12 Public procurement
| (a)
(33585)
18964/11
+ ADDs 1-2
COM(11) 895
(b)
(33586)
18966/11
+ ADDs 1-2
COM(11) 896
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Draft Directive on procurement by entities operating in the water, energy, transport and postal services sectors
Draft Directive on public procurement
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| Legal base | Articles 53(1), 62 and 114 TFEU; co-decision; QMV
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| Department | Cabinet Office
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| Basis of consideration | Minister's letter of 10 July 2013
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| Previous Committee Reports | (a) HC 428-lii (2010-12), chapter 2 (29 February 2012) and HC 86-xxi (2012-13) chapter 5 (28 November 2012)
(b) HC 428-lii (2010-12), chapter 3 (29 February 2012) and HC 86-xx (2012-13) chapter 4 (21 November 2012)
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| Discussion in Council | See para 12.8 below
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| Committee's assessment | Legally and politically important
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| Committee's decision | Cleared
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Background
12.1 According to the Commission, expenditure by public bodies
and utilities plays an important role in the EU's overall economic
performance, but it has noted that, although the two main legal
instruments in this area — Directive 2004/17/EC and Directive
2004/18/EC — seek to ensure that economic operators from
across the Single Market can compete freely for such contracts,
its Communication in April 2011 on the Single Market Act identified
the key need to make this process more flexible.
12.2 It therefore put forward in December 2011
— together with a proposal[41]
relating to the award of concession contracts — these two
proposals, the aim being to maintain the present broad approach,
whilst increasing efficiency by simplifying the existing rules,
and allowing procurement to better support certain common goals.
As we noted in our Report of 29 February 2012, it sought to do
this by addressing the following five areas.
Simplification of procurement procedures
This would involve clarifying the scope of the Directives;
giving purchasers more choice over which procedure to use; introducing
a simplified regime for purchases by local and regional authorities;
promoting e-procurement, by making the transmission of notices
in electronic form mandatory, and requiring a switch to fully
electronic communication within two years; and shortening time
limits for the submission of offers, introducing greater flexibility,
and enabling the exclusion of suppliers which have performed persistently
or significantly badly in the past.
Strategic use of public procurement in response
to new challenges
This would enable contracting authorities to procure
goods and services through fostering innovation and respecting
the environment in assessing tenders, and excluding economic operators
who have infringed EU legal obligations relating to social, labour
or environmental law, or international law provisions. Also,
Member States would have a very large discretion to organise service
providers for social, health and education services, with a specific
regime for contracts above a certain threshold, which would impose
only the basic principles of transparency and equal treatment.
Better access to the market for SMEs and start-ups
This would provide easier access to procurement markets
for SMEs, including a simplification of information requirements;
the division of larger contracts into "lots"; and enabling
Member States to allow subcontractors (which are often SMEs) to
request payment direct from contracting authorities.
Sound procedures
This would incorporate improved safeguards against
conflicts of interest, illicit conduct, and the granting of unfair
advantages to any participants which have advised the contracting
authority or been involved in the preparation of the procedure.
12.3 The proposals would also have introduced
two other significant changes. First, the current distinction,
under which non-priority (Part B) services[42]
unlikely to attract cross-border interest are subject to only
certain provisions, would be removed. Secondly, since the Commission
considered that not all Member States systematically monitored
the application of the procurement rules, it proposed that they
should designate a single national authority for this purpose,
which would also provide legal advice on the rules; establish
systems to detect conflicts of interest and other irregularities;
draw attention to specific violations and systemic problems; monitor
the decisions taken by national courts and authorities following
rulings by the European Court of Justice or findings by the European
Court of Auditors; and report to the European Anti-Fraud Office
any infringement of procurement procedures in such instances.
In particular, it would have obliged Member States to empower
the body to "seize" the jurisdiction of the courts to
review decisions by contracting entities where it has detected
a violation in the course of its monitoring and legal advisory
work.
12.4 We noted that, whilst the Government had
welcomed many of these proposals, it had concerns about the removal
of the distinction between Part A and Part B services, and was
not convinced about the benefits of the approach now proposed
for social services. However, its main concerns related to the
proposed requirement for national oversight bodies to be able
to 'seize' the jurisdiction of the Courts, which it considered
could (among other things) infringe the principles of subsidiarity
and/or proportionality. We said that we fully agreed that this
aspect of the proposal was unjustifiably intrusive, and we concluded
that it amounted to an unwarranted interference in the domestic
legal order of the UK, and so infringed the principle of subsidiarity.
Accordingly, we recommended that the House should adopt the draft
Reasoned Opinion annexed to our Reports on these two proposals,
and that this should be sent to the Presidents of the Commission,
Council and European Parliament — a course which was adopted,
following a debate in the House on 6 March 2012.
12.5 We subsequently received from the Minister
for the Cabinet Office and Paymaster General (Rt Hon Francis Maude)
a letter of 24 July 2012, recording that satisfactory progress
had been made in many areas, including the introduction of flexible
procedures; the strategic use of public procurement in areas such
as "life cycle" costing; reducing documentation requirements;
the treatment of poor performers; the aggregation of demand; and
improved access for SMEs. However, he indicated that issues remained
in three areas — the proposal on so-called "Part B"
services (which was supported by most Member States, although
the possibility of maintaining some kind of lighter regime was
being explored); the proposal that there should be 100% electronic
procurement within two years (which the UK regarded as being too
"absolutist"); and the proposed national oversight body
(where most other Member States shared the UK's concerns). The
Minister also drew attention to the UK's wish that the Directive
should explicitly allow innovative public service delivery agents,
such as employee-owned "mutuals", to become established
before they are subject to full competition.
12.6 We next received a letter of 15 November
2012 from the Minister for Political and Constitutional Reform
(Miss Chloe Smith), drawing attention to a number of further developments.
As we noted in our Reports of 21 and 28 November 2012, these related
to the position of mutuals (where the Commission had indicated
some willingness to address UK concerns); Part B services (where,
in the light of the view held by the majority of Member States,
the UK had modified its negotiating position by getting more
"B-Services" included in the new light-touch approach
proposed for social/health services, and by seeking to increase
the threshold for these services); governance (where the proposals
requiring the setting up of national oversight bodies had been
removed, and the proposed reporting requirements had been cut
back); threshold levels (where the latest text committed the Commission
to reviewing their impact within three years of the Directive's
transposition); social and environmental aspects (where the latest
draft text confirmed that these were now explicitly permissible
award criteria); and defence and security exemptions (where the
current text was much clearer, although the UK was pushing for
further improvements).
12.7 The Minister also told us that the Commission
and Presidency were keen to reach an early common position on
the proposals, and, in view of this, she asked if we would be
willing, in the light of the update she had provided, to clear
the document or waive the scrutiny reserve. Having considered
that request, we noted that, notwithstanding the undoubted progress,
a number of important issues still remained to be finally resolved,
and that consequently, we did not think it would be right to release
the documents from scrutiny altogether. However, in view of the
Government's wish to clinch a satisfactory deal if one was on
offer, we issued a waiver under paragraph 3(b) of the Scrutiny
Reserve Resolution, on the basis that we would continue to be
kept informed of developments.
Minister's letter of 10 July 2013
12.8 We have now received a further letter of
10 July 2013 from the Minister, in which she says that, following
the general approach agreed by the Council in December 2012, trilogue
discussions have been taking place between the Presidency, Commission
and European Parliament, and that a provisional agreement has
been reached. She asks if we would now be prepared to clear these
two documents in advance of discussion in the Council, indicating
that the new Directives will represent a tangible improvement
over existing European procurement rules, and that issues where
previous correspondence had identified a number of matters where
the outcome remained uncertain, or where the European Parliament
might adopt an unwelcome position, have been resolved satisfactorily,
with the Government's key aims having been largely retained through
the trilogues.
12.9 In particular, she highlights the following
issues:
certain services will be reserved for mutuals and
cooperatives;
- the original proposal for a national oversight
body was removed from the Council's General Agreement, and has
not been re-introduced, and the European Parliament has also agreed
to reduce reporting and monitoring obligations on Member States
compared with their original position;
- there was insufficient support from other Member
States or the Parliament for the current minimalist approach for
all the pre-existing "Part B" service categories, but
an acceptable compromise has been reached where health and social
services, a number of hotel and restaurant services, many social
care services, and others such as some legal services, have been
included in a "light-touch" regime, with a higher threshold
of €750,000 (with it being left to Member States to devise
their own light-touch rules, apart from some basic transparency
and advertising requirements);
- the UK has secured effective defence and security
exemptions, which are consistent with the Defence and Security
procurement directive;
- the Presidency successfully resisted suggestions
for potentially protectionist reciprocity provisions in the public
procurement directive (some limited pre-existing reciprocity provisions
have been carried over from the current utilities directive into
the new utilities directive, but do not extend their scope);
- a requirement for full electronic communication
(in effect e-procurement) remains in the Directives, but the deadline
is now 2 years after transposition, i.e. 4½ years after adoption;
- the welcome additional clarity on the use of
social and environmental award criteria has been retained, and
an obligation to use those criteria, which would have reduced
authorities' discretion and affected value for money, has been
successfully resisted;
- the "most economically advantageous tender"
(in effect value for money) is the main basis for contract award,
but "lowest price" (only) is still recognised as appropriate
in some circumstances, which is consistent with UK policy; and
- the scope of the exclusion of contracts involving
public-public cooperation has been clarified.
Conclusion
12.10 We are grateful for the Minister for
this update, and for her confirmation that these two proposals
have now been amended in ways which address the UK's earlier concerns.
In the light of her explanation, we are now content to clear both
documents.
12.11 We have issued a Reasoned Opinion on
these proposals. Clearing them from scrutiny is without prejudice
to any decision the Committee might recommend in a legal challenge
under Article 8 of the Protocol on the Application of the Principles
of Subsidiarity and Proportionality.
41 (33584) 18960/11: see Chapter 11 of this Report. Back
42
These currently include hotel, rail and water transport, legal
and recreational services. Back
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