Strategic Use of Public Procurement
Imposing environmental and social requirements in public procurement Jörgen Hettne
New Directive (COM/2011/0896 final) Two complementary objectives: Increase the efficiency … Allow procurers to make better use of public procurement in support of common societal goals such as protection of the environment, higher resource and energy efficiency, combating climate change, promoting innovation, employment and social inclusion and ensuring the best possible conditions for the provision of high quality social services. What does this mean?
Social and environmental considerations
Two different approaches:
Public authorities should be free to buy what they want and can thus impose social and environmental requirements that they find appropriate. Contracting authorities is part of the state which means that the requirements they impose may be seen as trade restrictions if they obstruct firms from participating in the procurement procedure. Contracting authorities may therefore not impose requirement which are not compatible with EU law in general.
Public Procurement and the Internal Market
The purpose of coordination at Community level the procedures for award of public contracts is to eliminate barriers to the freedom to provide services and goods an therefore to protect the interest of traders established in a Member State who whish to offer goods or services to contracting authorities established i another Member State (C380/90 University of Cambridge, para 16).
Confirmed by the White Paper Completing the Internal Market
COM(85) 310 81. Public procurement covers a sizeable part of GDP and is still marked by the tendency of the authorities concerned to keep their purchases and contracts within their own country. This continued partitioning of individual national markets is one of the most evident barriers to the achievement of a real internal market. 82. The basic rule, contained in Article 30 et seq. of the EEC Treaty [now Article 34 TFEU], that goods should move freely in the common market, without being subject to quantitative restrictions between Member States and of all measures having equivalent effect, fully applies to the supply of goods to public purchasing bodies, as do the basic provisions of Article 59 et seq. [now Article 56 TFEU] in order to ensure the freedom to provide services.
Confirmed by the preamble to Directive 2004/18 „The award of contracts concluded in the Member States …is subject to the respect of the principles of the Treaty and in particular to the principle of freedom of movement of goods, the principle of freedom of establishment and the principle of freedom to provide services and to the principles deriving therefrom, such as the principle of equal treatment, the principle of non-discrimination, the principle of mutual recognition, the principle of proportionality and the principle of transparency. However, for public contracts above a certain value, it is advisable to draw up provisions of Community coordination of national procedures for the award of such contracts …. These coordinating provisions should therefore be interpreted in accordance with both the aforementioned rules and principles and other rules of the Treaty.‟ Based on case-law: Cf. cases 31/87 Beentjes (all the relevant provisions of EU law), 45/87, Commission v Ireland, 3/88 Commission v Italy, C-359/93 Commission v Netherlands C-243/03 Contse, C-376/08, Serrantoni
Can the Council/EP change the present legal situation?
Not immediately (constitutionally impossible). A Directive (secondary law) cannot alter the principles stemming from the Treaty (primary law). Social and environmental considerations can however since long time be taken into account in public procurement. The scope for social and environmental considerations can increase if Union law in general develops in that direction. The present situation is rather complex
Specific exemple – Free movement of goods
Article 34 TFEU: Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States. Dassonville (8/74) All trading rules which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade Extremely wide scope
Cassis de Dijon (120/78) Principle of mutual recognition Not necessary to prove discrimination Rule of reason – balancing of interests List of mandatory requirements
Mandatory requirement
Cassis
• • •
The effectiveness of fiscal supervision The protection of public health The fairness of commercial transactions
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The defence of consumer Protection of the environment Protection of working conditions Protection of cinema as a form of cultural expression Protection of national or regional socio-cultural characteristics Maintenance of press diversity Preventing the risk of seriously undermining the financial balance of the social security system Protection of fundamental rights
Post Cassis
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Harmonisation
Commission communication – Interpretation of the judgment in Cassis de Dijon (3 October 1980) “The Commission‟s work of harmonisation will henceforth have to be directed mainly at national laws having an impact on the functioning of the common market where barriers to trade to be removed arise from national provisions which are admissible under the criteria set by the Court.”
What does harmonisation mean?
Directives, regulations and decisions Lex specialis, harmonisation rules take the place of Treaty rules (also the exceptions). All interests at stake are already balanced? The level/intensity of the harmonisation measure differs
Exhaustive/full harmonisation Minimum harmonisation
Harmonised requirements simplify (make superfluous) the discrimination and proportionality test. Harmonised rules are used when the Union interest is serious, inter alia when different approaches exist as regards social and environmental considerations.
Mutual recognition in public procurement
Contracting authorities may not exclude technical specifications which are recognised at European level or which are permissible according to union law. Cassis de Dijon – what is legal in one Member State is presumed to be legal in the other Member States. List of mandatory requirement, inter alia, protection of the environment and protection of working conditions.
Public procurement and harmonised legal requirements Two different situations can appear. 1. There are harmonisation measures relating to a product or service that the contracting authority is interested in purchasing (see C-6/05 Medipac and C489/06, Commission v. Greece – medical devices). 2. Social or environmental consideration can as such be subject of harmonisation (see 346/06, Rüffert – posting of workers). If there is minimum harmonisation, the minimum requirements must be respected, but more stringent national measures are allowed if they comply with the Treaty provisions, the case-law and the general principles of law.
EU Treaties and general principles
Minimum harmonisation
Total harmonisation
A realistic strategy for strategic use of public procurement Define the object and subject matter of the contract well Connect to the policy of the Union if possible If there is a potential conflict (trade/environment) use award criteria rather than obligatory requirements (technical specifications etc)
The object of the contract
The contracting authorities procure in general what they need on market conditions and largely according to their own preferences as long as the principles of the free movement of goods and services and freedom of establishment are respected. Contracting authorities must carefully define what they really want. In some cases it may be perfectly legitimate to define the object of the contract to a very narrow category of goods or services. However, state rules and guidelines which will have as a result that contracting authorities systematically will choose to procure domestic products instead of foreign products may be prohibited even if the preference would have been legitimate in an individual case. Harmonised rules cannot be ignored.
Different situation if the common interest of the union will be promoted
Support for environmental and social consideration that the contracting authorities wishes to promote may exist in EU law (c.f. Regulation no 106/2008 on Community energy-efficiency labelling programme for office equipment, Article 6). Support for environmental and social consideration in general may often exist (c.f. Directive 2001/77 on the promotion of electricity produced from renewable energy sources in the internal electricity market – of relevance in C-448/01 Wienstrom and Regulation no 2092/91 on marketing of products obtained from organic agriculture – of relevance in C-368/10 Commission v. Netherlands). This development will continue:
The Lisbon Treaty (Articles 7-13 TFEU) Consistency principle Instruction to the legislator (EP/Council)
The impact on trade must be assessed case by case – possible use of award criteria
Choosing a product cannot always be the same thing as imposing a restriction on all non chosen products. However, a requirement in a procurement procedure may have the same effect as a typical trade barrier if the result is that some suppliers are prevented from launching a bid (exclusion for any reason). The CJEU has stated that the purpose of the procurement rules is inter alia effective competition by promoting the widest possible expression of interest among contractors in the Member States. The Court has found acceptance for environmental considerations through the application of award criteria which, unlike the mandatory requirements, allow a comparison of quality and price for all the products or services that meet the basic requirements (see Cases C-513/99, Concordia Bus and C -448/01, Wienstrom). Award criteria must not be formulated so that they in practice constitute disguised technical specifications or similar (proportionality test). Award criteria must correspond to the subject-matter of the contract. Particular caution is required when award criteria are set higher than harmonised standards in Union law (cf. case law regarding the use of products - C-142/05, Mickelsson och Roos – can award criteria be treated in the same way as in use restrictions?)
Conclusion The most important thing to remember is that the procurement directives are only part of a larger and rather complex set of Union rules, the acquis communautaire.
