The European Commission has acted to ensure that EU rules on public procurement – the spending of public money by public authorities – are respected in Greece.
EU public procurement rules are designed to ensure fair and transparent competition for public contracts in Europe, thereby creating opportunities for European companies while ensuring best value for public money. If the rules are not respected, there is a risk of a closed market and waste of public money. The Commission’s request to Greece takes the form of a reasoned opinion. If Greece does not reply satisfactorily within two months, the Commission may refer this matter to the Court of Justice.
The Commission is concerned that Greece has breached EU public procurement rules by directly awarding a public service contract for developing an information system used by the Greek Government’s citizens’ services network (KEP).
n 2007, following a public procurement procedure, the Greek authorities awarded a contract to a company for the development of ERMIS national portal, an online one-stop shop where citizens and businesses can go for all their dealings with the Greek Government.
Soon after, the Greek authorities awarded a supplementary contract worth €1.5 million to the very same company for the development of an information system to be used by staff working in the Greek government’s KEP centres. KEP centres are government service centres where citizens can obtain information and official documents such as birth certificates, licences and identification papers.
The Greek authorities used a negotiated procedure to settle the terms with the company for the development of the information system. No prior contract notice was published.
In the Commission’s view, the development of the ERMIS online portal is different from the development of the internal information system. The contract should therefore not have been awarded on the basis of a supplementary contract following a negotiated procedure, but rather in a formal tender procedure with a Europe-wide publication of a tender notice, as required by the rules of the applicable EU public procurement Directive, 2004/18/EC.
Public procurement: Commission acts to ensure fair access to waste management contracts in Sweden
The Commission is concerned that Sweden has breached EU public procurement rules by allowing local authorities to award contracts for waste management without any tendering procedure.
The Swedish municipalities of Ängelholm and Helsingborg awarded several waste management contracts to a company they co-own with other municipalities. The municipalities of Tomelilla and Simrishamn also awarded waste management contracts to a company they co-own with other municipalities. In both cases, no prior call for tender was published.
Only under very strict conditions can authorities directly award contracts to companies they own themselves or co-own with other authorities. In previous rulings, the Court of Justice has made it clear that authorities are only allowed to do so when it concerns an “in-house” situation: this is when an authority exercises the same amount of control over the company as it does over its own administrative departments. Another condition is that the major part of the company’s activities is carried out for their owners, in this case the municipalities.
However, the Commission has learned that the two companies concerned are clearly active in the private market where they make a significant share of their turn-over. Therefore, the so-called “in-house” conditions developed in the case law of the Court of Justice are not met.
Public procurement: Commission requests Germany to comply with Court judgment on the award of a waste disposal contract in Bonn
In a previous European Union Court of Justice case, the Court ruled that Germany had failed to fulfil its obligations under the EU public procurement rules by concluding a contract for the disposal of biodegradable and green waste without any competitive tendering procedure.
The Commission considers that the German authorities have not taken the necessary measures to comply with the judgment of the Court as the waste disposal contract has not yet been terminated.
The Court judgment concerned a combined waste disposal arrangement concluded between the City of Bonn and a private waste management company: the company collects and delivers the household waste that is to be incinerated in the City’s incineration plant and in return treats bio-waste for the City in its composting plants. The Court confirmed the Commission’s position that, with respect to the bio-waste part, this arrangement has to be regarded as a public service contract. By awarding the contract without a competitive tendering procedure, the German authorities failed to fulfil their obligations under the Public Procurement Directives.
Public procurement: Commission refers the Czech Republic to the EU Court of Justice for not complying with EU rules in the purchase of military transport aircraft
The Commission is concerned that the Czech Republic has breached EU public procurement rules by not opening up a public contract for four military tactical transport aircraft to EU-wide competition.
According to the European public procurement Directive 2004/18/EC, public contracts above certain values must be awarded on the basis of an EU-wide tender procedure. However, the Directive provides for an exemption from this obligation in cases where the contracting authority buys specific military material. A public tender would then put the essential security interests of the relevant Member State at risk.
In April 2008, the Czech Ministry of Defence directly awarded a public supply contract worth €132 million for four military tactical transport aircraft of the type CASA-295M without organising a tendering procedure. The Czech authorities considered that no public tendering procedure would be necessary as the aircraft would be used mainly for Czech Republic military missions, i.e. for the protection of essential security interests of the State.
However, a Member State cannot automatically deviate from standard public procurement rules when procuring military equipment. It has to demonstrate that the tendering procedure as such would present a risk for its essential security interests. In the Commission’s view, the Czech Republic has so far failed to demonstrate why a public tender for unarmed transport aircraft would pose a risk for its essential security interests.
EU Pushes China to Open Bidding
EU officials say they hope to pressure China into conceding more openness by urging it to sign up to the Government Procurement Agreement, a little-known 1996 treaty among 41 members of the World Trade Organization.
The U.S. has also called for China to join the GPA, but the EU can afford to be more aggressive because the Buy American provision in recent stimulus spending hurts the U.S. position, say WTO officials. With the exception of defense spending, EU rules stop its 27 members from protecting markets from each other and, by extension, non-EU countries like the U.S. and China.
The GPA guarantees nondiscrimination for contracts above a threshold — $7.6 million for construction projects, and $500,000 for service agreements. Some $2 trillion in public contracts are tendered every year, according to research published this year by Business Europe, a Brussels-based lobby group.
But the annexes to the GPA contain hundreds of exceptions. For example, European countries don't have to consider U.S.-based bids to supply air-traffic-control equipment. The EU and Canada close their markets for computers and office supplies to each other. Military spending is almost always exempted.
The GPA offers its members a legal recourse at the WTO if one of its companies unfairly loses a bid for a public contract. If discrimination is shown, countries have the right to impose retaliatory sanctions. However, it has only been used three times, and not since 2001 when the U.S. lost a case against South Korea over the building of an airport. Improving enforcement is a key goal of the current round of redrafting the GPA.
China restricts bidders on most public contracts to companies whose trademark and technology are registered in China, a category that includes many foreign companies, but one that can also be used as a tool to keep them out.
Last year, an elaboration of government procurement rules was released, indicating that purchases of high-tech equipment would be limited to locally developed technology. That prompted foreign companies in the U.S., Europe and Asia to make an unprecedented joint complaint.
The government later revised the rules, removing some of the restrictive language, but companies and foreign business associations continue to protest.
Although China's central government maintains that China doesn't discriminate against foreign companies on procurement, the rules have emboldened local governments to shut foreign companies out of bidding for contracts worth billions of dollars.
European countries have traditionally been more conciliatory toward China on trade issues than the U.S., but this is changing amid surging Chinese exports to a region that is grappling with high unemployment.
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