Earlier than expected, and perhaps unintentionally, a first version of the new European public procurement legislation has been circulated. It envisages a very far-reaching reform.
Unlike the three existing directives (for the classical sectors, the utilities sectors and concessions), a single regulation is envisaged. It would apply to both sectors as well as to concessions.
Unlike a directive, a regulation is directly applicable in the Member States. For contracts with an estimated value equal to or above the European threshold, there would therefore no longer be a separate Belgian law on concessions or public procurement. Nevertheless, (new) national legislation will still have to be adopted for contracts that do not fall within the scope of the new regulation.
In addition, the Royal Decree establishing the general rules for the execution of public contracts will also have to be revised. Indeed, the proposed regulation also deals with aspects of contract performance. For example, the amendment of a contract would become possible where significant technological developments occur that could not reasonably have been foreseen by a diligent contracting authority at the time the contract was awarded. This is not currently provided for. Listing all the changes is almost an impossible task. A first look at the substantial regulation (170 pages!) already reveals a whole series of new terms and principles.
- A distinction would be introduced between labour-intensive and non-labour-intensive contracts. Labour-intensive contracts are those in which labour costs are equal to or exceed 50% of the contract value. For the other contracts, this percentage would be 30%.
- It is immediately clear that awarding a contract solely on the basis of the lowest price would become an absolute exception. Contracting authorities could depart from the minimum percentages for qualitative award criteria only where the quality of the purchased product, service or works can be guaranteed, for example through technical specifications or contractual performance conditions.
- Technical specifications are currently formulated through performance or functional requirements and by reference to national standards implementing European standards, European technical assessments and national standards. This would also change. A hierarchy would be introduced. Technical specifications would have to be expressed as functional requirements. These are requirements describing the performance, intended function, required functionality, intended result or intended outcome that a work, product or service must achieve, without referring to specific technical means, designs or methods by which those functions or results are to be achieved. Reference to standards or norms would only be possible by way of exception. Allowing variants should also be considered in that case.
- To inform the market, contracting authorities would be required to publish indicative planning information at the beginning of each budgetary period. This needs plan could be amended to reflect changing needs and would not oblige contracting authorities actually to launch the contracts announced. This obligation appears to complement market consultation. It is expressly provided that market consultation may be organised in preparation of the “Needs Plan”.
- The obligations regarding transparency and publication would therefore not be reduced, including after the award of a contract. Contracting authorities would henceforth have to ensure, by electronic means, that from the date of publication of the competition notice until three years after contract award, free, unrestricted and full direct access to the procurement documents is provided. This is not currently the case. At present, a contracting authority may somewhat restrict access to the selection guide or procurement documents once the deadline for submitting requests to participate or tenders has passed. This would no longer be permitted.
- The ESPD (European Single Procurement Document) would disappear. It would be replaced by an “electronic suitability service”. This service would be established by the Commission and would support contracting authorities and economic operators in the digital process of verifying suitability in public procurement procedures. It should make possible the digital verification of company data, exclusion grounds, selection criteria and origin requirements through a digital business data tool.
- There is henceforth a reference to “qualified suppliers”. These are economic operators from a third country that is a party to the World Trade Organization (WTO) Agreement on Government Procurement (GPA), and economic operators from a third country that has concluded a bilateral or multilateral trade agreement with the Union. These companies must be treated equally. They benefit from the freedom of movement and may not be discriminated against. Other companies therefore apparently do not benefit from this freedom and protection.
- The number of procedures would be reduced. The regulation mentions the “open-negotiated procedure”, which most closely resembles the open procedure, and the “dynamic simplified procedure”, which resembles the dynamic purchasing system. In addition, there is an “innovation challenge procedure”- its name speaks for itself. Finally, there are special procedures for obtaining market information or for emergency purchases. A number of grounds for using the negotiated procedure without prior publication are listed in Articles 50 and 51 of the regulation. Unique artistic performances, the absence of competition for technical reasons or cases of extreme urgency may still justify the use of such a special procedure. This latter procedure therefore resembles the current negotiated procedure without prior publication.
- Not everything would change. The division of contracts into lots would, for example, remain advisable. However, when assessing whether a contract should be divided into lots, contracting authorities would also have to take into account, where relevant, the possible contribution of such division to reducing dependence on a single supplier, strengthening supply chain resilience and security of supply, or promoting innovation. As a result, the possibility of not dividing a contract into lots appears to be significantly reduced.
- Price and cost examination would remain in place. Here too, a tightening of the rules appears to be envisaged. Contracting authorities would be required to request explanations from tenderers where their price deviates from the estimated value of the contract, particularly where that estimate is based on prior market consultation. Taking into account the estimate and previously paid prices when carrying out the price and cost examination would be a new requirement.
The plans are very ambitious, and the changes are substantial. However, the road ahead is a long one. This first draft will be further refined into an initial proposal, which will then begin a lengthy journey through the European institutions. The Member States and the European Parliament will be involved before publication can be considered. It is currently envisaged that the Regulation will enter into force on the twentieth day following its publication in the Official Journal of the European Union, but that it will only become applicable two years later.
Until then, we will continue to work with the current directives.
This draft regulation represents the most significant reform of European public procurement law in more than ten years. Although the final text may still change, it is already clear that contracting authorities and businesses would be well advised to prepare in good time for these new European public procurement rules. At Tender Law, we closely follow the further development of this regulation and its impact on Belgian public procurement practice.