Sunday 28 December 2008

EU procurement: Economic operators

The internal market rules of the European Community (European Union) require equal and objective treatment of potential bidders and actual tenderers in public procurement.

The treaty principles are set out in a more concrete manner in secondary legislation, here the Procurement Directive 2004/18/EC. We take a look at a basic Directive provision on economic operators, i.e. firms and individuals (potentially) participating in public contracts procedures.

The European Commission has shown interest in the opportunities for small and medium-sized enterprises (SMEs) to compete successfully in tender procedures. We add a few references for interested readers.


Article 4

The EC (EU) Classic Directive or Procurement Directive 2004/18/EC starts Title II Rules on public contracts, with Chapter I General provisions. Article 4 Economic operators concerns some aspects of equal treatment of tenderers from different member states:


General provisions

Article 4
Economic operators

1. Candidates or tenderers who, 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 and/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 may submit tenders or put themselves forward as candidates. In order to submit a tender or a request to participate, these groups may not be required by the contracting authorities to assume a specific legal form; however, the group selected may be required to do so when it has been awarded the contract, to the extent that this change is necessary for the satisfactory performance of the contract.


Economic operator

We start by returning to the definition of economic operator.

Economic operator is a convenient term to cover the concepts of contractor, supplier and service provider, as described in Article 1(8):

8. The terms ‘contractor’, ‘supplier’ and ‘service provider’ mean any natural or legal person or public entity or group of such persons and/or bodies which offers on the market, respectively, the execution of works and/or a work, products or services.

The term ‘economic operator’ shall cover equally the concepts of contractor, supplier and service provider. It is used merely in the interest of simplification.

An economic operator who has submitted a tender shall be designated a ‘tenderer’. One which has sought an invitation to take part in a restricted or negotiated procedure or a competitive dialogue shall be designated a ‘candidate’.


Latest consolidation

The latest consolidated version of the Procurement Directive 2004/18/EC, found on Eur-Lex under legislation in force, is of 15 September 2008.


Equal treatment, non-discrimination and transparency

We are reminded of the general rules concerning equal treatment of companies and individuals vying for business contracts and of transparent procedures, in Article 2 of the Procurement Directive 2004/18/EC:

Article 2
Principles of awarding contracts

Contracting authorities shall treat economic operators equally and non-discriminatorily and shall act in a transparent way.


Mutual recognition

Article 4(1) evokes the principle of mutual recognition. To require domestic qualifications in the awarding member states tends to favour domestic bidders at the expense of firms or individuals from other member states and consequently against the internal market principles of free movement.

The Community rules on mutual recognition of diplomas and professional qualifications apply.


Professional qualifications

Legal persons can be required to show that they have suitably qualified individuals, who can fulfil the contract.

The Community rules on mutual recognition of diplomas and professional qualifications apply.

Under Freedom of establishment, the Commission’s Guide to the Community rules on public works contracts (based on the old Directive 93/37/EEC) explains some of the treaty provisions on professional qualifications (page 2 to 3):

However, the taking-up and pursuit of certain self-employed activities may be conditional on complying with certain provisions laid down by law, regulation or administrative action justified by the general good, such as rules relating to organization, qualifications, professional ethics, supervision and liability. Such provisions may stipulate in particular that pursuit of a particular activity is restricted to holders of a diploma, certificate or other evidence of formal qualifications, to persons belonging to a professional body or to persons subject to particular rules or supervision, as the case may be.

Where the taking-up or pursuit of a specific activity is subject to such conditions in the host Member State, a national of another Member State intending to pursue that activity must in principle comply with them. It is for this reason that Article 57 provides that the Council is to issue directives for the mutual recognition of diplomas, certificates and other evidence of formal qualifications or, as the case may be, for the coordination of national provisions concerning the taking-up and pursuit of activities as self-employed persons.

It follows, however, from the Court’ s case-law that national measures liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty must fulfil four conditions: they must be applied in a non-discriminatory manner; they must be justified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain it.”


Joint bids

Article 4(2) allows companies to leave joint bids as groups. Only if necessary, can a group be demanded to assume a specific legal form.

The Commission’s Guide to the Community rules on public works contracts (based on the old Directive 93/37/EEC) explains how a group of companies can submit a tender without assuming a particular legal form. A successful group may be required to assume a certain legal form, indicated in advance (page 54):

6.4.3 Groups of contractors

Groups of contractors must be allowed to submit a tender or to negotiate without having to assume a particular legal form. However, a group may be required to assume a particular legal form if it is awarded the contract. In such a case, the contracting authority must have indicated beforehand, in the contract notice, the legal form required.

As was pointed out in connection with the definition of the contractor (point 1.2), the Court has stated that a company which has neither the intention nor the resources to carry out the works itself may participate in a procedure for the award of a public works contract. However, in order to prove that it has the required financial and economic standing and technical capability, it must establish that it actually has available to it the resources of the contractors by whom it intends to have the contract carried out and that those resources meet the requirements specified by the contracting authority.


SMEs: “Small Business Act” for Europe

Groups of contractors are important, because they offer small businesses opportunities to participate in joint bids for public contracts too large for them to handle on their own.

One of the ten principles of the “Small Business Act” for Europe is Principle V Adapt public policy tools to SME needs: facilitate SMEs’ participation in public procurement and better use State Aid possibilities for SMEs.

Source: Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions: “Think Small First” A “Small Business Act” for Europe (Brussels, 25.6.2008 COM(2008) 394 final).

The Member States committed to implement the SBA by adopting the Competitiveness Council Conclusions of 1 December 2008.

The SBA Action Plan, annexed to the Competitiveness Council Conclusions, focuses on short and medium-term measures to improve SMEs’ access to finance, to improve the regulatory environment and to enhance market access for SMEs. These priority measures are an integral part of the Commission’s response to alleviate the negative impact of economic and financial crisis on enterprises, especially SMEs.

The European Council on 11-12 December 2008 supported the full implementation of the Action Plan for the SBA adopted by the Competitiveness Council on 1 December 2008.


Code of Best Practice(s)

The European SBA refers to the Code of Best Practice. Readers interested in improving the opportunities for small and medium-sized enterprises in public procurement are invited to look at the suggestions made by the Commission Staff Working Document: European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts (Brussels, 25.6.2008 SEC(2008) 2193).

You can look at the proposals directly or read the earlier blog posts with summaries.

Ralf Grahn

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