on a quarterly basis. In that case, they shall send the grouped notices within 30 days of the end of each quarter. 3. The information provided in accordance with Annex XII and intended for publication shall be published in accordance with Annex IX. Certain information on the contract award or the conclusion of the framework agreement may be withheld from publication where its release would impede law enforcement or otherwise be contrary to the public interest or would prejudice the legitimate commercial interests of a particular economic operator, public or private, or might prejudice fair competition between economic operators.

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Art. 71

In the case of contracts for research-and-development services (‘R & D services’), the information concerning the nature and quantity of the services may be limited to: (a) the indication ‘R & D services’ where the contract has been awarded by a negotiated procedure without a call for competition in accordance with Article 50(b); (b) information at least as detailed as was indicated in the notice that was used as a means of calling for competition. 4. Information provided in accordance with Annex XII and marked as not being intended for publication shall be published only in simplified form and in accordance with Annex IX for statistical purposes. This provision is identical to the Public Sector Directive Article 50. For a commen- 1 tary, see this provision. However, Article 70 is more flexible than Article 50 of the Public Sector Directive as to the type of information which can be excluded from publication as the latter article sets out some examples of the types of information which might be excluded from publication.

Article 71 Form and manner of publication of notices 1. Notices referred to in Articles 67 to 70 shall include the information set out in Annexes VI Part A, VI Part B, X, XI, and XII and in the format of standard forms, including standard forms for corrigenda. The Commission shall establish those standard forms by means of implementing acts. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 105. 2. Notices referred to in Articles 67 to 70 shall be drawn up, transmitted by electronic means to the Publications Office of the European Union and published in accordance with Annex IX. Notices shall be published not later than five days after they are sent. The costs of publication of the notices by Publications Office of the European Union shall be borne by the Union. 3. Notices referred to in Articles 67 to 70 shall be published in full in the official language(s) of the institutions of the Union chosen by the contracting entity. That language version or those language versions shall constitute the sole authentic text(s). A summary of the important elements of each notice shall be published in the other official languages of the institutions of the Union. 4. The Publications Office of the European Union shall ensure that the full text and the summary of periodic indicative notices referred to in Article 67(2), calls for competition setting up a dynamic purchasing system as referred to in point (a) of Article 52(4) and notices on the existence of a qualification system used as a means of calling for competition in accordance with point (b) of Article 44(4) continue to be published: (a) in the case of periodic indicative notices for 12 months or until receipt of a contract award notice as provided for in Article 70(2) indicating that no further contracts will be awarded during the 12 month period covered by the call for competition. However, in the case of contracts for social and other specific services, the periodic indicative notice referred to in point (b) of Article 92(1) shall continue to be published until the end of its originally indicated period Sune Troels Poulsen

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of validity or until receipt of a contract award notice as provided for in Article 70 indicating that no further contracts will be awarded during the period covered by the call for competition; (b) in the case of calls for competition setting up a dynamic purchasing system for the period of validity of the dynamic purchasing system; (c) in the case of notices on the existence of a qualification system for its period of validity. 5. Contracting entities shall be able to supply proof of the dates on which notices are dispatched. The Publications Office of the European Union shall give the contracting entity confirmation of the receipt of the notice and of the publication of the information sent, indicating the date of that publication. Such confirmation shall constitute proof of publication. 6. Contracting entities may publish notices for works, supply or service contracts that are not subject to the publication requirements laid down in this Directive provided that those notices are sent to the Publications Office of the European Union by electronic means in accordance with the format and procedures for transmission indicated in Annex IX. 1

This provision is identical to the Public Sector Directive Article 51. For a commentary, see this provision.

Article 72 Publication at national level 1. Notices referred to in Articles 67 to 70 and the information contained therein shall not be published at national level before the publication pursuant to Article 71. However, publication may in any event take place at the national level where contracting entities have not been notified of the publication within 48 hours after confirmation of the receipt of the notice in accordance with Article 71. 2. Notices published at national level shall not contain information other than that contained in the notices dispatched to the Publications Office of the European Union or published on a buyer profile, but shall indicate the date of dispatch of the notice to the Publications Office of the European Union or its publication on the buyer profile. 3. Periodic indicative notices shall not be published on a buyer profile before the dispatch to the Publications Office of the European Union of the notice of their publication in that form; they shall indicate the date of that dispatch. 1

This provision is identical to the Public Sector Directive Article 52. For a commentary, see this provision.

Article 73 Electronic availability of procurement documents 1. Contracting entities shall by electronic means offer unrestricted and full direct access free of charge to the procurement documents from the date of publication of a notice in accordance with Article 71 or the date on which an invitation to confirm interest was sent.

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Art. 74

Where the means of calling for competition is a notice on the existence of a qualification system, such access shall be offered as soon as possible and at the latest when the invitation to tender or to negotiate is sent. The text of the notice or of those invitations shall specify the internet address at which the procurement documents are accessible. Where unrestricted and full direct access free of charge by electronic means to certain procurement documents cannot be offered for one of the reasons set out in the second subparagraph of Article 40(1), contracting entities may indicate in the notice or the invitation to confirm interest that the procurement documents concerned will be transmitted by other means than electronic means in accordance with paragraph 2 of this Article. In such a case, the time limit for the submission of tenders shall be prolonged by five days, except in the cases of duly substantiated urgency referred to in Article 45(3) and where the time limit is set by mutual agreement pursuant to the second subparagraph of Article 46(2) or the second subparagraph of Article 47(2). Where unrestricted and full direct access free of charge by electronic means to certain procurement documents cannot be offered because contracting entities intend to apply Article 39(2), they shall indicate in the notice or the invitation to confirm interest or, where the means of calling for competition is a notice on the existence of a qualification system, in the procurement documents which measures aimed at protecting the confidential nature of the information they require and how access can be obtained to the documents concerned. In such case, the time limit for the submission of tenders shall be prolonged by five days, except in the cases of duly substantiated urgency referred to in Article 45(3) and where the time limit is set by mutual agreement pursuant to the second subparagraph of Article 46(2) or the second subparagraph of Article 47(2). 2. Provided that it has been requested in good time, the contracting entities shall supply to all tenderers taking part in the procurement procedure additional information relating to the specifications and any supporting documents not later than six days before the time limit fixed for the receipt of tenders. In the event of an accelerated open procedure as referred to in Article 45(3), that period shall be four days. This provision is identical to the Public Sector Directive Article 53. For a commen- 1 tary, see this provision.

Article 74 Invitations to candidates 1. In restricted procedures, competitive dialogue procedures, innovation partnerships and negotiated procedures with prior call for competition, contracting entities shall simultaneously and in writing invite the selected candidates to submit their tenders, to take part in the dialogue or to negotiate. Where a periodic indicative notice is used as a call for competition pursuant to point (a) of Article 44(4), contracting entities shall simultaneously and in writing invite the economic operators which have expressed their interest to confirm their continuing interest. 2. The invitations referred to in paragraph 1 of this Article shall include a reference to the electronic address on which the procurement documents have been made directly available by electronic means. The invitations shall be accompanied by Sune Troels Poulsen

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the procurement documents, where those documents have not been the subject of unrestricted and full direct access, free of charge, for the reasons set out in the third or fourth subparagraph of Article 73(1) and have not already been made otherwise available. In addition, the invitations referred to in paragraph 1 of this Article shall include the information set out in Annex XIII. 1

This provision is identical to the Public Sector Directive Article 54. For a commentary, see this provision.

Article 75 Informing applicants for qualification, candidates and tenderers 1. Contracting entities shall as soon as possible inform each candidate and tenderer of decisions reached concerning the conclusion of a framework agreement, the award of the contract or admittance to a dynamic purchasing system, including the grounds for any decision not to conclude a framework agreement or award a contract for which there has been a call for competition or to recommence the procedure, or not to implement a dynamic purchasing system. 2. On request from the candidate or tenderer concerned, contracting entities shall, as soon as possible, and in any event within 15 days from receipt of a written request, inform: (a) any unsuccessful candidate of the reasons for the rejection of its request to participate; (b) any unsuccessful tenderer of the reasons for the rejection of its tender, including, for the cases referred to in Article 60(5) and (6), the reasons for their decision of non-equivalence or their decision that the works, supplies or services do not meet the performance or functional requirements; (c) any tenderer that has made an admissible tender of the characteristics and relative advantages of the tender selected, as well as the name of the successful tenderer or the parties to the framework agreement; (d) any tenderer that has made an admissible tender of the conduct and progress of negotiations and dialogue with tenderers. 3. Contracting entities may decide to withhold certain information referred to in paragraphs 1 and 2, regarding the contract award, the conclusion of the framework agreement or the admittance to a dynamic purchasing system is to be withheld where its release would impede law enforcement or otherwise be contrary to the public interest or would prejudice the legitimate commercial interests of a particular economic operator, public or private, or might prejudice fair competition between economic operators. 4. Contracting entities which establish and operate a system of qualification shall inform applicants of their decision as to qualification within a period of six months. If the decision will take longer than four months from the presentation of an application, the contracting entity shall inform the applicant, within two months of the application, of the reasons justifying the longer period and of the date by which his application will be accepted or refused. 5. Applicants whose qualification is refused shall be informed of the refusal decision and the reasons for that decision as soon as possible and no more than 15 days later than the date of the refusal decision. The reasons shall be based on the criteria for qualification referred to in Article 77(2).

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Art. 76

6. Contracting entities which establish and operate a system of qualification may bring the qualification of an economic operator to an end only for reasons based on the criteria for qualification referred to in Article 77(2). Any intention to bring the qualification to an end shall be notified in writing to the economic operator at least 15 days before the date on which the qualification is due to end, together with the reason or reasons justifying the proposed action. Paragraph 1, 2 and 3 of this article are identical to Article 55 of the Public Sector Di- 1 rective. For a commentary, see these provisions.

75.4. Information to the applicants When a qualification system is set up and during its operation the contracting entity 2 must in principle inform applicants within six months whether it has been decided that they qualify for admittance to the system or not. If it is not possible to meet this deadline, the contracting entity will according to Article 75(4) have to inform the applicants thereof not later than 4 months after having received the applications and inform the applicants of the reasons for the longer period and of the date where the decision on admittance or refusal is expected to be taken. If further delay is encountered the contracting entity will obviously also have to inform the applicants.

77.5. Information when an application is refused If an application is refused, the applicant must according to Article 75(5) be informed 3 of this and the reasons for the refusal. The reasons will have to be sent to the applicant as soon as possible and not later than 15 days after the refusal decision has been made.

75.6. Procedure for removing an economic operator from a qualification system A qualified economic operator may be removed from the qualification system only if 4 notice has been given at least 15 days before the date on which the qualification is due to end, together with the reasons justifying this action. This stand-still period gives the economic operator an opportunity to either challenge the decision or enter into discussions with the contracting entity with the aim of changing its decision.

Section 3 Choice of participants and award of contracts Article 76 General principles 1. For the purpose of selecting participants in their procurement procedures, the following rules shall all apply: (a) contracting entities having provided rules and criteria for the exclusion of tenderers or candidates in accordance with Article 78(1) or Article 80(1) shall exclude economic operators identified in accordance with such rules and fulfilling such criteria; (b) they shall select tenderers and candidates in accordance with the objective rules and criteria laid down pursuant to Articles 78 and 80;

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2.

3.

4.

5.

6. 7.

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(c) in restricted procedures, in negotiated procedures with a call for competition, in competitive dialogues and in innovation partnerships, they shall where appropriate reduce in accordance with Article 78(2) the number of candidates selected pursuant to points (a) and (b) of this paragraph. When a call for competition is made by means of a notice on the existence of a qualification system and for the purpose of selecting participants in procurement procedures for the specific contracts which are the subject of the call for competition, contracting entities shall: (a) qualify economic operators in accordance with Article 77; (b) apply to such qualified economic operators those provisions of paragraph 1 that are relevant to restricted or negotiated procedures, to competitive dialogues or to innovation partnerships. When selecting participants for a restricted or negotiated procedure, a competitive dialogue or an innovation partnership, in reaching their decision as to qualification or when the criteria and rules are being updated, contracting entities shall not: (a) impose administrative, technical or financial conditions on certain economic operators which would not be imposed on others; (b) require tests or evidence which would duplicate objective evidence already available. Where information or documentation to be submitted by economic operators is or appears to be incomplete or erroneous, or where specific documents are missing, contracting entities may, unless otherwise provided for by the national law implementing this Directive, request the economic operators concerned to submit, supplement, clarify or complete the relevant information or documentation within an appropriate time limit, provided that such requests are made in full compliance with the principles of equal treatment and transparency. Contracting entities shall verify that the tenders submitted by the selected tenderers comply with the rules and requirements applicable to tenders and award the contract on the basis of the criteria laid down in Articles 82 and 84, taking into account Article 64. Contracting entities may decide not to award a contract to the tenderer submitting the best tender where they have established that the tender does not comply with the applicable obligations referred to in Article 36(2). In open procedures, contracting entities may decide to examine tenders before verifying the suitability of tenderers, provided that the relevant provisions of Articles 76 to 84 are observed, including the rule that the contract shall not be awarded to a tenderer who should have been excluded pursuant to Article 80 or who does not meet the selection criteria set out by the contracting entity in accordance with Article 78(1) and Article 80. Member States may exclude the use of the procedure in the first subparagraph for, or restrict it to, certain types of procurement or specific circumstances. The Commission shall be empowered to adopt delegated acts in accordance with Article 103 to amend the list in Annex XIV, where necessary, to add new international agreements that have been ratified by all Member States or where the existing international agreements referred to are no longer ratified by all Member States or they are otherwise changed, for instance in respect of their scope, content or denomination.

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Art. 76

Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, pp. 168; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, p. 422; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2nd ed. 2007, pp. 364; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 1059.

Under the Utilities Directive the contracting entities have according to Article 78 and 1 80 a high degree of flexibility for determining the criteria for excluding and selecting economic operators (candidates and tenderers). The present provision mirrors this high degree of flexibility as the rules of this article (subparagraph 1 and 2) are dependent on the contracting entity having set up rules and criteria for making exclusions and selecting economic operators. The other paragraphs of this article (3, 4, 5, 6, 7, and 8) are to a large extent identical 2 to the corresponding articles of the Public Sector Directive and should be seen as an attempt to align the provisions of the two directives. Also, a contracting entity has the possibility to set up a qualification system which 3 can provide the basis for the award of contract, see Article 77. Under a qualification system a group of qualified economic operators is preselected according to criteria for exclusion and selection of tenderers and such a system can be seen as an alternative to determining criteria for excluding and selecting economic operators for every single contract.

76.1. Rules set out for exclusion and selection should be adhered to The contracting entity has under Articles 78 and 80 discretion as to determining the 4 criteria for excluding and selecting candidates and tenderers for a specific contract. However, it is set out in the present provision that if a contracting entity has set out such rules then the entity is obliged to take its decision on exclusion and selection on the basis of those exact rules and criteria.1 It is, correspondingly, set out that if the contracting entity has specified rules and criteria for shortlisting then the entity must use those rules when reducing the number of candidates that will have an opportunity to hand in a tender for the contract or will be invited to negotiate for the contract.

76.2. Rules for exclusion and selection under a qualification system This provision sets out that a contracting entity is entitled to establish rules and crite- 5 ria for excluding and selecting candidates for a qualification system. The contracting entity should qualify economic operators in accordance with article 77 with regard to qualification systems which generally regulate such systems. The contracting entity is also entitled to set up rules and criteria for excluding and selecting economic operators and the provision makes a cross reference to article 76(1) implying that the contracting entity is obliged to make use of those rules and criteria it has established for making decisions on exclusion and selection.

76.3. The principle of equality applies throughout the procedure This provision provides an express rule on the application of the principle of equality. 6 When a contracting entity is selecting participants for a procedure or when the entity is updating rules or criteria for participation and qualification the contracting entity is barred from differentiating between the economic operators by imposing administra1

Case C-42/13, Cartiera dell’Adda, paragraph 42-44.

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tive, technical or financial conditions on some economic operators which the entity does not impose on other economic operators. The second subparagraph is in line with this as the contracting entity is barred from requiring tests or evidence which are already available to it. Although this provision seems obvious it is inserted in the Utilities Directive to counter the high degree of flexibility on the side of the contracting entities as to determining the rules and procedures for excluding and selecting economic operators for a concrete contract and the provision must presumably also be seen in the perspective of the Commission experience with the rule of the former Utilities Directive.

76.4. The additional provisions in Article 76 7

The provisions in Articles 76(4) and Article 76(6)-(8) are identical to Article 56(1)-(4) and Artticle 76(5) is identical to Article 51(3). For a commentary, see these provisions.

Subsection 1 Qualification and qualitative selection Article 77 Qualification systems 1. Contracting entities which so wish may establish and operate a system of qualification of economic operators. Contracting entities which establish or operate a system of qualification shall ensure that economic operators are at all times able to request qualification. 2. The system under paragraph 1 may involve different qualification stages. Contracting entities shall establish objective rules and criteria for the exclusion and selection of economic operators requesting qualification and objective criteria and rules for the operation of the qualification system, covering matters such as inscription in the system, periodic updating of the qualifications, if any, and the duration of the system. Where those criteria and rules include technical specifications, Articles 60 to 62 shall apply. The criteria and rules may be updated as required. 3. The criteria and rules referred to in paragraph 2 shall be made available to economic operators on request. Those updated criteria and rules shall be communicated to interested economic operators. Where a contracting entity considers that the qualification system of certain other entities or bodies meets its requirements, it shall communicate to interested economic operators the names of such other entities or bodies. 4. A written record of qualified economic operators shall be kept; it may be divided into categories according to the type of contract for which the qualification is valid. 5. When a call for competition is made by means of a notice on the existence of a qualification system, specific contracts for the works, supplies or services covered by the qualification system shall be awarded by restricted procedures or negotiated procedures, in which all tenderers and participants are selected among the candidates already qualified in accordance with such a system.

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Art. 77

6. Any charges that are billed in connection with requests for qualification or with updating or conserving an already obtained qualification pursuant to the system shall be proportionate to the generated costs. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, pp. 175; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2nd ed. 2012, pp. 391; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2 nd ed. 2007, pp. 368; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, p. 1040.

The Utilities Directive provides in article 44(3) that contracting entities may establish and operate a ‘system of qualification of economic operators”. A qualification system can be seen as a means for making a call for competition where the subsequent contracts for works, goods or services are awarded to economic operators admitted to the system by using a restricted or negotiated procedure. This procurement procedure can only be used for specific contracts that are subject to the Utilities Directive. A qualification system is a procedure whereby a contracting entity can establish a group of economic operators which have been pre-assessed with respect to exclusion criteria and found to as well fulfil certain financial and technical criteria. If, at a later point, the contracting entity wishes to enter into a contract, it can approach the qualified economic operators, sending them details of the specific contract and invite them to submit tenders or enter into negotiations. There are procedural advantages with a qualification system, and it saves time. When setting up a qualification system a contract notice is published, and there must be renewed publication in connection with the award of specific contracts. The technical and financial qualifications of economic operators are assessed when setting up a qualification system, and there is no need to repeat this assessment for each contract. The use of a qualification system means it is possible to speed up the award of contracts, as the contracting entity can focus on obtaining offers or negotiating with a number of the economic operators listed in the system. It will also be easier to undertake more substantial changes to the contract specifications. With usual procurements of a single contract, making substantial changes to the contract specifications normally means it will be necessary to start a new procurement procedure. If a qualification system has been set up, the contracting authority can restrict itself to making a new selection from among the economic operators listed in the system. The disadvantages of a qualification system are that resources are used to set it up before it is clear how much it may be used. It can also be difficult to establish the technical and financial selection criteria sufficiently precisely for future contracts, as they may either be so specific that they are only applicable to a limited number of contracts, or they can be so broad that they do not say anything useful about qualifications for future contracts. However, this problem can be overcome by dividing a qualification system into different categories according to the size and nature (electrical installation, roofing work, external maintenance etc.) of the expected contracts, special skills and so on. The rules on qualification systems are covered by several rules of the Utilities Directive: – – – –

A notice must be published on establishing a qualification system (Article 68), the notice must contain concrete information (Annex X), full electronic access must be given to the documents (Article 73(1)), the possibility of using exclusion grounds or selection criteria of the Public Sector Directive (Article 76(2), Article 77(2) and Article 80(1)),

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3

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– information on decision for admittance to the qualification system or removal from the system must be given to the applicants (Article 75(4, 5 and 6)), – It is possible to demonstrate the fulfilment of criteria for qualification by the use of subcontractors ((Article 79(1)), – A qualification system may be used in combination with a dynamic purchasing system (Article 52(6)), an electronic auction (Article 53(4)) or an electronic catalogue (Article 54(3)).

77.1. Concerns for competition 5

A qualification system is a closed system. At the time of the award of a contract the contracting entity can only choose from among the economic operators already admitted to the system. Of course, there is nothing to prevent a contracting entity from deciding not to use the qualification system for a specific contract, and to carry out a full procurement procedure. No time limits are laid down for the duration of a qualification system, so that it can, in principle, be unlimited. However, the combination of a closed system and unlimited duration would be contrary to the purpose of the Utilities Directive which is to open the contracts of contracting authorities to competition, and accordingly the Directive lays down two requirements for contracting authorities in order to ensure that economic operators have the possibility of being admitted to a qualification system. The more important of the two requirements is that contracting authorities must ensure that economic operators are able to request qualification at all times. Secondly, the qualification criteria and the procedural rules for admission to a system must upon request be made available to the interested economic operators. Consequently, a contracting entity may not restrict the number of participants in a qualification system. Although a qualification system may be set up for an unlimited duration there is no requirement in the Utilities Directive on regular publication of a notice about the qualification system. In this respect the Utilities Directive differs from the former Utilities Directive (2004/17).

77.2. The procedure for establishing and operating a qualification system 6

The contracting entity lays down requirements for the economic, financial, professional and technical capacities of economic operators which it finds appropriate for the qualification system. The Utilities Directive sets no limits to the requirements which a contracting entity can lay down for the qualifications of economic operators, although it is provided in Article 76(2) that the contracting entity is entitled to use the rules on exclusion and the selection criteria set out in the Public Sector Directive. Similarly, there are no limits in the Utilities Directive as to what a contracting entity can demand as evidence of fulfilment of the requirements. The contracting entity can carry out its own examination of the qualifications of economic operators concerning “the capacities of the economic operators and/or the characteristics of the works, supplies or services covered by the system. For the purposes of qualification, contracting entities may conduct their own tests in order to evaluate the characteristics of the works, supplies or services concerned, in particular in terms of compatibility and safety.”1

7

The fulfilment of economic, financial, professional and technical requirements can, according to Article 79(1), be satisfied by using subcontractors. A consortium or another 1

Recital 51, paragraph 2 of the former Utilities Directive (2004/17).

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group can also fulfil requirements on the basis of the joint capacities of the consortium or group members. A contracting entity can according to Article 76(2) and Article 80 apply the grounds 8 for exclusion referred to in Article 57 of the Public Sector Directive, such as lack of professional integrity, insolvency etc. However, if the contracting entity is a contracting authority as referred to in Article 3 of the Utilities Directive (State, regional or local authorities, etc.), it is obliged to apply the exclusion grounds set out in Article 57(1) and (2) of the Public Sector Directive. If, in setting up a qualification system, a contracting entity has laid down technical specifications for the works, services or goods that are to be provided within the framework of the qualification system, these specifications must be drawn up in accordance with the requirements in Articles 60-62 of the Utilities Directive. The contracting entity must lay down the procedure for admitting economic opera- 9 tors to the system, and must follow the procedures and apply the criteria which it has laid down when selecting participants for the qualification system. The contracting entity must also lay down the procedure for the operation of the qualification system, how an interested economic operator may obtain access to the system, how qualifications are periodically updated, how tenderers and participants are selected for specific contracts for works, supplies or services etc. A qualified economic operator may be removed from the qualification system only in 10 accordance with the conditions set out in Article 75(6).

77.3. Information on conditions for access The article sets out that the contracting entity is obliged to have updated rules and 11 criteria for obtaining access to the qualification system and must provide those rules and criteria to interested economic operators.2 With respect to subsequent applications for admittance to the system the requirements as to information to economic operators seeking access are set out in Article 75(4). The contracting entity must in principle inform a candidate within six months whether it has been decided that the candidate qualifies for admittance to the system. If it is not possible to meet this deadline, the contracting entity will according to Article 75(4) have to inform the applicant thereof not later than 4 months after having received the applications and inform the applicant of the reasons for the prolonged period and of the date where the decision on admittance or refusal is expected to be taken. If an application is refused, the applicant must according to Article 75(5) be informed of this and the reasons for the refusal. The reasons will have to be sent to the applicant as soon as possible and not later than 15 days after the refusal decision has been made. 77.3.1. Use of other contracting entities qualification systems It must presumably be open for a contracting entity to use the qualification system set 12 up by another contracting entity. This possibility is seen indirectly in the recitals to the former Utilities Directive: “Qualification systems should be operated in accordance with objective rules and criteria, which, at the contracting entities' choice, may concern the capacities of the economic operators and/or the characteristics of the works, supplies or services covered by the system. For the purposes of qualification, contracting entities may conduct their own tests in order to evaluate the characteristics of the works, supplies or services concerned, in particular in terms of compatibility and safety.” 3 2 3

This mirrors Article 63 of the Utilities Directive on the communication of technical specifications. Recital 51(2) to the former Utilities Directive (2004/17).

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If a contracting entity is of the opinion that the qualification system of another contracting entity fulfils its requirements it must communicate this to interested economic operators which then have the possibility of applying for access to that qualification system.

77.4. Information on economic operators in the system 13

It is possible to divide the qualification system into categories for specific types of works, services or supplies. The contracting entity must keep a record of the qualified economic operators which have been granted access to the system or each of those categories.

77.5. Procedure for awarding a contract A qualification system can be seen as a call for competition where the award of concrete contracts for works, supplies or services will take place at a later stage. After publication of a notice about the qualification system, the contracting entity is not required to make any further publication prior to awarding a contract. Contracts under a qualification system should be awarded by restricted procedures or negotiated procedures and it is set out that it is possible to combine those procedures with dynamic purchasing systems (Article 52(6), electronic auctions (Article 53(4) or electronic catalogues (Article 54(3)). It is set out that tenderers must be chosen from among the candidates who have been assessed as qualified and therefore are admitted into the system. This means that other economic operators cannot compete for a specific contract. The general principles of equal treatment and transparency must be used as the basis for the award procedure. From these principles and also from Article 77(2) it is possible to derive the guideline that the contracting entity must establish a procedure in advance for how it will select contractors for specific contracts, and the contracting entity will be bound by this procedure. 15 A contracting entity can either invite the economic operators that have been admitted to the qualification system to submit tenders or it can enter into negotiations with them. A contracting entity can choose to follow the procedure in Article 46 of the Utilities Directive on restricted procedures or Article 47 on negotiated procedure for initiating the procedure for the award of a contract. In this situation, the invitation to submit a tender or to enter into negotiations must contain the information stated in Article 74. In any case, the invitation must state the award criteria and their weightings, where these are not stated in the notice on the establishment of the qualification system. A contracting entity is relatively free to choose which economic operators to invite to submit a tender or to enter into negotiation with although the criteria for making such a selection must be set out in the rules for the operation of the qualification system. Guidance on which criteria are suitable for “short-listing” can presumably be obtained by reference to the way a contracting entity carries out ‘short-listing’ for restricted procedures. A contracting entity must thus be able to establish a way to determine which economic operators are best qualified, to determine how competition for the contract in question can best be promoted, to ensure the contracting entity’s security of supply in having several suppliers etc. 16 The award of a contract must be made in accordance with the normal rules of the Utilities Directive, i.e. the contract must be awarded on the basis of criteria that are laid down in advance, and a tender can only be rejected as being abnormally low after the contracting entity has conducted a consultation procedure with the tenderer. 14

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A contracting entity must inform the economic operators of the award of the con- 17 tract, but such information need only be sent to those economic operators that have been selected for the contract in question. The contracting entity must also publish a notice about the award of the contract.

77.6. Fees for being admitted to a qualification system It is specifically authorised that a contracting entity is entitled to set at fee for being 18 admitted to or being part of a qualification system. In this respect the rules for qualification systems differ from those concerning dynamic purchasing systems as it is set out in article 52(9) that no charges may be billed prior to or during the period of validity of the dynamic purchasing system. It is a requirement for such a fee that it must be proportionate and related to the costs of running a qualification system.

Article 78 Criteria for qualitative selection 1. Contracting entities may establish objective rules and criteria for the exclusion and selection of tenderers or candidates; those rules and criteria shall be available to interested economic operators. 2. Where contracting entities need to ensure an appropriate balance between the particular characteristics of the procurement procedure and the resources required to conduct it, they may, in restricted or negotiated procedures, in competitive dialogues or in innovation partnerships, establish objective rules and criteria that reflect this need and enable the contracting entity to reduce the number of candidates that will be invited to tender or to negotiate. The number of candidates selected shall, however, take account of the need to ensure adequate competition. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, pp. 168 and 178; Sune T. Poulsen, Simon E. Kalsmose-Hjelmborg and Peter S. Jakobsen, EU Public Procurement Law, 2 nd ed. 2012, p. 422 and 425; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2 nd ed. 2007, pp. 364; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 1059.

This provision should be seen together with Article 80 which provides the possibility 1 for contracting entities to use the criteria set out in the Public Sector Directive for excluding and selecting tenderers and candidates. Also Article 76 is relevant as it obliges the contracting entity to use the rules and criteria the entity has established for the exclusion and selection of candidates and tenderers.

78.1. Wide discretion for the contracting entity This provision authorises contracting entities to establish rules and criteria which 2 may provide the foundation for excluding and selecting candidates and tenderers. The flexibility provided by the Utilities Directive for contracting entities when entering into contracts are very clear in this provision as it is totally open-ended. Two limitations can be observed, namely that the rules and criteria should be made available to interested economic operators and that the contracting entity under article 76 is obliged to use the rules and criteria which are set up for entering into a concrete contract by a contracting entity. These limitations would presumably follow already from the principles of equality

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and transparency and they do not impose severe limitations upon the contracting entities. A contracting entity is entitled to use criteria and requirements for evidence that correspond to Articles 57 and 58 of the Public Sector Directive, but it is not obliged to do so. A contracting entity may use criteria other than those set out in the Public Sector Directive as long as the criteria are objective, and the fundamental legal principles are respected. A contracting entity will also be able to attach more weight to other forms of evidence than those listed in the Public Sector Directive. However, a contracting entity may not apply administrative, technical or financial demands to some candidates or tenderers without applying them to all.1 3 It is stated that the exclusion and selection criteria should be made available to interested economic operators. When the contracting entity decides to publish a contract notice it follows from Article 69 of the Utilities Directive read in connection with Annex XI that “information concerning the economic operator’s position and the minimum economic and technical conditions required of him” should be included in the notice. As a contracting entity under the Utilities Directive also has the choice of using a periodic indicative notice or a notice on establishing a qualification system as call for competition the directive uses the terminology, that the rules and criteria “shall be available” in order to cover also these two methods.

78.2. Short-listing 4

A specific rule is set out for limiting the number of qualified candidates if the contracting entity finds this appropriate for conducting the tender procedure when balancing the administrative costs and the need to ensure competition for the contract and obtaining the most economically advantageous tender. It follows from Article 76(1)(c), that a contracting entity is obliged to use such rules. The rule provides more flexibility than the corresponding Article 65 of the Public Sector Directive for instance in not setting a minimum number of candidates which must be selected. It is only set out that the number of candidates selected should be sufficient to ensure adequate competition.

Article 79 Reliance on the capacities of other entities 1. Where the objective rules and criteria for the exclusion and selection of economic operators requesting qualification in a qualification system include requirements relating to the economic and financial capacity of the economic operator, or to its technical and professional abilities, the economic operator may where necessary rely on the capacity of other entities, whatever the legal nature of the link between itself and those entities. With regard to criteria relating to the educational and professional qualifications of the service provider or contractor or those of the undertaking’s managerial staff or to the relevant professional experience, economic operators may however only rely on the capacities of other entities where the latter will perform the works or services for which these capacities are required. Where an economic operator wants to rely on the capacities of other entities, it shall prove to the contracting entity that those resources will be available to it

1

Article 76(3) of the Utilities Directive.

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throughout the period of the validity of the qualification system, for example by producing a commitment by those entities to that effect. Where, pursuant to Article 80 of this Directive, contracting entities have referred to exclusion or selection criteria provided for under Directive 2014/24/EU, contracting entities shall verify in accordance with Article 80(3) of this Directive whether the other entities on whose capacity the economic operator intends to rely fulfil the relevant selection criteria or whether there are grounds for exclusion, to which the contracting entities have referred, pursuant to Article 57 of Directive 2014/24/EU. The contracting entity shall require that the economic operator replaces an entity in respect of which there are compulsory grounds for exclusion to which the contracting entity has referred. The contracting entity may require or may be required by the Member State to require that the economic operator replaces an entity in respect of which there are non-compulsory grounds for exclusion to which the contracting entity has referred. Where an economic operator relies on the capacities of other entities with regard to criteria relating to economic and financial standing, the contracting entity may require that the economic operator and those entities be jointly liable for the execution of the contract. Under the same conditions, a group of economic operators as referred to in Article 37(2) may rely on the capacity of participants in the group or of other entities. 2. Where the objective rules and criteria for the exclusion and selection of candidates and tenderers in open, restricted or negotiated procedures, in competitive dialogues or in innovation partnerships include requirements relating to the economic and financial capacity of the economic operator, or to its technical and professional abilities the economic operator may where necessary and for a particular contract rely on the capacity of other entities, whatever the legal nature of the link between itself and those entities. With regard to criteria relating to the educational and professional qualifications of the service provider or contractor or those of the undertaking’s managerial staff or to the relevant professional experience, economic operators may however only rely on the capacities of other entities where the latter will perform the works or services for which these capacities are required. Where an economic operator wants to rely on the capacities of other entities, it shall prove to the contracting entity that the necessary resources will be available to it, for example by delivering a commitment by those entities to that effect. Where, pursuant to Article 80 of this Directive, contracting entities have referred to exclusion or selection criteria provided for under Directive 2014/24/EU, contracting entities shall verify in accordance with Article 80(3) of this Directive whether the other entities on whose capacity the economic operator intends to rely fulfil the relevant selection criteria or whether there are grounds for exclusion, to which the contracting entities have referred, pursuant to Article 57 of Directive 2014/24/EU. The contracting entity shall require that the economic operator replaces an entity which does not meet a relevant selection criterion, or in respect of which there are compulsory grounds for exclusion to which the contracting entity has referred. The contracting entity may require or may be required by the Member State to require that the economic operator replaces an entity in respect of which there are non-compulsory grounds for exclusion to which the contracting entity has referred. Where an economic operator relies on the capacities of other entities with regard to criteria relating to economic and financial standing, the contracting entity may

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require that the economic operator and those entities be jointly liable for the execution of the contract. Under the same conditions, a group of economic operators as referred to in Article 37 may rely on the capacities of participants in the group or of other entities. 3. In the case of works contracts, service contracts and siting and installation operations in the context of a supply contract, contracting entities may require that certain critical tasks be performed directly by the tenderer itself or, where the tender is submitted by a group of economic operators as referred to in Article 37(2), a participant in that group. 1

This article is to a large extent identical to Article 63 of the Public Sector Directive. However, a number of differences can be observed due to the fact that the contracting entities under Articles 78 and 80 of the Utilities Directive have a high degree of flexibility for determining the criteria for excluding and selecting economic operators (candidates and tenderers). The present provision mirrors this high degree of flexibility as the rules on reliance on the capacities of other entities are dependent on the contracting entity having set up rules and criteria for making exclusions and selecting economic operators. If a contracting entity has set up rules and criteria for exclusion and selecting economic operators, an economic operator can only rely on the capacitities of other entities if it proves to the satisfaction of the contracting entity that the other entity is not in a position leading to exclusion, that it possesses the needed capacities and skills and that these capacities and skills are available to the economic operator throughout the contract period or the period where a qualification system exists. If a contracting entity in accordance with Article 80 of the Utilities Directive has made use of exclusion grounds and selection criteria provided for under the Public Sector Directive, special rules are set up dealing with this situation where especially the rules on documentation and means of proof in Article 59 to 61 of the latter directive should be adhered to.

79.1. Qualification systems and the reliance on the capacities of other entities 2

A contracting entity has the possibility under Article 77 of the Utilities Directive to set up a qualification system which can provide the basis for the award of contract. Under a qualification system a group of qualified economic operators is preselected according to criteria for exclusion and selecting tenderers and such a system can be seen as an alternative to determine criteria for excluding and selecting economic operators for every single contract. When setting up a qualification system a contracting entity may use criteria for exclusion and selecting economic operators similar to those for individual contracts. When setting up a qualification system a contracting entity may according to Articles 76 and 80 of the Utilities Directive refer to exclusion grounds and selection criteria provided for under the Public Sector Directive (2014/24). If a contracting entity chooses to do so the consequence will be that also the exclusion grounds and criteria for assessing the qualifications of such other entities must be assessed in accordance with the rules of the Public Sector Directive. The verification of grounds for exclusion or fulfilment of relevant selection criteria must according to Article 80(3) also be in accordance with the rules of the Public Sector Directive.

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Art. 80

For an interpretation of the conditions under the Public Sector Directive for a con- 3 tracting entity to rely on the capacities of other entities the reader is referred to Article 63 of that directive.

79.2. Other procurement procedures and the reliance on the capacities of other entities A contracting entity can exclude and select tenderers in open, restricted, negotiated 4 procedures, in competitive dialogues or in innovation partnerships. The economic operators may rely on the capacity of other entities in order to fulfil criteria set up for the exclusion and selection. When specifying criteria for exclusion and for selecting economic operators a contracting entity may according to Articles 76 and 80 of the Utilities Directive refer to the exclusion grounds and selection criteria provided for under the Public Sector Directive (2014/24). If a contracting entity chooses to do so the consequence will be that also the exclusion grounds and criteria for assessing the qualifications of such other entities whose qualifications the economic operator intends to rely on must be assessed in accordance with the rules of the Public Sector Directive. The verification of grounds for exclusion or fulfilment of relevant selection criteria must according to Article 80(3) also be in accordance with the rules of the Public Sector Directive. For an interpretation of the conditions under the Public Sector Directive for a con- 5 tracting entity to rely on the capacities of other entities the reader is referred to Article 63 of that directive.

79.3. Certain critical tasks This provision is identical to the Public Sector Directive Article 63(2). For a commen- 6 tary, see this provision.

Article 80 Use of exclusion grounds and selection criteria provided for under Directive 2014/24/EU 1. The objective rules and criteria for the exclusion and selection of economic operators requesting qualification in a qualification system and the objective rules and criteria for the exclusion and selection of candidates and tenderers in open, restricted or negotiated procedures, in competitive dialogues or in innovation partnerships may include the exclusion grounds listed in Article 57 of Directive 2014/24/EU on the terms and conditions set out therein. Where the contracting entity is a contracting authority, those criteria and rules shall include the exclusion grounds listed in Article 57(1) and (2) of Directive 2014/24/EU on the terms and conditions set out in that Article. If so required by Member States, those criteria and rules shall, in addition, include the exclusion grounds listed in Article 57(4) of Directive 2014/24/EU on the terms and conditions set out in that Article. 2. The criteria and rules referred to in paragraph 1 of this Article may include the selection criteria set out in Article 58 of Directive 2014/24/EU on the terms and conditions set out therein, notably as regards the limits to requirements concern-

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ing yearly turnovers, as provided for under the second subparagraph of paragraph 3 of that Article. 3. For the purpose of applying paragraphs 1 and 2 of this Article, Articles 59 to 61 of Directive 2014/24/EU shall apply. 1

This article must be seen together with Article 76 on general principles and Article 78 on qualitative selection. When Article 80 is seen in combination with Article 78 it seems at the outset that a contracting entity has all the flexibility of the former Utilities Directive when determining the criteria for exclusion and selection of candidates and tenderers. However, a more prudent reading of Article 80 leads to the conclusion that if a contracting entity enters the area of the Public Sector Directive which is concerned with criteria for exclusion and selection of candidates and tenderers it will be bound by those rules in their entirety. This, furthermore, implies that also the means of proof set out in Article 59 to 62 of the Public Sector Directive for demonstrating that a candidate or tenderer is not in one of the situations for exclusion referred to in Article 57 or that it meets the relevant selection criteria in Article 58 will be binding for a contracting entity.

80.1. Possibility vs obligation of using exclusion grounds of the Public Sector Directive A contracting entity is entitled to use the exclusion ground set out in Article 57 of the Public Sector Directive. It is specifically stated that if a contracting entity chooses to refer to the exclusion grounds set out in Article 57 the entity will in such a case have to use the grounds “on the terms and conditions set out” in that provision. This seems to imply that also the rules on “self-cleaning” set out in Article 57(6) of the Public Sector Directive must be used by a contracting entity if it chooses to use the exclusion grounds of that directive. 3 A special rule provided for contracting entities which are contracting authorities as they are obliged to use the exclusion grounds listed in Article 57(1) and (2) of the Public Sector Directive. In Article 57(1) some types of serious crimes recognised as such at the EU level are listed. In Article 57(2) breaches as to payment of taxes and social security contributions are listed. Under the Public Sector Directive an economic operator will be permitted to demonstrate that it has settled its tax debt etc. by either paying the debts or entering into some type of binding arrangement with the relevant authorities and should therefore not be excluded. That possibility must be taken to also be open for an economic operator under the Utilities Directive as it is stated that Article 57(1) and (2) should be included “on the terms and conditions set out in that Article”. For more on Article 57 in the Public Sector Directive, see this provision. 2

80.2. Possibility of using the selection criteria of the Public Sector Directive 4

A contracting entity is entitled to use the criteria and rules for selecting candidates and tenderers set out in Article 58 of the Public Sector Directive. It is specifically stated that if a contracting entity chooses to refer to the selection criteria set out in Article 58 the entity will have to use the criteria “on the terms and conditions set out” in that provision. Furthermore, specific reference is made to requirements concerning yearly turnover and a contracting entity is therefore bound by this provision if it chooses to refer to Article 58.1 1

Recital 92 of the Utilities Directive.

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Art. 80

It is not entirely clear whether a contracting entity will be bound by Article 58 and the terms and conditions set out in that article when it chooses to refer to selection criteria that are set out in the article. The recitals only provide limited clarity: “In so far as compatible with the need to ensure the objective of sound commercial practice while allowing for maximum flexibility, it is appropriate to provide for the application of Directive 2014/24/EU in respect of requirements concerning economic and financial capacity and documentary evidence. Contracting entities should therefore be allowed to apply the selection criteria provided for in that Directive and, where they do so, they should then be obliged to apply certain other provisions concerning, in particular, the ceiling to requirements on minimum turnover as well as on use of the European Single Procurement Document.”2

A fair reading of Article 80 and recital 92 seems to imply that a contracting entity is bound by Article 58 in its entirety not only where the entity specifically makes a reference to that provision in the procurement documents but that the entity is also bound by Article 58 if it chooses to include some or all of the selection criteria which are set out in Article 58. If the contracting entity sets a minimum requirement for turnover it will be limited by the ceiling for such turnover set at two times the estimated contract value. This can be seen to minimise the flexibility for a contracting entity when compared with the former Utilities Directive (2004/17).

80.3. Reference to the means for proof of the Public Sector Directive It is essential that a contracting entity which has set up rules and criteria for exclusion 5 and selection of candidates and tenderers provides information on the documentation that an economic operator may use in order to demonstrate that it either fulfils the exclusion grounds or the selection criteria. If a contracting entity chooses to refer to the rules of the Public Sector Directive on either exclusion grounds (Article 57) or selection criteria (Article 58) the contracting entity must also apply the rules of the Public Sector Directive on such means whereby an economic operator may prove that it fulfils the exclusion grounds or the selection criteria. Under the Public Sector Directive a hierarchy of methods of proof is set out. The 6 European Single Procurement Document is intended to be the preliminary means of proving that a candidate or tenderer is not in one of the situations referred to in Article 57 and that it meets the relevant selection criteria set out in accordance with Article 58 (and the possible criteria for short-listing in Article 65). Only in a second stage of assessment and evaluation is the contracting entity entitled to require supplementary documentation from the economic operators. Article 59 of the Public Sector Directive sets out rules on the European Single Procurement Document and the reader is referred to that article. Article 60 of the Public Sector Directive provides rules on the means of proof which a contracting entity shall accept as evidence for the absence of grounds for exclusion listed in Article 57 and for the fulfilment of the selection criteria in Article 58. Means of proof may include certificates, statements, extracts from registers or other means of proof as referred to in Article 60 and Annex XII of that directive. For a further analysis the reader is referred to that article. Article 61 of the Public Sector Directive provides rules on the e-Certis and the reader is referred to that article. 2

Recital 92 of the Utilities Directive.

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Also the rules on quality assurance standards and environmental management standards of the Public Sector Directive seem to apply under the Utilities Directive if a contracting entity chooses to make reference to the selection criteria set out in Article 58 of the Public Sector Directive. This follows from Article 60(2) of that directive where it is stated that “Contracting authorities shall not require means of proof other than those referred to in this Article and in Article 62.” The implication is that a contracting entity is entitled to refer to such standards on the conditions set out in article 62. For an interpretation of article 62 of the Public Sector Directive the reader is referred to that article.

Article 81 Quality assurance standards and environmental management standards 1. Contracting entities shall, where they require the production of certificates drawn up by independent bodies attesting that the economic operator complies with certain quality assurance standards, including on accessibility for disabled persons, refer to quality assurance systems based on the relevant European standards series certified by accredited bodies. They shall recognise equivalent certificates from bodies established in other Member States. They shall also accept other evidence of equivalent quality assurance measures where the economic operator concerned had no possibility of obtaining such certificates within the relevant time limits for reasons that are not attributable to that economic operator provided that the economic operator proves that the proposed quality assurance measures comply with the required quality assurance standards. 2. Where contracting entities require the production of certificates drawn up by independent bodies attesting that the economic operator complies with certain environmental management systems or standards, they shall refer to the Eco-Management and Audit Scheme (EMAS) of the Union or to other environmental management systems as recognised in accordance with Article 45 of Regulation (EC) No 1221/2009 or other environmental management standards based on the relevant European or international standards by accredited bodies. They shall recognise equivalent certificates from bodies established in other Member States. Where an economic operator had demonstrably no access to such certificates, or no possibility of obtaining them within the relevant time limits for reasons that are not attributable to that economic operator, the contracting entity shall also accept other evidence of environmental management measures, provided that the economic operator proves that these measures are equivalent to those required under the applicable environmental management system or standard. 3. Upon request, Member States shall make available to other Member States any information relating to the documents produced as evidence of compliance with quality and environmental standards referred to in paragraphs 1 and 2. 1

This provision is identical to the Public Sector Directive Article 62. For a commentary, see this provision.

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Art. 82

Subsection 2 Award of the contract Article 82 Contract award criteria 1. Without prejudice to national laws, regulations or administrative provisions on the price of certain supplies or the remuneration of certain services, contracting entities shall base the award of contracts on the most economically advantageous tender. 2. The most economically advantageous tender from the point of view of the contracting entity shall be identified on the basis of the price or cost, using a costeffectiveness approach, such as life-cycle costing in accordance with Article 83, and may include the best price-quality ratio, which shall be assessed on the basis of criteria, including qualitative, environmental and/or social aspects, linked to the subject-matter of the contract in question. Such criteria may comprise, for instance: (a) quality, including technical merit, aesthetic and functional characteristics, accessibility, design for all users, social, environmental and innovative characteristics and trading and its conditions; (b) organisation, qualification and experience of staff assigned to performing the contract, where the quality of the staff assigned can have a significant impact on the level of performance of the contract; or (c) after-sales service and technical assistance, delivery conditions such as delivery date, delivery process and delivery period or period of completion, commitments with regard to parts and security of supply. The cost element may also take the form of a fixed price or cost on the basis of which economic operators will compete on quality criteria only. Member States may provide that contracting entities may not use price only or cost only as the sole award criterion or restrict their use to certain categories of contracting entities or certain types of contracts. 3. Award criteria shall be considered to be linked to the subject-matter of the public contract where they relate to the works, supplies or services to be provided under that contract in any respect and at any stage of their life cycle, including factors involved in: (a) the specific process of production, provision or trading of those works, supplies or services; or (b) a specific process for another stage of their life cycle, even where such factors do not form part of their material substance. 4. Award criteria shall not have the effect of conferring an unrestricted freedom of choice on the contracting entity. They shall ensure the possibility of effective competition and shall be accompanied by specifications that allow the information provided by the tenderers to be effectively verified in order to assess how well the tenders meet the award criteria. In case of doubt, contracting entities shall verify effectively the accuracy of the information and proof provided by the tenderers. 5. The contracting entity shall specify in the procurement documents, the relative weighting which it gives to each of the criteria chosen to determine the most economically advantageous tender, except where this is identified on the basis of price alone.

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Those weightings may be expressed by providing for a range with an appropriate maximum spread. Where weighting is not possible for objective reasons, the contracting entity shall indicate the criteria in descending order of importance. 1

This provision is identical to the Public Sector Directive Article 67. For a commentary, see this provision.

Article 83 Life-cycle costing 1. Life-cycle costing shall to the extent relevant cover parts or all of the following costs over the life cycle of a product, service or works (a) costs, borne by the contracting entity or other users, such as: (i) costs relating to acquisition, (ii) costs of use, such as consumption of energy and other resources, (iii) maintenance costs, (iv) end of life costs, such as collection and recycling costs (b) cost imputed to environmental externalities linked to the product, service or works during its life cycle, provided their monetary value can be determined and verified; such costs may include the cost of emissions of greenhouse gases and of other pollutant emissions and other climate change mitigation costs. 2. Where contracting entities assess the costs using a life-cycle costing approach, they shall indicate in the procurement documents the data to be provided by the tenderers and the method which the contracting entity will use to determine the life-cycle costs on the basis of those data. The method used for the assessment of costs imputed to environmental externalities shall fulfil all of the following conditions: (a) it is based on objectively verifiable and non-discriminatory criteria. In particular where it has not been established for repeated or continuous application, it shall not unduly favour or disadvantage certain economic operators; (b) it is accessible to all interested parties; (c) the data required can be provided with reasonable effort by normally diligent economic operators, including economic operators from third countries party to the GPA or other international agreements by which the Union is bound. 3. Whenever a common method for the calculation of life-cycle costs has been made mandatory by a legislative act of the Union that common method shall be applied for the assessment of life-cycle costs. A list of such legislative acts, and where necessary the delegated acts supplementing them, is set out in Annex XV. The Commission, shall be empowered to adopt delegated acts in accordance with Article 103 concerning the update of that list, when an update of the list is necessary due to the adoption of new legislation making a common method mandatory or the repeal or modification of existing legal acts. 1

This provision is identical to the Public Sector Directive Article 68. For a commentary, see this provision.

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Article 84 Abnormally low tenders 1. Contracting entities shall require economic operators to explain the price or costs proposed in the tender where tenders appear to be abnormally low in relation to the works, supplies or services. 2. The explanations referred to in paragraph 1 may in particular relate to: (a) the economics of the manufacturing process, of the services provided or of the construction method; (b) the technical solutions chosen or any exceptionally favourable conditions available to the tenderer for the supply of the products or services or for the execution of the work; (c) the originality of the supplies, services or work proposed by the tenderer; (d) compliance with obligations referred to in Article 36(2); (e) compliance with obligations referred to in Article 88; (f) the possibility of the tenderer obtaining State aid. 3. The contracting entity shall assess the information provided by consulting the tenderer. It may only reject the tender where the evidence supplied does not satisfactorily account for the low level of price or costs proposed, taking into account the elements referred to in paragraph 2. Contracting entities shall reject the tender, where they have established that the tender is abnormally low because it does not comply with applicable obligations referred to in Article 36(2). 4. Where a contracting entity establishes that a tender is abnormally low because the tenderer has obtained State aid, the tender may be rejected on that ground alone only after consultation with the tenderer where the latter is unable to prove, within a sufficient time limit fixed by the contracting entity, that the aid in question was compatible with the internal market within the meaning of Article 107 TFEU. Where the contracting entity rejects a tender in those circumstances, it shall inform the Commission thereof. 5. Upon request, Member States shall make available to other Member States by means of administrative cooperation any information at its disposal, such as laws, regulations, universally applicable collective agreements or national technical standards, relating to the evidence and documents produced in relation to details listed in paragraph 2. This provision is identical to the Public Sector Directive Article 69. For a commen- 1 tary, see this provision.

Section 4 Tenders comprising products originating in third countries and relations with those countries Article 85 Tenders comprising products originating in third countries 1. This Article shall apply to tenders covering products originating in third countries with which the Union has not concluded, whether multilaterally or bilaterally, an agreement ensuring comparable and effective access for Union undertakings

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3.

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to the markets of those third countries. It shall be without prejudice to the obligations of the Union or its Member States in respect of third countries. Any tender submitted for the award of a supply contract may be rejected where the proportion of the products originating in third countries, as determined in accordance with Regulation (EU) No 952/2013 of the European Parliament and of the Council,1 exceeds 50 % of the total value of the products constituting the tender. For the purposes of this Article, software used in telecommunications network equipment shall be regarded as products. Subject to the second subparagraph of this paragraph, where two or more tenders are equivalent in the light of the contract award criteria defined in Article 82, preference shall be given to those tenders which may not be rejected pursuant to paragraph 2 of this Article. The prices of those tenders shall be considered equivalent for the purposes of this Article, if the price difference does not exceed 3 %. However, a tender shall not be preferred to another pursuant to the first subparagraph where its acceptance would oblige the contracting entity to acquire equipment having technical characteristics different from those of existing equipment, resulting in incompatibility, technical difficulties in operation and maintenance, or disproportionate costs. For the purposes of this Article, those third countries to which the benefit of this Directive has been extended by a Council Decision in accordance with paragraph 1 shall not be taken into account for determining the proportion, referred to in paragraph 2, of products originating in third countries. By 31 December 2015 and every year thereafter, the Commission shall submit an annual report to the Council, on progress made in multilateral or bilateral negotiations regarding access for Union undertakings to the markets of third countries in the fields covered by this Directive, on any result which such negotiations may have achieved, and on the implementation in practice of all the agreements which have been concluded.

Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, pp. 131; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2nd ed. 2007, pp. 478; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 1014 and 1352.

85.1. Possible exclusion of products from third countries 1

The purpose of the article is to give preference to Union products in the absence of an international trade agreement with a third country. The article should be seen as a safeguard for Union products where the competing products originate in third countries which do not provide comparable and effective access for Union undertakings. This provision is identical to Article 58 of the former Utilities Directive (2004/17). In the proposal for a new directive (COM (2011) 895) such an article was not inserted but it was reinserted in the proposal after negotiations with the European Parliament. 2

1 Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code (OJ L 269, 10.10.2013, p. 1). 2 Amendment 195 in the report of the European Parliament on the proposal for a “Utilities Directive” of 7. February 2013 (A7-0034/2013).

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85.1. The origin of the products is determinant It is not the nationality of the tenderer but the origin of the goods that determines 2 whether a contracting entity may rely on this provision. The origin will be determined in accordance with the Union rules on the Customs Code as set out in paragraph 2. Accordingly, whether a tender is submitted by an EU undertaking, an EU subsidiary of an undertaking from a third country or by a third country undertaking is irrelevant.

85.2. Possibility of rejecting third country tenders If a tender comprises products more than 50 % of which originate in a country with 3 which the Union does not have an agreement ensuring comparable and effective access for Union undertakings, assessed by the value of the products, a contracting entity is entitled to reject such a tender. This is a discretionary decision on the part of the contracting entity.

85.3. Mandatory exclusion of third country tenders A contracting entity might in some situations be compelled to reject an offer. This is 4 dependent on the two conditions set out in paragraph 1 and 2, namely that the offer contains products originating in a country with which the Union does not have concluded an agreement ensuring comparable and effective access for Union undertakings to the markets for those countries, and that the tender comprises more than 50 % third country products assessed by value. Furthermore, compulsory rejection of a tender is dependent on the Union offer and the offer containing third country product being equivalent in the light of the contract award criteria. If this is the case, and the price difference does not exceed 3 % the contracting entity must give preference to the Union tender. Apart from the political significance of this provision in negotiations with third countries on access to the markets and other trade issues, it can be doubted whether this provision has a significant practical impact as contracting entities usually are interested in obtaining best value for money and because price is often only one among several criteria which determine which tender is the most economically advantageous tender. Moreover, there is a general exemption from the obligation to give preference to Union tenders over acceptable offers which include more than 50 % products of a third country origin. That is the case if the preference would lead to incompatibility, technical difficulties, disproportionate costs or the acquisition of products having different characteristics than existing products. This exemption provides quite a large discretion for a contracting entity to accept a third country offer.

Article 86 Relations with third countries as regards works, supplies and service contracts 1. Member States shall inform the Commission of any general difficulties, in law or in fact, encountered and reported by their undertakings in securing the award of service contracts in third countries. 2. The Commission shall report to the Council by 18 April 2019, and periodically thereafter, on the opening up of service contracts in third countries and on progress in negotiations with these countries on this subject, particularly within the framework of the World Trade Organisation (WTO).

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3. The Commission shall endeavour, by approaching the third country concerned, to remedy any situation whereby it finds, on the basis either of the reports referred to in paragraph 2 or of other information, that, in the context of the award of service contracts, a third country: (a) does not grant Union undertakings effective access comparable to that granted by the Union to undertakings from that country; (b) does not grant Union undertakings national treatment or the same competitive opportunities as are available to national undertakings; or (c) grants undertakings from other third countries more favourable treatment than Union undertakings. 4. Member States shall inform the Commission of any difficulties, in law or in fact, encountered and reported by their undertakings and which are due to the nonobservance of the international labour law provisions listed in Annex XIV when those undertakings have tried to secure the award of contracts in third countries. 5. In the circumstances referred to in paragraphs 3 and 4, the Commission may at any time propose that the Council adopt an implementing act to suspend or restrict, over a period to be laid down in that implementing act, the award of service contracts to: (a) undertakings governed by the law of the third country in question; (b) undertakings affiliated to the undertakings specified in point (a) and having their registered office in the Union but having no direct and effective link with the economy of a Member State; (c) undertakings submitting tenders which have as their subject-matter services originating in the third country in question. The Council shall act, by qualified majority, as soon as possible. The Commission may propose those measures on its own initiative or at the request of a Member State. 6. This Article shall be without prejudice to the commitments of the Union in relation to third countries ensuing from international agreements on public procurement, particularly within the framework of the WTO. Literature: Christopher H. Bovis, EU Public Procurement Law, 2nd ed. 2012, pp. 132; Peter A. Trepte, Public Procurement in the EU, A Practitioners’ Guide, 2nd ed. 2007, pp. 479; Sue Arrowsmith, The Law of Public and Utilities Procurement, 2nd ed. 2005, pp. 1014 and 1352.

1

The purpose of the article is related to the purpose of Article 85. The article should be seen as a safeguard for Union companies submitting tenders for services contracts in third countries where the third country do not provide comparable and effective access for Union undertakings. This article is identical to Article 59 of the former Utilities Directive (2004/17), however a new paragraph 6 is inserted which sets out a general disclaimer towards commitments of the Union in relation to third countries. In the proposal for a new directive (COM (2011) 895) no such article was inserted but it was reinserted in the proposal after negotiations with the European Parliament. 1 The article provides for a procedure whereby Member States may inform the Commission of difficulties in obtaining access for their undertaking to obtain service contracts in third countries. The Commission shall inform the Council of the difficulties and seek to remedy the situation by entering into negotiations with the third country in 1 Amendment 196 in the report of the European Parliament on the proposal for a “Utilities Directive” of 7. February 2013 (A7-0034/2013).

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question. It is specifically set out that it should be reported if the difficulties are connected with non-observance of the fundamental ILO conventions on labour conditions as set out in Annex XIV of the Utilities Directive. Finally, the Commission may take reciprocal measures towards undertakings of the third country by submitting a proposal to the Council to suspend or restrict the award of service contracts to such undertakings.

Chapter IV Contract performance Article 87 Conditions for performance of contracts Contracting entities may lay down special conditions relating to the performance of a contract, provided that they are linked to the subject-matter of the contract within the meaning of Article 82(3) and indicated in the call for competition or in the procurement documents. Those conditions may include economic, innovation-related, environmental, social or employment-related considerations. This provision is identical to the Public Sector Directive Article 70. For a commen- 1 tary, see this provision.

Article 88 Subcontracting 1. Observance of the obligations referred to in Article 36(2) by subcontractors is ensured through appropriate action by the competent national authorities acting within the scope of their responsibility and remit. 2. In the procurement documents, the contracting entity may ask, or may be required by a Member State to ask, the tenderer to indicate in its tender any share of the contract it may intend to subcontract to third parties and any proposed subcontractors. 3. Member States may provide that at the request of the subcontractor and where the nature of the contract so allows, the contracting entity shall transfer due payments directly to the subcontractor for services, supplies or works provided to the economic operator to whom the contract has been awarded (the main contractor). Such measures may include appropriate mechanisms permitting the main contractor to object to undue payments. The arrangements concerning that mode of payment shall be set out in the procurement documents. 4. Paragraphs 1 to 3 shall be without prejudice to the question of the main contractor’s liability. 5. In the case of works contracts and in respect of services to be provided at a facility under the direct oversight of the contracting entity, after the award of the contract and at the latest when the performance of the contract commences, the contracting entity shall require the main contractor to indicate to the contracting entity the name, contact details and legal representatives of its subcontractors, involved in such works or services, insofar as known at this point in time. The contracting entity shall require the main contractor to notify the contracting entity of any changes to this information during the course of the contract as well as of the required information for any new subcontractors which it subsequently involves in such works or services. Sune Troels Poulsen

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Notwithstanding the first subparagraph, Member States may impose the obligation to deliver the required information directly on the main contractor. Where necessary for the purposes of point (b) of paragraph 6 of this Article, the required information shall be accompanied by the subcontractors’ self-declarations as referred to in Article 80(3). The implementing measures pursuant to paragraph 8 of this Article may provide that subcontractors which are presented after the award of the contract shall provide the certificates and other supporting documents instead of the self-declaration. The first subparagraph shall not apply to suppliers. Contracting entities may extend or may be required by Member States to extend the obligations provided for in the first subparagraph to for instance: (a) supply contracts, to services contracts other than those concerning services to be provided at the facilities under the direct oversight of the contracting entity or to suppliers involved in works or services contracts; (b) subcontractors of the main contractor’s subcontractors or further down the subcontracting chain. 6. With the aim of avoiding breaches of the obligations referred to in Article 36(2), appropriate measures may be taken, such as: (a) Where the national law of a Member State provides for a mechanism of joint liability between subcontractors and the main contractor, the Member State concerned shall ensure that the relevant rules are applied in compliance with the conditions set out in Article 36(2). (b) Contracting authorities may, in accordance with Article 80(3) of this Directive, verify or may be required by Member States to verify whether there are grounds for exclusion of subcontractors pursuant to Article 57 of Directive 2014/24/EU. In such cases, the contracting authority shall require that the economic operator replaces a subcontractor in respect of which the verification has shown that there are compulsory grounds for exclusion. The contracting authority may require or may be required by a Member State to require that the economic operator replaces a subcontractor in respect of which the verification has shown that there are non-compulsory grounds for exclusion. 7. Member States may provide for more stringent liability rules under national law or to go further under national law on direct payments to subcontractors, for instance by providing for direct payments to subcontractors without it being necessary for them to request such direct payment. 8. Member States having chosen to provide for measures pursuant to paragraphs 3, 5 or 6 shall, by law, regulation or administrative provisions and having regard for Union law, specify the implementing conditions for those measures. In so doing, Member States may limit their applicability, for instance in respect of certain types of contracts, certain categories of contracting entities or economic operators or as of certain amounts. 1

This provision is identical to the Public Sector Directive Article 71. For a commentary, see this provision.

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Article 89 Modification of contracts during their term 1. Contracts and framework agreements may be modified without a new procurement procedure in accordance with this Directive in any of the following cases: (a) where the modifications, irrespective of their monetary value, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses, which may include price revision clauses, or options. Such clauses shall state the scope and nature of possible modifications or options as well as the conditions under which they may be used. They shall not provide for modifications or options that would alter the overall nature of the contract or framework agreement; (b) for additional works, services or supplies by the original contractor, irrespective of their value, that have become necessary and were not included in the initial procurement where a change of contractor: (i) cannot be made for economic or technical reasons such as requirements of interchangeability or interoperability with existing equipment, software, services or installations procured under the initial procurement; and (ii) would cause significant inconvenience or substantial duplication of costs for the contracting entity; (c) where all of the following conditions are fulfilled: (i) the need for modification has been brought about by circumstances which a diligent contracting entity could not foresee; (ii) the modification does not alter the overall nature of the contract; (d) Where a new contractor replaces the one to which the contracting entity had initially awarded the contract as a consequence of either: (i) an unequivocal review clause or option in conformity with point (a), (ii) universal or partial succession into the position of the initial contractor, following corporate restructuring, including takeover, merger, acquisition or insolvency, of another economic operator that fulfils the criteria for qualitative selection initially established provided that this does not entail other substantial modifications to the contract and is not aimed at circumventing the application of this Directive; or (iii) in the event that the contracting entity itself assumes the main contractor’s obligations towards its subcontractors where this possibility is provided for under national legislation pursuant to Article 88; (e) where the modifications, irrespective of their value, are not substantial within the meaning of paragraph 4. Contracting entities having modified a contract in the cases set out under points (b) and (c) of this paragraph shall publish a notice to that effect in the Official Journal of the European Union. Such notice shall contain the information set out in Annex XVI and shall be published in accordance with Article 71. 2. Furthermore, and without any need to verify whether the conditions set out under points (a) to (d) of paragraph 4 are met, contracts may equally be modified without a new procurement procedure in accordance with this Directive being necessary where the value of the modification is below both of the following values: (i) the thresholds set out in Article 15; and (ii) 10 % of the initial contract value for service and supply contracts and below 15 % of the initial contract value for works contracts.

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However, the modification may not alter the overall nature of the contract or framework agreement. Where several successive modifications are made, the value shall be assessed on the basis of the net cumulative value of the successive modifications. 3. For the purpose of the calculation of the price referred to in paragraph 2, the updated price shall be the reference value when the contract includes an indexation clause. 4. A modification of a contract or a framework agreement during its term shall be considered to be substantial within the meaning of point (e) of paragraph 1, where it renders the contract or the framework agreement materially different in character from the one initially concluded. In any event, without prejudice to paragraphs 1 and 2, a modification shall be considered to be substantial where one or more of the following conditions is met: (a) the modification introduces conditions which, had they been part of the initial procurement procedure, would have allowed for the admission of other candidates than those initially selected or for the acceptance of a tender other than that originally accepted or would have attracted additional participants in the procurement procedure; (b) the modification changes the economic balance of the contract or the framework agreement in favour of the contractor in a manner which was not provided for in the initial contract or framework agreement; (c) the modification extends the scope of the contract or framework agreement considerably; (d) where a new contractor replaces the one to which the contracting entity had initially awarded the contract in other cases than those provided for under point (d) of paragraph 1. 5. A new procurement procedure in accordance with this Directive shall be required for other modifications of the provisions of a works, supply or service contract or a framework agreement during its term than those provided for under paragraphs 1 and 2. This provision is identical to the Public Sector Directive Article 72. For a commentary, see this provision. 2 However, in the Public Sector Directive there is in Article 72(1)(b) on additional works, services or supplies, and in Article 72(1)(c) on unforeseen circumstances, a 50 % limitation on price increases and a similar limitation is not inserted in Article 89 of the Utilities Directive. 3 During the negotiations a proposal of the European Parliament for classifying modifications of the scope of the contract pursuant to significant innovations or technological changes as non-substantial changes was not included in the directive. Neither were other proposed amendments to the proposal with the aim of classifying amendments to a contract as non-substantial included in the Utilities Directive, presumably because they were found to be covered by Article 50 on the use of the negotiated procedure without a prior call for competition.1 1

1 Amendment 206 in the report of the European Parliament on the proposal for a “Utilities Directive” of 7. February 2013 (A7-0034/2013).

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Article 90 Termination of contracts Member States shall ensure that contracting entities have the possibility, at least under the following circumstances and under the conditions determined by the applicable national law, to terminate a works, supply or service contract during its term, where: (a) the contract has been subject to a substantial modification which would have required a new procurement procedure pursuant to Article 89; (b) the contractor has, at the time of contract award, been in one of the situations referred to in Article 57(1) of Directive 2014/24/EU and should therefore have been excluded from the procurement procedure pursuant to the second subparagraph of Article 80(1) of this Directive; (c) the contract should not have been awarded to the contractor in view of a serious infringement of the obligations under the Treaties and this Directive that has been declared by the Court of Justice of the European Union in a procedure under Article 258 TFEU. This provision is identical to the Public Sector Directive Article 73. For a commen- 1 tary, see this provision.

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TITLE III PARTICULAR PROCUREMENT REGIMES Chapter I Social and other specific services Article 91 Award of contracts for social and other specific services Contracts for social and other specific services, listed in Annex XVII shall be awarded in accordance with this Chapter where the value of the contracts is equal to or greater than the threshold indicated in point (c) Article 15. 1

This provision is identical to the Public Sector Directive Article 74. For a commentary, see this provision.

Article 92 Publication of notices 1. Contracting entities intending to award a contract for the services referred to in Article 91 shall make known their intention by any of the following means: (a) by means of a contract notice; or (b) by means of a periodic indicative notice, which shall be published continuously. The periodic indicative notice shall refer specifically to the types of services that will be the subject of the contracts to be awarded. It shall indicate that the contracts will be awarded without further publication and invite interested economic operators to express their interest in writing; or (c) by means of a notice on the existence of a qualification system, which shall be published continuously. The first subparagraph shall, however, not apply where a negotiated procedure without prior call for competition could have been used in conformity with Article 50 for the award of a service contract. 2. Contracting entities that have awarded a contract for the services referred to in Article 91 shall make known the results by means of contract award notice. They may, however, group such notices on a quarterly basis. In that case, they shall send the grouped notices within 30 days of the end of each quarter. 3. The notices referred to in paragraphs 1 and 2 of this Article shall contain the information referred to in Annex XVIII, respectively in parts A, B, C or D, in accordance with the standard model notices. The Commission shall establish the standard forms by means of implementing acts. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 105. 4. The notices referred to in this Article shall be published in accordance with Article 71. 1

This provision is identical to the Public Sector Directive Article 75. For a commentary, see this provision. However, there are some differences as to the information which the contracting entity must publish. Under the Public Sector Directive it is determined in Annexes to that directive which information should be published. Such requirement regarding the con1050

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tent of the information is not found in the Utilities Directive and for this reason a contracting entity is free to publish the information which it finds appropriate. When making this decision the contracting entity must bear in mind that the principles of transparency and equality will apply to the contract and the contracting entity might find inspiration in the Public Sector Directive as to the content of the information it is going to publish.

Article 93 Principles of awarding contracts 1. Member States shall put in place national rules for the award of contracts subject to this Chapter, in order to ensure contracting entities comply with the principles of transparency and equal treatment of economic operators. Member States are free to determine the procedural rules applicable as long as such rules allow contracting entities to take into account the specificities of the services in question. 2. Member States shall ensure that contracting entities may take into account the need to ensure quality, continuity, accessibility, affordability, availability and comprehensiveness of the services, the specific needs of different categories of users, including disadvantaged and vulnerable groups, the involvement and empowerment of users and innovation. Member States may also provide that the choice of the service provider shall be made on the basis of the tender presenting the best price-quality ratio, taking into account quality and sustainability criteria for social services. This provision is identical to the Public Sector Directive Article 76. For a commen- 1 tary, see this provision.

Article 94 Reserved contracts for certain services 1. Member States may provide that contracting entities which are contracting authorities may reserve the right for organisations to participate in procedures for the award of public contracts exclusively for those health, social and cultural services referred to in Article 91, which are covered by CPV codes 75121000-0, 75122000-7, 75123000-4, 79622000-0, 79624000-4, 79625000-1, 80110000-8, 80300000-7, 80420000-4, 80430000-7, 80511000-9, 80520000-5, 80590000-6, from 85000000-9 to 85323000-9, 92500000-6, 92600000-7, 98133000-4, 98133110-8. 2. An organisation referred to in paragraph 1 shall fulfil all of the following conditions: (a) its objective is the pursuit of a public service mission linked to the delivery of the services referred to in paragraph 1; (b) profits are reinvested with a view to achieving the organisation’s objective. Where profits are distributed or redistributed, this should be based on participatory considerations; (c) the structures of management or ownership of the organisation performing the contract are based on employee ownership or participatory principles, or require the active participation of employees, users or stakeholders; and (d) the organisation has not been awarded a contract for the services concerned by the contracting authority concerned pursuant to this Article within the past three years. Sune Troels Poulsen

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3. The maximum duration of the contract shall not be longer than three years. 4. The call for competition shall make reference to this Article. 5. Notwithstanding Article 108, the Commission shall assess the effects of this Article and report to the European Parliament and the Council by 18 April 2019. 1

This provision is identical to the Public Sector Directive Article 77. For a commentary, see this provision.

Chapter II Rules governing design contests Article 95 Scope 1. This Chapter shall apply to design contests organised as part of a procurement procedure for a service contract, provided that the estimated value of the contract, net of VAT, and including any possible prizes or payments to participants, is equal to or greater than the amount set out in point (a) of Article 15. 2. This Chapter shall apply to all design contests where the total amount of contest prizes and payments to participants, including the estimated value net of VAT of the service contract which might subsequently be concluded under point (j) of Article 50 if the contracting entity does not exclude such an award in the contest notice, is equal to or greater than the amount set out in point (a) of Article 15. Although the wording is slightly different and the article is divided into paragraphs this provision is identical to the Public Sector Directive Article 78. For a commentary, see this provision. 2 If the contracting entity contemplates to make use of the provision set out in Article 50(j) of the Utilities Directive for awarding a service contract without prior publication of a contract notice all payments foreseen under the service contract should be included when calculating the value of the design contest. However, if the contracting entity in the contract notice excludes a subsequent award of a service contract, the value of such service contract shall not be included when calculating the value of the design contest. The implication is that “design contests with prizes or payments to participants” will be covered by this chapter of the Utilities Directive if the value of prizes and payments to participants excededs the threshold values of Article 15 of the Utilities Directive. 1

Article 96 Notices 1. Contracting entities that intend to organise a design contest shall call for competition by means of a contest notice. Where they intend to award a subsequent service contract pursuant to point (j) of Article 50, this shall be indicated in the design contest notice. Contracting entities that have held a design contest shall make the results known by means of a notice. 2. The call for competition shall include the information set out in Annex XIX and the notice of the results of a design contest shall include the information set out in Annex XX in the format of standard forms. The Commission shall establish those

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standard forms by means of implementing acts. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 105. The notice of the results of a design contest shall be forwarded to the Publication Office of the European Union within 30 days of the closure of the design contest. Where the release of information on the outcome of the contest would impede law enforcement, would be contrary to the public interest or would prejudice the legitimate commercial interests of a particular economic operator, whether public or private, or might prejudice fair competition between economic operators, such information may be withheld from publication. 3. Article 71(2) to (6) shall also apply to notices relating to design contests. This provision is identical to the Public Sector Directive Article 79. For a commen- 1 tary, see this provision. However, as to the information which should be published in the contest notice, there 2 are some differences in Annex XIX and XX of the Utilities Directive when compared with Annex V, part E and F of the Public Sector Directive. These differences mirror the greater flexibility under the Utilities Directive.

Article 97 Rules on the organisation of design contests, the selection of participants and the jury 1. When organising design contests, contracting entities shall apply procedures which are adapted to Title I and this Chapter. 2. The admission of participants to design contests shall not be limited: (a) by reference to the territory or part of the territory of a Member State; (b) on the grounds that, under the law of the Member State in which the contest is organised, they would be required to be either natural or legal persons. 3. Where design contests are restricted to a limited number of participants, contracting entities shall establish clear and non-discriminatory selection criteria. In any event, the number of candidates invited to participate shall be sufficient to ensure genuine competition. 4. The jury shall be composed exclusively of natural persons who are independent of participants in the contest. Where a particular professional qualification is required of participants in a contest, at least a third of the jury members shall have that qualification or an equivalent qualification. Paragraphs 1, 2 and 3 of this article are identical to Article 80 and paragraph 4 is 1 identical to Article 81 of the Public Sector Directive. For a commentary, see these provisions.

Article 98 Decisions of the jury 1. The jury shall be autonomous in its decisions or opinions. 2. The jury shall examine the plans and projects submitted by the candidates anonymously and solely on the basis of the criteria indicated in the contest notice.

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PART II The Utilities Directive 2014/25/EU

3. The jury shall record its ranking of projects in a report, signed by its members, made according to the merits of each project, together with its remarks and any points that may need clarification. 4. Anonymity shall be observed until the jury has reached its opinion or decision. 5. Candidates may be invited, if need be, to answer questions that the jury has recorded in the minutes to clarify any aspects of the projects. 6. Complete minutes shall be drawn up of the dialogue between jury members and candidates. 1

This provision is identical to the Public Sector Directive Article 82. For a commentary, see this provision.

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PART III The Concessions Directive 2014/23/EU DIRECTIVE 2014/23/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 February 2014 on the award of concession contracts (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 53(1) and Articles 62 and 114 thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Economic and Social Committee,1 Having regard to the opinion of the Committee of the Regions,2 Acting in accordance with the ordinary legislative procedure,3 Whereas: (1) The absence of clear rules at Union level governing the award of concession contracts gives rise to legal uncertainty and to obstacles to the free provision of services and causes distortions in the functioning of the internal market. As a result, economic operators, in particular small and medium-sized enterprises (SMEs), are being deprived of their rights within the internal market and miss out on important business opportunities, while public authorities may not find the best use of public money so that Union citizens benefit from quality services at best prices. An adequate, balanced and flexible legal framework for the award of concessions would ensure effective and non-discriminatory access to the market to all Union economic operators and legal certainty, favouring public investments in infrastructures

and strategic services to the citizen. Such a legal framework would also afford greater legal certainty to economic operators and could be a basis for and means of further opening up international public procurement markets and boosting world trade. Particular importance should be given to improving the access opportunities of SMEs throughout the Union concession markets. (2) The rules of the legislative framework applicable to the award of concessions should be clear and simple. They should duly reflect the specificity of concessions as compared to public contracts and should not create an excessive amount of bureaucracy. (3) Public procurement plays a key role in the Europe 2020 strategy, set out in the Commission Communication of 3 March 2010 entitled ‘Europe 2020, a strategy for smart, sustainable and inclusive growth’ (the ‘Europe 2020 strategy’), as one of the market-based instruments to be used to achieve smart, sustainable and inclusive growth while ensuring the most efficient use of public funds. In this context, concession contracts represent important instruments in the long-term structural development of infrastructure and strategic services, contributing to the progress of competition within the internal market, making it possible to benefit from private sector expertise and helping to achieve efficiency and innovation.

OJ C 191, 29.6.2012, p. 84. OJ C 391, 18.12.2012, p. 49. 3 Position of the European Parliament of 15 January 2014 (not yet published in the Official Journal) and decision of the Council of 11 February 2014. 1

2

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DIRECTIVE 2014/23/EU (4) The award of public works concessions is presently subject to the basic rules of Directive 2004/18/EC of the European Parliament and of the Council;4 while the award of services concessions with a cross-border interest is subject to the principles of the Treaty on the Functioning of the European Union (TFEU), and in particular the principles of free movement of goods, freedom of establishment and freedom to provide services, as well as to the principles deriving therefrom such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency. There is a risk of legal uncertainty related to divergent interpretations of the principles of the Treaty by national legislators and of wide disparities among the legislations of various Member States. Such risk has been confirmed by the extensive case law of the Court of Justice of the European Union which has, nevertheless, only partially addressed certain aspects of the award of concession contracts. A uniform application of the principles of the TFEU across all Member States and the elimination of discrepancies in the understanding of those principles is necessary at Union level in order to eliminate persisting distortions of the internal market. That would also favour the efficiency of public spending, facilitate equal access and fair participation of SMEs in the award of concession contracts, both at local and Union level, and support the achievement of sustainable public policy objectives. (5) This Directive recognises and reaffirms the right of Member States and public authorities to decide the means of administration they judge to be most appropriate for performing works and providing services. In particular, this Directive should not in any way affect the freedom of Member States and public authorities to perform works or provide services directly to the public or to outsource such provision by delegating it to third parties. Member States or public authorities should remain free to define and specify the characteristics of the ser-

PART III The Concessions Directive 2014/23/EU vices to be provided, including any conditions regarding the quality or price of the services, in accordance with Union law, in order to pursue their public policy objectives. (6) It should be recalled that Member States are free to decide, in compliance with the principles of the TFEU on equal treatment, non-discrimination, transparency and the free movement of persons to organise the provision of services either as services of general economic interest or as non-economic services of general interest or as a mixture thereof. It should also be recalled that this Directive is without prejudice to the freedom of national, regional and local authorities to define, in conformity with Union law, services of general economic interest, their scope and the characteristics of the service to be provided, including any conditions regarding the quality of the service, in order to pursue their public policy objectives. It should also be without prejudice to the power of national, regional and local authorities to provide, commission and finance services of general economic interest in accordance with Article 14 TFEU and Protocol No 26 annexed to the TFEU and to the Treaty on European Union (TEU). In addition, this Directive does not deal with the funding of services of general economic interest or with systems of aid granted by Member States, in particular in the social field, in accordance with Union rules on competition. It is appropriate to clarify that non-economic services of general interest should not fall within the scope of this Directive. (7) It is also appropriate to recall that this Directive should not affect the social security legislation of the Member States. Nor should it entail the liberalisation of services of general economic interest, reserved to public or private entities, or the privatisation of public entities providing services. (8) For concessions equal to or above a certain value, it is appropriate to provide for a minimum coordination of national procedures for the award of such con-

4 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 (OJ L 134, 30.4.2004, p. 114).

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PART III The Concessions Directive 2014/23/EU tracts based on the principles of the TFEU so as to guarantee the opening-up of concessions to competition and adequate legal certainty. Those coordinating provisions should not go beyond what is necessary in order to achieve the aforementioned objectives and to ensure a certain degree of flexibility. Member States should be allowed to complete and develop further those provisions if they find it appropriate, in particular to better ensure compliance with the principles set out above. (9) It should be clarified that groups of economic operators, including where they have come together in the form of a temporary association, may participate in award procedures without it being necessary for them to take on a specific legal form. To the extent that that is necessary, for instance where joint and several liability is required, a specific form may be required when such groups are awarded the concession. It should also be clarified that contracting authorities or contracting entities should be able to set out explicitly how groups of economic operators are to meet the requirements concerning economic and financial standing, or the criteria relating to technical and professional ability which are required of economic operators participating on their own. The performance of concession contracts by groups of economic operators may necessitate setting conditions which are not imposed on individual participants. Such conditions, which should be justified by objective reasons and be proportionate, could for instance include requiring the appointment of a joint representation or a lead partner for the purposes of the concession award procedure or requiring information on their constitution. (10) Certain coordination provisions should also be introduced for the award of works and services concessions in the energy, transport and postal services sectors, given that national authorities may influence the behaviour of entities operating in those sectors, and taking into account the closed nature of the markets in which they operate, due to the existence of special or exclusive rights granted by the Member States concerning the supply to, provision or operation of net-

DIRECTIVE 2014/23/EU works for providing the services concerned. (11) Concessions are contracts for pecuniary interest by means of which one or more contracting authorities or contracting entities entrusts the execution of works, or the provision and the management of services, to one or more economic operators. The object of such contracts is the procurement of works or services by means of a concession, the consideration of which consists in the right to exploit the works or services or in that right together with payment. Such contracts may, but do not necessarily, involve a transfer of ownership to contracting authorities or contracting entities, but contracting authorities or contracting entities always obtain the benefits of the works or services in question. (12) For the purpose of this Directive, it should be clarified that the mere financing, in particular through grants, of an activity, which is frequently linked to the obligation to reimburse the amounts received where they are not used for the purposes intended, does not fall under the scope of this Directive. (13) Furthermore, arrangements where all operators fulfilling certain conditions are entitled to perform a given task, without any selectivity, such as customer choice and service voucher systems, should not qualify as concessions, including those based on legal agreements between the public authority and the economic operators. Such systems are typically based on a decision by a public authority defining the transparent and non-discriminatory conditions on the continuous access of economic operators to the provision of specific services, such as social services, allowing customers to choose between such operators. (14) In addition, certain Member State acts such as authorisations or licences, whereby the Member State or a public authority thereof establishes the conditions for the exercise of an economic activity, including a condition to carry out a given operation, granted, normally, on request of the economic operator and not on the initiative of the contracting authority or the contracting entity and where the economic operator remains free to withdraw from the provision of

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DIRECTIVE 2014/23/EU works or services, should not qualify as concessions. In the case of those Member State acts, the specific provisions of Directive 2006/123/EC of the European Parliament and of the Council5 apply. In contrast to those Member State acts, concession contracts provide for mutually binding obligations where the execution of the works or services are subject to specific requirements defined by the contracting authority or the contracting entity, which are legally enforceable. (15) In addition, certain agreements having as their object the right of an economic operator to exploit certain public domains or resources under private or public law, such as land or any public property, in particular in the maritime, inland ports or airports sector, whereby the State or contracting authority or contracting entity establishes only general conditions for their use without procuring specific works or services, should not qualify as concessions within the meaning of this Directive. This is normally the case with public domain or land lease contracts which generally contain terms concerning entry into possession by the tenant, the use to which the property is to be put, the obligations of the landlord and tenant regarding the maintenance of the property, the duration of the lease and the giving up of possession to the landlord, the rent and the incidental charges to be paid by the tenant. (16) In addition, agreements that grant rights of way covering the utilisation of public immovable property for the provision or operation of fixed lines or networks intended to provide a service to the public should also not be considered to be concessions within the meaning of this Directive, in so far as those agreements neither impose an obligation of supply nor involve any acquisition of services by a contracting authority or contracting entity to itself or to end users. (17) Contracts not involving payments to the contractor and where the contractor is remunerated on the basis of the regulated tariffs, calculated so as to cover all costs and investments borne by the con-

PART III The Concessions Directive 2014/23/EU tractor for providing the service, should not be covered by this Directive. (18) Difficulties related to the interpretation of the concepts of concession and public contract have generated continued legal uncertainty among stakeholders and have given rise to numerous judgments of the Court of Justice of the European Union. Therefore, the definition of concession should be clarified, in particular by referring to the concept of operating risk. The main feature of a concession, the right to exploit the works or services, always implies the transfer to the concessionaire of an operating risk of economic nature involving the possibility that it will not recoup the investments made and the costs incurred in operating the works or services awarded under normal operating conditions even if a part of the risk remains with the contracting authority or contracting entity. The application of specific rules governing the award of concessions would not be justified if the contracting authority or contracting entity relieved the economic operator of any potential loss, by guaranteeing a minimal revenue, equal or higher to the investments made and the costs that the economic operator has to incur in relation with the performance of the contract. At the same time it should be made clear that certain arrangements which are exclusively remunerated by a contracting authority or a contracting entity should qualify as concessions where the recoupment of the investments and costs incurred by the operator for executing the work or providing the service depends on the actual demand for or the supply of the service or asset. (19) Where sector-specific regulation eliminates the risk by providing for a guarantee to the concessionaire on breaking even on investments and costs incurred for operating the contract, such contract should not qualify as a concession within the meaning of this Directive. The fact that the risk is limited from the outset should not preclude the qualification of the contract as a concession. This can be the case for instance in sectors with regulated tariffs or where the operating risk

5 Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (OJ L 376, 27.12.2006, p. 36).

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PART III The Concessions Directive 2014/23/EU is limited by means of contractual arrangements providing for partial compensation including compensation in the event of early termination of the concession for reasons attributable to the contracting authority or contracting entity or for reasons of force majeure. (20) An operating risk should stem from factors which are outside the control of the parties. Risks such as those linked to bad management, contractual defaults by the economic operator or to instances of force majeure are not decisive for the purpose of classification as a concession, since those risks are inherent in every contract, whether it be a public procurement contract or a concession. An operating risk should be understood as the risk of exposure to the vagaries of the market, which may consist of either a demand risk or a supply risk, or both a demand and supply risk. Demand risk is to be understood as the risk on actual demand for the works or services which are the object of the contract. Supply risk is to be understood as the risk on the provision of the works or services which are the object of the contract, in particular the risk that the provision of the services will not match demand. For the purpose of assessment of the operating risk the net present value of all the investment, costs and revenues of the concessionaire should be taken into account in a consistent and uniform manner. (21) The notion of ‘bodies governed by public law’ has been examined repeatedly in the case-law of the Court of Justice of the European Union. A number of clarifications are key to the full understanding of this concept. It should therefore be clarified that a body which operates in normal market conditions, aims to make a profit, and bears the losses resulting

DIRECTIVE 2014/23/EU from the exercise of its activity should not be considered to be a ‘body governed by public law’, since the needs in the general interest, that it has been set up to meet or been given the task of meeting, can be deemed to have an industrial or commercial character. Similarly, the condition relating to the origin of the funding of the body considered, has also been examined by the Court, which has clarified that financed for ‘the most part’ means for more than half and that such financing may include payments from users which are imposed, calculated and collected in accordance with rules of public law. (22) It is appropriate to define ‘exclusive rights’ and ‘special rights’ as these notions are crucial to the scope of this Directive and the notion of contracting entities. It should be clarified that entities which are neither contracting entities pursuant to point (a) of Article 7(1) nor public undertakings are subject to its provisions only to the extent that they exercise one of the activities covered on the basis of such rights. However, they will not be considered to be contracting entities if such rights have been granted by means of a procedure based on objective criteria, in particular pursuant to Union legislation, and for which adequate publicity has been ensured. That legislation should include Directive 2009/73/EC of the European Parliament and of the Council,6 Directive 2009/72/EC of the European Parliament and of the Council,7 Directive 97/67/EC of the European Parliament and of the Council,8 Directive 94/22/EC of the European Parliament and of the Coun-

6 Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (OJ L 211, 14.8.2009, p. 94). 7 Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (OJ L 211, 14.8.2009, p. 55). 8 Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the development of the internal market of Community postal services and the improvement of quality of service (OJ L 15, 21.1.1998, p. 14).

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DIRECTIVE 2014/23/EU cil9 and Regulation (EC) No 1370/2007 of the European Parliament and of the Council.10 It should also be clarified that that listing of legislation is not exhaustive and that rights in any form, which have been granted by means of other procedures based on objective criteria and for which adequate publicity has been ensured are not relevant for the purposes of determining the contracting entities covered by this Directive. (23) This Directive should apply only to concession contracts whose value is equal to or greater than a certain threshold, which should reflect the clear cross-border interest of concessions to economic operators located in Member States other than that of the contracting authority or contracting entity. Consequently, the method of calculating the estimated value of a concession needs to be set out, and should be identical for works and services concessions, as both contracts often cover elements of works and services. The calculation should refer to the total turnover of the concessionaire in consideration of the works and services being the object of the concession, as estimated by the contracting authority or the contracting entity, excluding VAT, over the duration of the contract. (24) To ensure a real opening up of the market and a fair balance in the application of concession award rules in the energy, transport and postal services sectors, it is necessary for the entities covered to be identified on a basis other than their legal status. It should be ensured, therefore, that the equal treatment of contracting entities operating in the public sector and those operating in the private sector is not jeopardised. It is also necessary to ensure, in keeping with Article 345 TFEU, that the rules governing the system of property ownership in Member States are not prejudiced. For this reason, specific and uniform rules should apply to concessions awarded by entities exercising one of the abovemen-

PART III The Concessions Directive 2014/23/EU tioned activities for purposes of pursuing such activities, independently of whether they are state, local or regional authorities, bodies governed by public law, public undertakings or other entities enjoying special or exclusive rights. Entities which are responsible, under national law, for the provision of services related to one of the activities referred to in Annex II, should be presumed to pursue such activities. (25) It should be clarified that the relevant activity in the field of airports also covers services provided to passengers which contribute to the smooth functioning of the airport facilities and which are expected of a well-functioning modern airport, such as retailing, public catering and car parking. (26) Certain entities are active in the fields of production, transmission or distribution of both heat and cooling. There may be some uncertainty as to which rules apply to respectively heat and cooling related activities. It should therefore be clarified that the transmission and/or distribution of heat is an activity covered by Annex II and thus entities which are active in the heating sector are subject to the rules of this Directive applicable to contracting entities in so far as they qualify as such. On the other hand, entities operating in the cooling field are subject to the rules of this Directive applicable to contracting authorities in so far as they qualify as such. It should finally be clarified that concessions awarded for the pursuit of both heating and cooling contracts should be examined under the provisions on contracts for the pursuit of several activities to determine which procurement rules, if any, will govern their award. (27) Before envisaging any change to the scope of this Directive for the cooling sector, the situation of that sector should be examined in order to obtain sufficient information, in particular in respect of the competitive situation, the degree of

9 Directive 94/22/EC of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons (OJ L 164, 30.6.1994, p. 3). 10 Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70 (OJ L 315, 3.12.2007, p. 1).

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PART III The Concessions Directive 2014/23/EU cross-border procurement and the views of stakeholders. Given that the application of this Directive to the sector could have a substantial impact in terms of market-opening, that examination should be conducted when assessing the impact of this Directive. (28) It should be clarified that for the purposes of paragraphs 1 and 2 of Annex II, ‘supply’ includes generation/production, wholesale and retail sale. However, production of gas in the form of extraction falls within the scope of paragraph 6 of that Annex. (29) In the case of mixed contracts, the applicable rules should be determined with respect to the main subject of the contract, if the different parts which constitute the contract are objectively not separable. It should therefore be clarified how contracting authorities and contracting entities should determine whether the different parts are separable or not. Such clarification should be based on the relevant case-law of the Court of Justice of the European Union. The determination should be carried out on a case-by-case basis, in which the expressed or presumed intentions of the contracting authority or a contracting entity to regard the various aspects making up a mixed contract as indivisible should not be sufficient, but should be supported by objective evidence capable of justifying them and of establishing the need to conclude a single contract. Such a justified need to conclude a single contract could for instance be present in the case of the construction of one single building, a part of which is to be used directly by the contracting authority concerned and another part to be operated on a concession basis, for instance to provide parking facilities to the public. It should be clarified that the need to conclude a single contract may be due to reasons both of a technical nature and of an economic nature. (30) In the case of mixed contracts which can be separated, contracting authorities and contracting entities are always free to award separate contracts for the separate parts of the mixed contract, in which case the provisions applicable to each separate part should be determined exclusively with respect to the character-

DIRECTIVE 2014/23/EU istics of that specific contract. On the other hand, where contracting authorities and contracting entities choose to award a contract including both elements of a concession and other elements, whatever their value and whatever the legal regime these elements would otherwise have been subject to, the rules applicable to such cases should be indicated. Special provision should be made for mixed contracts involving defence or security aspects or certain parts not falling within the scope of the TFEU. (31) Concessions might be awarded by contracting entities for the purpose of meeting the requirements of several activities, possibly subject to different legal regimes. It should be clarified that the legal regime applicable to a single concession intended to cover several activities should be subject to the rules applicable to the activity for which it is principally intended. Determination of the activity for which the concession is principally intended can be based on an analysis of the requirements which the specific concession must meet, carried out by the contracting entity for the purposes of estimating the concession value and drawing up the concession award documents. In certain cases, it might be objectively impossible to determine for which activity the concession is principally intended. The rules applicable to such cases should be indicated. (32) In certain cases, a given contracting authority or contracting entity which is a State, regional or local authority or body governed by public law or a given association thereof might be the sole source for a given service, for the provision of which it enjoys an exclusive right pursuant to national laws, regulations or published administrative provisions which are compatible with the TFEU. It should be clarified that in those situations a contracting authority or contracting entity as referred to in this recital or association thereof may award concessions to such bodies without this Directive being applied. (33) It is also appropriate to exclude from the scope of this Directive certain services concessions awarded to economic operators, where they are awarded on the basis of an exclusive right which that operator

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DIRECTIVE 2014/23/EU enjoys under national laws, regulations or published administrative provisions and which has been granted in accordance with the TFEU and Union acts laying down common rules on access to the market applicable to activities referred to in Annex II, since such exclusive right makes it impossible to follow a competitive procedure for the award. By way of derogation and without prejudice to the legal consequences of the general exclusion from the scope of this Directive, concessions as referred to in the second subparagraph of Article 10(1) should be subject to the obligation to publish a concession award notice in view of ensuring basic transparency unless the conditions of such transparency are provided for in sectoral legislation. In order to reinforce transparency, where a Member State grants an exclusive right to an economic operator for the exercise of one of the activities referred to in Annex II, it should inform the Commission thereof. (34) For the purposes of this Directive, the notions of essential security interests, military equipment, sensitive equipment, sensitive works and sensitive services should be understood within the meaning of Directive 2009/81/EC of the European Parliament and of the Council.11 (35) This Directive should not affect the freedom of Member States to choose, in accordance with Union law, methods for organising and controlling the operation of gambling and betting, including by means of authorisations. It is appropriate to exclude from the scope of this Directive concessions relating to the operation of lotteries awarded by a Member State to an economic operator on the basis of an exclusive right granted by means of a procedure without publicity pursuant to applicable national laws, regulations or published administrative provisions in accordance with the TFEU. That exclusion is justified by the granting of an exclusive right to an economic operator, making a competitive proce-

PART III The Concessions Directive 2014/23/EU dure inapplicable, as well as by the need to retain the possibility for Member States to regulate the gambling sector at national level in view of their obligations in terms of protecting public and social order. (36) This Directive should not apply to certain emergency services where they are performed by non-profit organisations or associations, since the particular nature of those organisations would be difficult to preserve if the service providers had to be chosen in accordance with the procedures set out in this Directive. However, the exclusion should not be extended beyond that strictly necessary. It should therefore be set out explicitly that patient transport ambulance services should not be excluded. In that context it is furthermore necessary to clarify that CPV Group 601 ‘Land Transport Services’ does not cover ambulance services, to be found in CPV class 8514. It should therefore be clarified that services which are covered by CPV code 85143000-3, consisting exclusively of patient transport ambulance services should be subject to the special regime set out for social and other specific services (the ‘light regime’). Consequently, mixed concession contracts for the provision of ambulance services in general would also be subject to the light regime if the value of the patient transport ambulance services were greater than the value of other ambulance services. (37) It is appropriate to recall that this Directive applies only to contracting authorities and contracting entities of Member States. Consequently, political parties, not being contracting authorities or contracting entities are not subject to its provisions. However, political parties in some Member States might fall within the notion of bodies governed by public law. However, certain services (such as propaganda film production and propaganda video-tape production) are so inextricably connected to the political views of the service provider when provided in the context of an election cam-

11 Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC (OJ L 216, 20.8.2009, p. 76).

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PART III The Concessions Directive 2014/23/EU paign, that the service providers are normally selected in a manner which cannot be governed by concession rules. Finally it should be recalled that the statute and funding of European political parties and European Political foundations are subject to rules other than those laid down in this Directive. (38) Many contracting entities are organised as an economic group which may comprise a series of separate undertakings; often each of those undertakings has a specialised role in the overall context of the economic group. It is therefore appropriate to exclude certain service and works concessions awarded to an affiliated undertaking having as its principal activity the provision of such services or works to the group of which it is part, rather than offering them on the market. It is also appropriate to exclude certain service and works concessions awarded by a contracting entity to a joint venture which is formed by a number of contracting entities for the purpose of carrying out activities covered by this Directive and of which that entity is part. However, it is also appropriate to ensure that this exclusion does not give rise to distortions of competition to the benefit of the undertakings or joint ventures that are affiliated with the contracting entities; it is appropriate to provide a suitable set of rules, in particular as regards the maximum limits within which the undertakings may obtain a part of their turnover from the market and above which they would lose the possibility of being awarded concessions without calls for competition, the composition of joint ventures and the stability of links between those joint ventures and the contracting entities of which they are composed. (39) Undertakings should be considered to be affiliated where a direct or indirect dominant influence exists between the contracting entity and the undertaking concerned or where both are subject to the dominant influence of another undertaking; in this context, private participa-

DIRECTIVE 2014/23/EU tion should, per se, not be relevant. The verification of whether an undertaking is affiliated to a given contracting entity should be as easy to perform as possible. Consequently, and given that the possible existence of such direct or indirect dominant influence would already have had to be verified for the purposes of deciding whether the annual accounts of the undertakings and entities concerned should be consolidated, undertakings should be considered to be affiliated where their annual accounts are consolidated. However, Union rules on consolidated accounts are not applicable in a certain number of cases, for instance because of the size of the undertakings involved or because certain conditions relating to their legal form are not met. In such cases, where Directive 2013/34/EU of the European Parliament and of the Council12 is not applicable, it will be necessary to examine whether a direct or indirect dominant influence is present taking into account ownership, financial participation or the rules governing the undertakings. (40) Concessions in the water sector are often subject to specific and complex arrangements which require a particular consideration given the importance of water as a public good of fundamental value to all Union citizens. The special features of those arrangements justify exclusions in the field of water from the scope of this Directive. The exclusion covers works and services concessions to provide or operate fixed networks intended to provide a service to the public in connection with the production, transport or distribution of drinking water or the supply of drinking water to such networks. Concessions for the disposal or treatment of sewage and for hydraulic engineering projects, irrigation or land drainage (provided that the volume of water to be used for the supply of drinking water represents more than 20 % of the total volume of water made available by such projects or irrigation or drainage installations) should also be excluded in so far

12 Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).

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DIRECTIVE 2014/23/EU as they are connected with an excluded activity. (41) This Directive should not apply to concessions awarded by contracting entities and intended to permit the performance of an activity referred to in Annex II if, in the Member State in which that activity is carried out, it is directly exposed to competition on markets to which access is not limited, as established following a procedure provided for to this purpose in Directive 2014/25/EU of the European Parliament and of the Council.13 It is therefore appropriate to maintain the procedure, applicable to all sectors, or parts thereof, covered by this Directive that will enable the effects of current or future opening up to competition to be taken into account. Such a procedure should provide legal certainty for the entities concerned, as well as an appropriate decision-making process, ensuring, within short time limits, the uniform application of Union law in this area. For the sake of legal certainty, it should be clarified that all Decisions adopted prior to the entry into force of this Directive adopted on the basis of Article 30 of Directive 2004/17/EC of the European Parliament and of the Council14 will continue to apply. (42) Being addressed to Member States, this Directive does not apply to the award of concessions by international organisations on their own behalf and for their own account. There is, however, a need to clarify to what extent this Directive should be applied to concession awards governed by specific international rules. (43) The awarding of concessions for certain audiovisual and radio media services by media providers should allow aspects of cultural or social significance to be taken into account, which renders the application of rules on the award of concessions inappropriate. For those reasons, an exception should therefore be made for service concessions, awarded by the media service providers themselves, for the

PART III The Concessions Directive 2014/23/EU purchase, development, production or co-production of off-the-shelf programmes and other preparatory services, such as those relating to scripts or artistic performances necessary for the production of the programme. It should also be clarified that that exclusion should apply equally to broadcast media services and on-demand services (nonlinear services). However, that exclusion should not apply to the supply of technical equipment necessary for the production, co-production and broadcasting of such programmes. (44) This Directive is without prejudice to the Member States’ competence to provide for the funding of public service broadcasting in so far as such funding is granted to broadcasting organisations for the fulfilment of the public service remit as conferred, defined and organised by each Member State in accordance with Protocol No 29 on the system of public broadcasting in Member States annexed to the TFEU and the TEU. (45) There is considerable legal uncertainty as to how far contracts concluded between entities within the public sector should be covered by the rules on concessions. The relevant case-law of the Court of Justice of the European Union is interpreted differently between Member States and even between contracting authorities or contracting entities. It is therefore necessary to clarify in which cases contracts concluded within the public sector are not subject to the application of the rules laid down in this Directive. Such clarification should be guided by the principles set out in the relevant case-law of the Court of Justice of the European Union. The sole fact that both parties to an agreement are themselves public authorities does not as such rule out the application of the rules laid down in this Directive. However, the application of the rules laid down in this Directive should not interfere with the freedom of public authorities to perform

13 Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors (see page 243 of this Official Journal). 14 Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors (OJ L 134, 30.4.2004, p. 1).

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PART III The Concessions Directive 2014/23/EU the public service tasks conferred on them by using their own resources, which includes the possibility of cooperation with other public authorities. It should be ensured that any exempted public-public cooperation does not result in a distortion of competition in relation to private economic operators in so far as it places a private provider of services in a position of advantage vis-àvis its competitors. (46) Concessions awarded to controlled legal persons should not be subject to the application of the procedures provided for by this Directive if the contracting authority or contracting entity as referred to point (a) of Article 7(1) exercises a control over the legal person concerned which is similar to that which it exercises over its own departments provided that the controlled legal person carries out more than 80 % of its activities in the performance of tasks entrusted to it by the controlling contracting authority or contracting entity or by other legal persons controlled by that contracting authority or contracting entity, regardless of the beneficiary of the contract performance. The exemption should not extend to situations where there is direct participation by a private economic operator in the capital of the controlled legal person since, in such circumstances, the award of a concession without a competitive procedure would provide the private economic operator with a capital participation in the controlled legal person an undue advantage over its competitors. However, in view of the particular characteristics of public bodies with compulsory membership, such as organisations responsible for the management or exercise of certain public services, this should not apply in cases where the participation of specific private economic operators in the capital of the controlled legal person is made compulsory by a national legislative provision in conformity with the Treaties, provided that such participation is noncontrolling and non-blocking and does not confer a decisive influence on the decisions of the controlled legal person. It should further be clarified that the decisive element is only the direct private

DIRECTIVE 2014/23/EU participation in the controlled legal person. Therefore, where there is private capital participation in the controlling contracting authority or contracting entity or in the controlling contracting authorities or contracting entities, this does not preclude the award of public contracts to the controlled legal person, without applying the procedures provided for by this Directive, as such participations do not adversely affect competition between private economic operators. It should also be clarified that contracting authorities or contracting entities such as bodies governed by public law, that may have private capital participation, should be in a position to avail themselves of the exemption for horizontal cooperation. Consequently, where all other conditions in relation to horizontal cooperation are met, the horizontal cooperation exemption should extend to such contracting authorities or contracting entities where the contract is concluded exclusively between contracting authorities or contracting entities. (47) Contracting authorities or contracting entities as referred to in point (a) of Article 7(1) should be able to choose to provide their public services jointly by way of cooperation without being obliged to use any particular legal form. Such cooperation might cover all types of activities related to the performance of services and responsibilities assigned to or assumed by the participating authorities, such as mandatory or voluntary tasks of local or regional authorities or services conferred upon specific bodies by public law. The services provided by the various participating authorities or entities need not necessarily be identical; they might also be complementary. Contracts for the joint provision of public services should not be subject to this Directive provided that they are concluded exclusively between contracting authorities or contracting entities, that the implementation of that cooperation is governed solely by considerations relating to the public interest and that no private service provider is placed in a position of advantage vis-à-vis its competitors.

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DIRECTIVE 2014/23/EU In order to fulfil those conditions, the cooperation should be based on a cooperative concept. Such cooperation does not require all participating authorities to assume the performance of main contractual obligations, provided there are commitments to contribute towards the cooperative performance of the public service in question. In addition, the implementation of the cooperation, including any financial transfers between the participating contracting authorities, should be governed solely by considerations relating to the public interest. (48) Certain cases exist where a legal entity acts, under the relevant provisions of national law, as an instrument or technical service to determined contracting authorities or contracting entities, and is obliged to carry out orders given to it by those contracting authorities or contracting entities and has no influence on the remuneration for its performance. In view of its non-contractual nature, such a purely administrative relationship should not fall within the scope of concession award procedures. (49) It should be clarified that the notion of ‘economic operators’ should be interpreted in a broad manner so as to include any persons and/or entities which offer the execution of works, the supply of products or the provision of services on the market, irrespective of the legal form under which they have chosen to operate. Thus, firms, branches, subsidiaries, partnerships, cooperative societies, limited companies, universities, public or private, and other forms of entities should all fall within the notion of economic operator, whether or not they are ‘legal persons’ in all circumstances. (50) In order to ensure adequate advertising of works and services concessions equal to or above a certain threshold awarded by contracting entities and by the contracting authorities the award of such concessions should be preceded by the compulsory publication of a concession notice in the Official Journal of the European Union. (51) In view of the detrimental effects on competition, the award of concessions without prior publication should only be permitted in very exceptional circumstances. This exception should be limited

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PART III The Concessions Directive 2014/23/EU to cases in which it is clear from the outset that a publication would not trigger more competition, in particular because there is objectively only one economic operator who can perform the concession. The impossibility of awarding the concession to any other economic operator should not have been created by the contracting authority or contracting entity itself in view of the future award procedure. Furthermore, the availability of adequate substitutes should be assessed thoroughly. (52) The duration of a concession should be limited in order to avoid market foreclosure and restriction of competition. In addition, concessions of a very long duration are likely to result in the foreclosure of the market, and may thereby hinder the free movement of services and the freedom of establishment. However, such a duration may be justified if it is indispensable to enable the concessionaire to recoup investments planned to perform the concession, as well as to obtain a return on the invested capital. Consequently, for concessions with a duration greater than five years the duration should be limited to the period in which the concessionaire could reasonably be expected to recoup the investment made for operating the works and services together with a return on invested capital under normal operating conditions, taking into account specific contractual objectives undertaken by the concessionaire in order to deliver requirements relating to, for example, quality or price for users. The estimation should be valid at the moment of the award of the concession. It should be possible to include initial and further investments deemed necessary for the operating of the concession in particular expenditure on infrastructure, copyrights, patents, equipment, logistics, hiring, training of personnel and initial expenses. The maximum duration of the concession should be indicated in the concession documents unless duration is used as an award criterion of the contract. Contracting authorities and contracting entities should always be able to award a concession for a period shorter than the time necessary to recoup the investments, provided that the related

PART III The Concessions Directive 2014/23/EU compensation does not eliminate the operating risk. (53) It is appropriate to exclude from the full application of this Directive only those services which have a limited cross-border dimension, such as certain social, health, or educational services. Those services are provided within a particular context that varies widely amongst Member States, due to different cultural traditions. A specific regime should therefore be established for concessions for these services, which takes into account the fact that they are newly regulated. An obligation to publish a prior information notice and a concession award notice of any concession with a value equal to or greater than the threshold established in this Directive is an adequate way to provide information to potential tenderers on business opportunities, as well as to provide information to all interested parties on the number and type of contracts awarded. Furthermore, Member States should put in place appropriate measures with reference to the award of concession contracts for those services, aimed at ensuring compliance with the principles of transparency and equal treatment of economic operators, while allowing contracting authorities and contracting entities to take into account the specificities of the services in question. Member States should ensure that contracting authorities and contracting entities are allowed to take into account the need to ensure innovation and, in accordance with Article 14 TFEU and Protocol No 26, a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of users’ rights. (54) Given the importance of the cultural context and the sensitivity of those services, Member States should be given wide discretion to organise the choice of the service providers in the way they consider most appropriate. This Directive does not prevent Member States from applying specific quality criteria for the choice of service providers, such as the criteria set out in the voluntary European Quality Framework for Social

DIRECTIVE 2014/23/EU Services of the European Union’s Social Protection Committee. Member States and/or public authorities remain free to provide these services themselves or to organise social services in a way that does not entail the conclusion of concessions, for example through the mere financing of such services or by granting licences or authorisations to all economic operators meeting the conditions established beforehand by the contracting authority or contracting entity, without any limits or quotas, provided such systems ensure sufficient advertising and complies with the principles of transparency and non-discrimination. (55) With a view to the appropriate integration of environmental, social and labour requirements into concession award procedures, it is of particular importance that Member States and contracting authorities or contracting entities take relevant measures to ensure compliance with obligations in the fields of environmental, social and labour law that apply at the place where the works are executed or the services provided and result from laws, regulations or administrative provisions, at national and Union level, as well as from collective agreements, provided that such rules, and their application, comply with Union law. Equally, obligations stemming from international agreements ratified by all Member States and listed in this Directive should apply during concession performance. However, this should in no way prevent the application of terms and conditions of employment which are more favourable to workers. The relevant measures should be applied in conformity with the basic principles of Union law, in particular with a view to ensuring equal treatment. Such relevant measures should be applied in accordance with Directive 96/71/EC of the European Parliament and of the Council,15 and in a way that ensures equal treatment and does not discriminate directly or indirectly against economic operators and workers from other Member States. (56) Services should be considered to be provided at the place where the characteris-

15 Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services (OJ L 18, 21.1.1997, p. 1).

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DIRECTIVE 2014/23/EU tic performances are executed. When services are provided at a distance, for example services provided by call centres, those services should be considered to be provided at the place where the services are executed, irrespective of the places and Member States to which the services are directed. (57) The relevant obligations could be mirrored in concession clauses. It should also be possible to include clauses ensuring compliance with collective agreements in compliance with Union law in concessions. Non-compliance with the relevant obligations could be considered to be grave misconduct on the part of the economic operator concerned, liable to exclusion of that economic operator from the procedure for the award of a concession. (58) Control of the observance of the environmental, social and labour law provisions should be performed at the relevant stages of the concession award procedure, when applying the general principles governing the choice of participants and the award of contracts, and when applying the exclusion criteria. (59) Nothing in this Directive should prevent the imposition or enforcement of measures necessary to protect public policy, public morality, public security, health, human and animal life, the preservation of plant life or other environmental measures, in particular with a view to sustainable development, provided that those measures are in conformity with the TFEU. (60) In order to ensure confidentiality during the procedure, contracting authorities and contracting entities, as well as economic operators should not disclose information that has been designated as confidential. Non-compliance with this obligation should trigger the application of adequate sanctions, as and where provided for under the civil or administrative law of the Member States. (61) In order to combat fraud, favouritism and corruption and prevent conflicts of interest, Member States should take appropriate measures to ensure the transparency of the award procedure and the equal treatment of all candidates and tenderers. Such measures should in par-

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PART III The Concessions Directive 2014/23/EU ticular aim at eliminating conflicts of interest and other serious irregularities. (62) In order to make it possible for all interested operators to submit applications and tenders, contracting authorities and contracting entities should be obliged to respect a minimum time limit for the receipt of such applications and tenders. (63) The choice of proportionate, non-discriminatory and fair selection criteria, and their application to economic operators is crucial for the operators’ effective access to the economic opportunities related to concessions. In particular, the possibility for a candidate to rely on the capacities of other entities can be decisive to enable the participation of SMEs. Therefore, it is appropriate to provide that the selection criteria should relate exclusively to the professional and technical ability and the financial and economic standing of operators, and be linked to the subject-matter of the contract, should be announced in the concession notice and cannot preclude an economic operator, save in exceptional circumstances, from relying on the capacities of other entities, regardless of the legal nature of its links with those entities, if the latter proves to the contracting authority or contracting entity that it will have at its disposal the necessary resources. (64) Furthermore, with a view to the better integration of social and environmental considerations in the concession award procedures, contracting authorities or contracting entities should be allowed to use award criteria or concession performance conditions relating to the works or services to be provided under the concession contract in any respect and at any stage of their life cycles from extraction of raw materials for the product to the stage of disposal of the product, including factors involved in the specific process of production, provision or trading of those works or services or a specific process during a later stage of their life cycle, even where such factors do not form part of their material substance. Criteria and conditions referring to such a production or provision process are for example that services being the object of the concession are provided using energy-efficient machines. In accordance

PART III The Concessions Directive 2014/23/EU with the case-law of the Court of Justice of the European Union, this also includes award criteria or concession performance conditions relating to the utilisation of fair trade products in the course of the performance of the concession to be awarded. Criteria and conditions relating to trading and its conditions can for instance refer the requirement to pay a minimum price and price premium to subcontractors. Concession performance conditions pertaining to environmental considerations might include, for example, waste minimisation or resource efficiency. (65) Award criteria or concession performance conditions concerning social aspects of the production process should be applied in accordance with Directive 96/71/EC, as interpreted by the Court of Justice of the European Union, and should not be chosen or applied in a way that discriminates directly or indirectly against economic operators from other Member States or from third countries parties to the World Trade Organisation Agreement on Government Procurement (the ‘GPA’) or to Free Trade Agreements to which the Union is party. Thus, requirements concerning the basic working conditions regulated in Directive 96/71/EC, such as minimum rates of pay, should remain at the level set by national legislation or by collective agreements applied in accordance with Union law in the context of that Directive. Concession performance conditions might also be intended to favour the implementation of measures for the promotion of equality of women and men at work, the increased participation of women in the labour market and the reconciliation of work and private life, the protection of the environment or animal welfare and to comply in substance with fundamental International Labour Organisation (ILO) Conventions, and to recruit more disadvantaged persons than are required under national legislation. (66) Measures aiming at the protection of health of the staff involved in the process of performance of the concession, the favouring of social integration of disadvantaged persons or members of vulnerable groups amongst the persons assigned to performing the concession or

DIRECTIVE 2014/23/EU training in the skills needed for the concession in question can also be the subject of award criteria or concession performance conditions provided that they relate to the works or services to be provided under the concession. For instance, such criteria or conditions might refer, amongst other things, to the employment of long-term job-seekers, the implementation of training measures for the unemployed or young persons in the course of the performance of the concession to be awarded. In technical specifications contracting authorities can provide such social requirements which directly characterise the product or service in question, such as accessibility for persons with disabilities or design for all users. (67) The technical and functional requirements drawn up by contracting authorities and contracting entities need to allow concession award to be opened up to competition. Those requirements should define the characteristics required of works and/or services covered by the concession, and might refer to the specific process of production or provision of the requested works or services, provided that they are linked to the subjectmatter of the concession and proportionate to its value and objectives. The specific process of production might include requirements concerning accessibility for people with disabilities, or environmental performance levels. Those technical and functional requirements should be included in the concession documents and should comply with the principles of equal treatment and transparency. They should be drafted such as to avoid artificially narrowing down competition, in particular through requirements that favour a specific economic operator by mirroring key characteristics of the supplies, services or works habitually offered by that economic operator. In any case, tenders comprising works and/or services, including supplies which are incidental to such works and services, complying in an equivalent manner with the characteristics required should be considered by contracting authorities or contracting entities.

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DIRECTIVE 2014/23/EU (68) Concessions are usually long-term, complex arrangements where the concessionaire assumes responsibilities and risks traditionally borne by the contracting authorities and contracting entities and normally falling within their remit. For that reason, subject to compliance with this Directive and with the principles of transparency and equal treatment, contracting authorities and contracting entities should be allowed considerable flexibility to define and organise the procedure leading to the choice of concessionaire. However, in order to ensure equal treatment and transparency throughout the awarding process, it is appropriate to provide for basic guarantees as to the awarding process, including information on the nature and scope of the concession, limitation of the number of candidates, the dissemination of information to candidates and tenderers and the availability of appropriate records. It is also necessary to provide that the initial terms of the concession notice should not be deviated from, in order to prevent unfair treatment of any potential candidates. (69) Concessions should not be awarded to economic operators that have participated in a criminal organisation or have been found guilty of corruption, fraud to the detriment of the Union’s financial interests, terrorist offences, money laundering, terrorist financing or trafficking in human beings. Member States should, however, be able to provide for a derogation from these mandatory exclusions in exceptional situations where overriding requirements in the general interest make a contract award indispensable. Non-payment of taxes or social security contributions should also be sanctioned by mandatory exclusion at the level of the Union. (70) Furthermore, contracting authorities and contracting entities should be given the possibility to exclude economic operators which have proven unreliable, for instance because of serious or repeated violations of environmental or social obligations, including rules on accessibility for disabled persons or other forms of grave professional misconduct, such as violations of competition rules or of intellectual property rights. It

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PART III The Concessions Directive 2014/23/EU should be clarified that grave professional misconduct can render an economic operator’s integrity questionable and thus render the economic operator unsuitable to receive the award of a concession contract irrespective of whether the economic operator would otherwise have the technical and economical capacity to perform the contract. Bearing in mind that the contracting authority or contracting entity is responsible for the consequences of possible erroneous decisions, contracting authorities and contracting entities should also remain free to consider that there has been grave professional misconduct, where, before a final and binding decision on the presence of mandatory exclusion grounds has been rendered, they can demonstrate by any appropriate means that an economic operator has violated its obligations, including obligations relating to the payment of taxes or social security contributions, unless otherwise provided by national law. Contracting authorities and contracting entities should also be able to exclude candidates or tenderers whose performance in earlier concessions or other contracts with contracting authorities or contracting entities has shown major deficiencies with regard to substantive requirements, for instance failure to deliver or perform, significant shortcomings of the product or service delivered, making it unusable for the intended purpose, or misbehaviour that casts serious doubts as to the reliability of the economic operator. National law should provide for a maximum duration for such exclusions. (71) Allowance should, however, be made for the possibility that economic operators can adopt compliance measures aimed at remedying the consequences of any criminal offences or misconduct and at effectively preventing further occurrences of the misbehaviour. Those measures might consist in particular of personnel and organisational measures such as the severance of all links with persons or organisations involved in the misbehaviour, appropriate staff reorganisation measures, the implementation of reporting and control systems, the creation of an internal audit structure to monitor compliance and the adoption of internal

PART III The Concessions Directive 2014/23/EU liability and compensation rules. Where such measures offer sufficient guarantees, the economic operator in question should no longer be excluded on those grounds alone. Economic operators should have the possibility to request that compliance measures taken with a view to possible admission to the concession award procedure be examined. However, it should be left to Member States to determine the exact procedural and substantive conditions applicable in such cases. They should, in particular, be free to decide whether to allow the individual contracting authorities or contracting entities to carry out the relevant assessments or to entrust other authorities on a central or decentralised level with that task. (72) It is important that the observance by subcontractors of applicable obligations in the fields of environmental, social and labour law, established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in this Directive provided that such rules, and their application, comply with Union law, be ensured through appropriate actions by the competent national authorities within the scope of their responsibilities and remit, such as labour inspection agencies or environmental protection agencies. It is also necessary to ensure some transparency in the subcontracting chain, as this gives contracting authorities and contracting entities information on who is present at building sites on which works are being performed for them, or on which undertakings are providing services in or at buildings, infrastructures or areas, such as town halls, municipal schools, sports facilities, ports or motorways, for which the contracting authorities are responsible or over which they have an oversight. It should be clarified that the obligation to deliver the required information is in any case incumbent upon the concessionaire, either on the basis of specific clauses, that each contracting authority or contracting entity would have to include in all award procedures, or on the basis of obligations which Member States would impose on the concession-

DIRECTIVE 2014/23/EU aire by means of generally applicable provisions. It should also be clarified that the conditions relating to the enforcement of observance of applicable obligations in the fields of environmental, social and labour law, established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in this Directive, provided that such rules and their application comply with Union law, should be applied whenever the national law of a Member State provides for a mechanism of joint liability between subcontractors and the concessionaire. Furthermore, it should be stated explicitly that Member States should be able to go further, for instance by extending the transparency obligations or by enabling or requiring contracting authorities or contracting entities to verify that subcontractors are not in any of the situations in which exclusion of economic operators would be warranted. Where such measures are applied to subcontractors, coherence with the provisions applicable to the concessionaire should be ensured so that existence of compulsory exclusion grounds would be followed by a requirement that the concessionaire replace the subcontractor concerned. Where such verification shows the presence of non-compulsory grounds for exclusion, it should be clarified that contracting authorities or contracting entities are able to require the replacement. It should, however, also be set out explicitly that contracting authorities or contracting entities may be obliged to require the replacement of the subcontractor concerned where exclusion of the concessionaire would be obligatory in such cases. It should also be set out explicitly that Member States remain free to provide for more stringent liability rules under national law. (73) Contracting authorities or contracting entities should assess tenders on the basis of one or several award criteria. In order to ensure transparency and equal treatment, criteria for the award of concessions should always comply with some general standards. Those standards may refer to factors which are not purely economic, but influence the value

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DIRECTIVE 2014/23/EU of a tender from the point of view of the contracting authority or contracting entity and permit it to identify an overall economic advantage to the contracting authority or the contracting entity. The criteria should be disclosed in advance to all potential candidates or tenderers, be related to the subject-matter of the contract and should not offer to the contracting authority or contracting entity an unrestricted freedom of choice. They should permit effective competition and be accompanied by requirements that allow the information provided by the tenderers to be effectively verified. It should be possible to include in award criteria, inter alia, environmental, social or innovation-related criteria. Contracting authorities or contracting entities should also indicate award criteria in descending order of importance so as to ensure the equal treatment of potential tenderers by allowing them to be aware of all the elements to be taken into account when they prepare their tenders. In exceptional cases where the contracting authority or contracting entity receives a tender which proposes an innovative solution with an exceptional level of functional performance which could not have foreseen by a diligent contracting authority or contracting entity, the contracting authority or contracting entity should, exceptionally, be able to modify the order of the award criteria to take into account the new possibilities brought about by that innovative solution, provided such a modification ensures equal treatment of all actual or potential tenderers by issuing a new invitation to tender or, where appropriate, publishing a new concession notice. (74) Electronic means of information and communication can greatly simplify the publication of concessions and increase the efficiency, speed and transparency of concession award processes. They could become the standard means of communication and information exchange in concession award procedures, as they greatly enhance the possibilities of economic operators to participate in concession award procedures across the internal market. (75) Concession contracts typically involve long-term and complex technical and fi-

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PART III The Concessions Directive 2014/23/EU nancial arrangements which are often subject to changing circumstances. It is therefore necessary to clarify the conditions under which modifications of a concession during its performance require a new concession award procedure, taking into account the relevant case-law of the Court of Justice of the European Union. A new concession procedure is required in the case of material changes to the initial concession, in particular to the scope and content of the mutual rights and obligations of the parties, including the distribution of intellectual property rights. Such changes demonstrate the parties’ intention to renegotiate essential terms or conditions of that concession. This is the case in particular if the amended conditions would have had an influence on the outcome of the procedure, had they been part of the initial procedure. Modifications of the concession resulting in a minor change of the contract value up to a certain level value should always be possible without the need to carry out a new concession procedure. To that effect and in order to ensure legal certainty, this Directive should provide for de minimis thresholds, below which a new award procedure is not required. Modifications of the concession above those thresholds should be possible without the need to carry out a new award procedure, to the extent that such modifications comply with certain conditions. That might be, for instance, the case of modifications which have become necessary following the need to accommodate requests from contracting authorities or contracting entities, with regard to security requirements and taking into account specificities of such activities as, for instance, operation of mountain sport and touristic facilities, where legislation might evolve to address the related hazards, to the extent such modifications comply with the relevant conditions laid down in this Directive. (76) Contracting authorities and contracting entities can be faced with external circumstances that they could not foresee when they awarded the concession, in particular when the performance of the concession covers a long period. In those cases, a certain degree of flexibility is

PART III The Concessions Directive 2014/23/EU needed to adapt the concession to the circumstances without a new award procedure. The notion of unforeseeable circumstances refers to circumstances that could not have been predicted despite reasonably diligent preparation of the initial award by the contracting authority or contracting entity, taking into account its available means, the nature and characteristics of the specific project, good practices in the field in question and the need to ensure an appropriate relationship between the resources spent in preparing the award and its foreseeable value. However, this cannot apply in cases where a modification results in an alteration of the nature of the overall concession, for instance by replacing the works to be executed or the services to be provided by something different or by fundamentally changing the type of concession since, in such a situation, a hypothetical influence on the outcome may be assumed. For concessions awarded for purposes of pursuing an activity other than those referred to in Annex II, any increase in value not requiring a new award procedure should not be higher than 50 % of the value of the original concession. Where several successive modifications are made, that limitation should apply to the value of each modification. Such consecutive modifications should not be aimed at circumventing this Directive. (77) In line with the principles of equal treatment and transparency, the successful tenderer should not, for instance where a concession is terminated because of deficiencies in the performance, be replaced by another economic operator without reopening the concession to competition. However, the successful tenderer performing the concession should be able, in particular where the concession has been awarded to a group of economic operators, to undergo certain structural changes during the performance of the concession, such as purely internal reorganisations, takeovers, mergers and acquisitions or insolvency. Such structural changes should not automatically require new award procedures for the concession performed by that tenderer. (78) Contracting authorities and contracting entities should have the possibility to

DIRECTIVE 2014/23/EU provide for modifications to a concession by way of review or option clauses, but such clauses should not give them unlimited discretion. This Directive should therefore set out to what extent modifications may be provided for in the initial concession. It should consequently be clarified that sufficiently clearly drafted review or option clauses may for instance provide for price indexations or ensure that, for example, communication equipment to be delivered over a given period continues to be suitable, also in the case of changing communications protocols or other technological changes. It should also be possible under sufficiently clear clauses to provide for adaptations of the concession which are rendered necessary by technical difficulties which have appeared during operation or maintenance. It should also be recalled that concessions could, for instance, include both ordinary maintenance as well as provide for extraordinary maintenance interventions that might become necessary in order to ensure continuation of a public service. (79) Contracting authorities and contracting entities might be faced with situations where additional works or services become necessary. In such cases, provided that the conditions set out in this Directive are fulfilled, a modification of the initial concession without a new concession award procedure should be considered to be justified. (80) Contracting authorities and contracting entities are sometimes faced with circumstances that require the early termination of the concession in order to comply with obligations under Union law in the field of concessions. Member States should therefore ensure that contracting authorities and contracting entities have the possibility, under the conditions determined by national law, to terminate a concession during its term if so required by Union law. (81) In order to ensure adequate judicial protection of candidates and tenderers in the concession award procedures, as well

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DIRECTIVE 2014/23/EU as to make effective the enforcement of this Directive and of the principles of the TFEU, Council Directive 89/665/EEC16 and Council Directive 92/13/EEC17 should also apply to services concessions and to works concessions awarded by both contracting authorities and contracting entities. Directives 89/665/EEC and 92/13/EEC should, therefore, be amended accordingly. (82) The processing of personal data pursuant to this Directive should be governed by Directive 95/46/EC of the European Parliament and of the Council.18 (83) Member States are required to consistently and systematically monitor the implementation and functioning of rules on the award of concession contracts in order to ensure the efficient and uniform application of Union law. (84) The Commission should assess the economic effects on the internal market, in particular in terms of factors such as the cross-border award of contracts, SME participation and transaction costs, resulting from the application of the thresholds set out in this Directive, and from the exclusion set out in Article 12 taking into account the specific structures of the water sector. The Commission should report thereon to the European Parliament and the Council by 18 April 2019. In accordance with Article XXIV(7) of the GPA, the GPA will be the subject of further negotiations three years after its entry into force and periodically thereafter. In that context, the appropriateness of the level of thresholds should be examined in the context of negotiations under the GPA bearing in mind the impact of inflation and transaction costs. The Commission should, where possible and appropriate, consider suggesting an increase of the thresh-

PART III The Concessions Directive 2014/23/EU olds applicable under the GPA during the next round of negotiations. In the event of any change to those thresholds, the report made by the Commission should, where appropriate, be followed by a legislative proposal modifying the threshold set out in this Directive. (85) In order to adapt to rapid technical, economic and regulatory developments, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of reviewing the list of acts set out in Annex III, reviewing the technical procedures for the calculation methods concerning the threshold as well as to periodically revise the threshold itself, amending references to the CPV nomenclature and adapting the list of acts set out in Annex X. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level. The Commission, when preparing and drawing up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council. (86) In order to ensure uniform conditions concerning the procedure for drawing up and transmission of notices and for sending and publishing data referred to in Annexes V, VII and VIII, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council.19 The advisory procedure should be used for the adoption of implementing acts, which have an impact neither on the financial situation nor on the nature and scope of the obligations stemming from this Directive. On the contrary, those acts are

16 Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts (OJ L 395, 30.12.1989, p. 33). 17 Council Directive 92/13/EEC of 25 February 1992 coordinating the laws, regulations and administrative provisions relating to the application of Community rules on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (OJ L 76, 23.3.1992, p. 14). 18 Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (OJ L 281, 23.11.1995, p. 31). 19 Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by the Member States of the Commission’s exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).

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PART III The Concessions Directive 2014/23/EU characterised by a mere administrative purpose and serve to facilitate the application of this Directive. (87) Since the objective of this Directive, namely the coordination of laws, regulations and administrative provisions of the Member States applying to certain concession procedures cannot be sufficiently achieved by the Member States but can rather, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 TEU. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve that objective. (88) In accordance with the Joint Political Declaration of Member States and the Commission on explanatory documents of 28 September 2011, Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a Directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified, HAVE ADOPTED THIS DIRECTIVE: TITLE I: SUBJECT MATTER, SCOPE, PRINCIPLES AND DEFINITIONS CHAPTER I: Scope, general principles and definitions SECTION I: Subject-matter, scope, general principles, definitions and threshold Article 1: Article 2: Article 3: Article 4: Article 5: Article 6: Article 7: Article 8:

Subject-matter and scope Principle of free administration by public authorities Principle of equal treatment, non-discrimination and transparency Freedom to define services of general economic interest Definitions Contracting authorities Contracting entities Threshold and methods for calculating the estimated value of concessions

Article 9:

Revision of the threshold

SECTION II: Exclusions Article 10:

Article 11: Article 12: Article 13: Article 14:

Article 15: Article 16: Article 17:

Exclusions applicable to concessions awarded by contracting authorities and contracting entities Specific exclusions in the field of electronic communications Specific exclusions in the field of water Concessions awarded to an affiliated undertaking Concessions awarded to a joint venture or to a contracting entity forming part of a joint venture Notification of information by contracting entities Exclusion of activities which are directly exposed to competition Concessions between entities within the public sector

SECTION III: General provisions Article 18: Article 19: Article 20: Article 21: Article 22: Article 23:

Duration of the concession Social and other specific services Mixed contracts Mixed procurement contracts involving defence or security aspects Contracts covering both activities referred to in Annex II and other activities Concessions covering both activities referred to in Annex II and activities involving defence or security aspects

SECTION IV: Specific situations Article 24: Article 25:

Reserved concessions Research and development services

CHAPTER II: Principles Article 26: Article 27: Article 28: Article 29:

Economic operators Nomenclatures Confidentiality Rules applicable to communication

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TITLE II: RULES ON THE AWARD OF CONCESSIONS: GENERAL PRINCIPLES AND PROCEDURAL GUARANTEES

Article 55:

CHAPTER I: General principles

ANNEX I:

Article 30: Article 31: Article 32: Article 33:

ANNEX II:

Article 34: Article 35:

General principles Concession notices Concession award notices Form and manner of publication of notices Electronic availability of concession documents Combating corruption and preventing conflicts of interest

Addressees

ANNEXES:

ANNEX III: ANNEX IV: ANNEX V:

CHAPTER II: Procedural guarantees Article 36: Article 37: Article 38: Article 39: Article 40: Article 41:

Technical and functional requirements Procedural guarantees Selection of and qualitative assessment of candidates Time limits for receipt of applications and tenders for the concession Provision of information to candidates and tenderers Award criteria

ANNEX VI:

ANNEX VII: ANNEX VIII:

TITLE III: RULES ON PERFORMANCE OF CONCESSIONS Article 42: Article 43:

Subcontracting Modification of contracts during their term Termination of concessions Monitoring and Reporting

ANNEX IX:

TITLE IV: AMENDMENTS OF DIRECTIVES 89/665/EEC AND 92/13/EEC

ANNEX XI:

Article 44: Article 45:

Article 46: Article 47:

Amendments to Directive 89/665/EEC Amendments to Directive 92/13/EEC

TITLE V: DELEGATED POWERS, IMPLEMENTING POWERS AND FINAL PROVISIONS Article 48: Article 49: Article 50: Article 51: Article 52: Article 53: Article 54:

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Exercise of the delegation Urgency procedure Committee Procedure Transposition Transitional provisions Monitoring and reporting Entry into force

ANNEX X:

List of the activities referred to in point (7) of Article 5 Activities exercised by contracting entities as referred to in Article 7 List of legal acts of the union referred to in point (b) of Article 7(2) Services referred to in Article 19 Information to be included in concession notices referred to in article 31 Information to be included in prior information notices concerning concessions for social and other specific services, as referred to in Article 31(3) Information to be included in concession award notices, as referred to in Article 32 Information to be included in concession award notices concerning concessions for social and other specific services, as referred to in Article 32 Features concerning publication List of international social and environmental conventions referred to in Article 30(3) Information to be included in notices of modifications of a concession during its term according to Article 43

TITLE I SUBJECT-MATTER, SCOPE, PRINCIPLES AND DEFINITIONS Chapter I Scope, general principles and definitions Section I Subject-matter, scope, general principles, definitions and threshold Article 1 Subject-matter and scope 1. This Directive establishes rules on the procedures for procurement by contracting authorities and contracting entities by means of a concession, whose value is esti-

PART III The Concessions Directive 2014/23/EU mated to be not less than the threshold laid down in Article 8. 2. This Directive applies to the award of works or services concessions, to economic operators by: (a) Contracting authorities; or (b) Contracting entities, provided that the works or services are intended for the pursuit of one of the activities referred to in Annex II. 3. The application of this Directive is subject to Article 346 TFEU. 4. Agreements, decisions or other legal instruments that organise the transfer of powers and responsibilities for the performance of public tasks between contracting authorities or contracting entities or groupings of contracting authorities or contracting entities, and which do not provide for remuneration to be given for contractual performance, are considered to be a matter of internal organisation of the Member State concerned and, as such, are not affected in any way by this Directive.

Article 2 Principle of free administration by public authorities 1. This Directive recognises the principle of free administration by national, regional and local authorities in conformity with national and Union law. Those authorities are free to decide how best to manage the execution of works or the provision of services, to ensure in particular a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights in public services. Those authorities may choose to perform their public interest tasks with their own resources, or in cooperation with other authorities or to confer them upon economic operators. 2. This Directive does not affect Member States’ systems of property ownership. In particular it does not require the privatisation of public enterprises providing services to the public.

Article 3 Principle of equal treatment, non-discrimination and transparency 1. Contracting authorities and contracting entities shall treat economic operators equally and without discrimination and

DIRECTIVE 2014/23/EU shall act in a transparent and proportionate manner. The design of the concession award procedure, including the estimate of the value, shall not be made with the intention of excluding it from the scope of this Directive or of unduly favouring or disadvantaging certain economic operators or certain works, supplies or services. 2. Contracting authorities and contracting entities shall aim at ensuring the transparency of the award procedure and of the performance of the contract, while complying with Article 28.

Article 4 Freedom to define services of general economic interest 1. This Directive does not affect the freedom of Member States to define, in conformity with Union law, what they consider to be services of general economic interest, how those services should be organised and financed, in compliance with the State aid rules, and what specific obligations they should be subject to. Equally, this Directive does not affect the way in which the Member States organise their social security systems. 2. Non-economic services of general interest shall fall outside the scope of this Directive.

Article 5 Definitions For the purposes of this Directive the following definitions apply: (1) ‘concessions’ means works or services concessions, as defined in points (a) and (b): (a) ‘works concession’ means a contract for pecuniary interest concluded in writing by means of which one or more contracting authorities or contracting entities entrust the execution of works to one or more economic operators the consideration for which consists either solely in the right to exploit the works that are the subject of the contract or in that right together with payment; (b) ‘services concession’ means a contract for pecuniary interest concluded in writing by means of which one or more contracting authorities or contracting entities entrust the pro-

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(2)

(3)

(4) (5) (6)

(7)

vision and the management of services other than the execution of works referred to in point (a) to one or more economic operators, the consideration of which consists either solely in the right to exploit the services that are the subject of the contract or in that right together with payment. The award of a works or services concession shall involve the transfer to the concessionaire of an operating risk in exploiting those works or services encompassing demand or supply risk or both. The concessionaire shall be deemed to assume operating risk where, under normal operating conditions, it is not guaranteed to recoup the investments made or the costs incurred in operating the works or the services which are the subject-matter of the concession. The part of the risk transferred to the concessionaire shall involve real exposure to the vagaries of the market, such that any potential estimated loss incurred by the concessionaire shall not be merely nominal or negligible; ‘economic operator’ means any natural or legal person, or public entity, or a group of such persons or entities, including temporary associations of undertakings, which offers the execution of works and/or a work, the supply of products or the provision of services on the market; ‘candidate’ means an economic operator that has sought an invitation or has been invited to take part in a concession award procedure; ‘tenderer’ means an economic operator which has submitted a tender; ‘concessionaire’ means an economic operator which has been awarded a concession; ‘written’ or ‘in writing’ means any expression consisting of words or figures which can be read, reproduced and subsequently communicated, including information which is transmitted and stored by electronic means; ‘execution of works’ means the execution, or both the design and execution, of works related to one of the activities referred to in Annex I or of a work, or the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority or

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PART III The Concessions Directive 2014/23/EU contracting entity exercising a decisive influence on the type or design of the work; (8) ‘a work’ means the outcome of building or civil engineering works taken as a whole which is sufficient in itself to fulfil an economic or technical function; (9) ‘electronic means’ means electronic equipment for the processing (including digital compression) and storage of data which is transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means; (10) ‘exclusive right’ means a right granted by a competent authority of a Member State by means of any law, regulation or published administrative provision which is compatible with the Treaties the effect of which is to limit the exercise of an activity to a single economic operator and which substantially affects the ability of other economic operators to carry out such an activity; (11) ‘special right’ means a right granted by a competent authority of a Member State by means of any law, regulation or published administrative provision which is compatible with the Treaties the effect of which is to limit the exercise of an activity to two or more economic operators and which substantially affects the ability of other economic operators to carry out such an activity; (12) ‘concession document’ means any document produced or referred to by the contracting authority or contracting entity to describe or determine elements of the concession or the procedure, including the concession notice, the technical and functional requirements, proposed conditions of concession, formats for the presentation of documents by candidates and tenderers, information on generally applicable obligations and any additional documents; (13) ‘innovation’ means the implementation of a new or significantly improved product, service or process, including but not limited to production, building or construction processes a new marketing method, or a new organisational method in business practices, workplace organisation or external relations, inter alia, with the purpose of helping to solve soci-

PART III The Concessions Directive 2014/23/EU etal challenges or to support the Europe 2020 strat