Public procurement in the EU is principally regulated by means of the domestic implementation of certain directives, including:
The three directives are collectively referred to below as the 2014 Procurement Directives.
Separately, Directive 2009/81/EC, regulates the award of certain contracts in the fields of defence and security (the Defence Directive), whilst Regulation 1370/2007/EC regulates the award of certain public passenger transport services by rail and road.
In addition to the obligations that arise under the legislation referred to above, the Court of Justices of the EU (CJEU) has established that the award of a contract for goods, works or services which falls outside the scope of EU procurement legislation (because, for example, the relevant value threshold is not met) may, nonetheless, be subject to obligations under the principles that emanate from the Treaty on the Functioning of the EU (TFEU) (the Treaty Principles). That would be the case where the contract is of certain cross-border interest, that is to say that, in view of its nature, value or place of performance the contract is of interest to a supplier in another EU member state.
The Treaty Principles include non-discrimination, equal treatment, transparency and proportionality. Compliance with these principles would generally require the carrying out of a sufficiently advertised procurement process based on objective criteria.
Review procedures and remedies for breaches of obligations under the 2014 Procurement Directives and the Defence Directive are dealt with under:
The Remedies Directives have been amended on numerous occasions, including by Directives 2007/06 and 2014/23. In addition to the remedies available at national level, the European Commission may take action against member states in the CJEU in relation to any alleged breach of EU legislation. In that context, the European Commission has brought a number of infringement proceedings in relation to breaches of EU procurement legislation.
EU bodies, including the European Commission, have procurement-related obligations based on the obligations to which member states are subject under the Public Sector Directive and the Concessions Directive. The relevant rules are set out in Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union.
Unless otherwise specified, the responses to the questions below relate to the application of the Public Sector Directive, which is the legislation under which most regulated contracts are procured in member states. Accordingly, references to “the legislation” should be construed as references to the Public Sector Directive. The reference to EU procurement law should be deemed to refer to the legal instruments mentioned above which create procurement-related obligations on member states.
EU procurement law obligations arise in relation to the award of certain contracts by “contracting authorities”, a term which is broadly defined and captures the overwhelming majority of public bodies. In addition, certain utility companies operating in the water, energy, transport and postal services sectors, are subject to procurement regulation to the extent that they award contracts for the purposes of their utility activities. Such utility companies will be subject to procurement legislation to the extent that they are “contracting authorities” or “public undertakings” (a term which captures entities over which a member state exercises a dominant influence) or carry out their regulated utility activity on the basis of “special or exclusive rights” granted by a competent authority.
In the interest of simplicity, this chapter will use the term “contracting authority” to refer to any entity that has an obligation to carry out a procurement process under EU procurement law.
In principle, EU procurement law applies to the award of contracts for pecuniary interest which are concluded in writing between one or more contracting authorities and one or more economic operators and which have as their object the execution of works, the supply of goods or the provision of services.
The term “pecuniary interest” means broadly consideration (whatever its nature). According to the case law of the CJEU, the provision of goods, works or services in exchange for the full, or even partial, reimbursement of costs can be sufficient for pecuniary interest to be established.
The award of works or services concession contracts (above certain value thresholds) is also regulated. Concession contracts involve consideration which consists either solely in the right to exploit the works or services that are the subject of the contract or in that right together with payment.
The European Commission reviews, and if necessary, revises the value thresholds which trigger the application of the procurement rules every two years, primarily so as to ensure that these continue to correspond to the thresholds established in the context of the Agreement on Government Procurement (the GPA), the plurilateral World Trade Organisation agreement that governs access to the procurement markets of its signatory parties. The current thresholds have been in place since 1 January 2020.
The Public Contract Directive applies when the value of a works contract meets or exceeds EUR5.35 million. The value threshold for goods and most services contracts is EUR214,000 (or EUR139,000 for most procurements by central government bodies). The value threshold for services contracts for social, educational, cultural and certain other types of services contracts (which are subject to a lighter form of regulation than other types of regulated contracts) stands at EUR750,000.
The Utilities Directive applies when the estimated value of a works contract meets or exceeds EUR5.35 million, or EUR428,000 for goods and most services contracts. The value threshold for services contracts for social and certain other types of services stands at EUR1 million.
The Concessions Directive applies when the estimated value of a works or services concession contract meets or exceeds EUR5.35 million. The same value threshold triggers the application of of the Defence and Security Public Contracts Regulations 2011 (DSPCR 2011) for the purposes of works contracts. The value threshold for goods and services contracts under the DSPCR 2011 is EUR428,000.
The above figures are exclusive of VAT.
Under the legislation access to contract award procedures is guaranteed, and remedies for breaches of the legislation are available, to economic operators from:
While generally most regulated contract award procedures in EU member states are open to all economic operators, there is no obligation on a contracting authority to consider the application or the tender of an economic operator from a country that is not covered under one of the above categories (a third-country economic operator). In addition, in the event that there is a breach of the legislation, a third-country economic operator would not be afforded protection (including access to remedies) under the legislation.
The UK ceased being a member of the EU on 31 January 2020. However, under the Withdrawal Agreement which sets out the terms of the UK’s exit from the EU, EU law will continue to apply to, and in, the UK at least until 31 December 2020 (the transition period). Accordingly, during the transition period, EEA economic operators will continue to have access to regulated procurements in the UK, as will economic operators from GPA member countries or countries with which the EU has a bilateral agreement, subject to the terms of those arrangements. Equally, UK economic operators will be deemed to constitute EU economic operators for the purposes of EU procurement legislation and EU law more generally, during this period.
Where the legislation applies, contracting authorities must, in general, meet their contractual requirements for goods, works and services by means of an advertised competitive contract award process which is based on objective, relevant and proportionate criteria. Underlying the legislation are the key obligations to treat economic operators equally and without discrimination and to act in a transparent and proportionate manner. These obligations are relevant even before the procurement process has commenced, so that, for example, the carrying out of a preliminary market consultation or the design of the procurement process, must be consistent with these obligations. Equally, even after the procurement process has concluded with the signing of a contract, there is a prohibition on making substantive modifications to contracts, so as not to breach the above obligations.
Separately, the legislation prohibits contracting authorities from designing a procurement with the intention of excluding it from the legislation’s scope or artificially narrowing competition.
In terms of the steps that a contracting authority must take in carrying out an advertised competitive contract award process, these would depend on the procurement procedure used, but as a general guide they would include:
Contracts award procedures must be advertised in the OJEU using the online “Tenders Electronic Daily” (https://ted.europa.eu/TED/browse/browseByMap.do). National publication can only take place following publication of a contract notice in the OJEU. However, if 48 hours elapse after confirmation of the receipt of the notice by the EU Publications Office and the notice has not yet been published, contracting authorities are entitled to publish at a national level.
The advertisement of a contract must be made using standard online forms. These generally require the publication of the following information:
The standard form used for the advertisement in the OJEU of a contract regulated by the Public Sector Directive may be accessed here:
The legislation expressly permits contracting authorities to carry out preliminary market consultations with a view to preparing the procurement and informing the market of their procurement plans and requirements. In carrying out such consultations, contracting authorities may seek or accept advice from independent experts or authorities, or from market participants. Such advice may be used in the planning and conduct of the procurement procedure, provided this does not have the effect of distorting competition and does not violate the principles of non-discrimination and transparency.
Where an economic operator has advised or has been involved in some other way in the preparation of the procurement process, the contracting authority is obliged to take appropriate measures to ensure that competition is not distorted as a result of the participation of that economic operator in the subsequent process. Such measures must include communicating to all other participants in the competition any relevant information exchanged with that economic operator in the context of preparing the procurement process and the fixing of adequate time limits for the receipt of tenders.
Where there are no means of ensuring the equal treatment of all economic operators, the economic operator who has been involved in the preparation of the process must be excluded from the procedure (but only after the economic operator in question has been given the opportunity to prove that its prior involvement is not capable of distorting competition).
The Public Sector Directive provides six different procedures that may be used for the award of a contract, as follows:
The contracting authority invites interested parties to submit tenders by a specified date. The process does not involve a separate selection stage, in that the tenders of all economic operators that meet the qualitative criteria for participation in the process must be evaluated and the contract awarded to the bidder with the most economically advantageous tender. Negotiations are not permitted under this procedure.
The contracting authority considers applications from interested parties and invites a minimum of five qualified applicants (determined on the basis of objective and non-discriminatory rules and criteria) to submit tenders. The contract is awarded to the bidder who has submitted the most economically advantageous tender. Negotiations are not permitted under this procedure.
Competitive Procedure with Negotiation
The contracting authority considers applications from interested parties and invites a minimum of three (though two might be permissible in specific circumstances) qualified applicants to negotiate the contract with the contracting authority. Negotiations may involve successive bidding rounds, so as to reduce the number of tenders to be negotiated. Final tenders cannot be negotiated.
The contracting authority considers applications from interested parties and invites a minimum of three (although two might be permissible in specific circumstances) qualified applicants to conduct a dialogue with the contracting authority with a view to identifying the solution or solutions capable of meeting its needs. A competitive dialogue may take place in successive stages in order to reduce the number of solutions to be discussed. There can be no substantive discussions following the submission of final tenders, although these may be clarified, specified and optimised at the request of the contracting authority. Limited (non-substantive) negotiations may also take place after the bidder with the most economically advantageous offer has been identified, with a view to finalising the terms of the contract.
This aims at setting up a partnership between a contracting authority and one or more economic operators for the development of an innovative product, service or works meeting the contracting authority's minimum requirements. At the conclusion of the innovation phase, the contracting authority can purchase the resulting products, services or works without the need for a new procurement process, provided that these correspond to the performance levels and maximum costs agreed between the contracting authority and the participants. The actual process for setting up an innovation partnership is based on the procedural rules that apply to the competitive procedure with negotiation.
Competitive Procedure Without Prior Publication
In certain limited and narrowly defined circumstances, the legislation permits member states to allow contracting authorities to award contracts without first having to advertise the requirement. Such cases include where there is an extreme urgency (not attributable to the contracting authority) or where the requirement can only be met by a particular economic operator as a result of technical reasons or the existence of exclusive rights (see further 5.2 Direct Contract Awards).
In line with all other aspects of a procurement process, the conduct of negotiations (where this is permitted) is subject to the obligation to treat economic operators equally and without discrimination. Among other things, this means that the contracting authority cannot disclose the confidential information of one bidder to the other bidders without the former’s agreement. Any such agreement cannot take the form of a general waiver. Instead, consent may only be granted with reference to the intended disclosure of specific information.
Where the competitive procedure with negotiation is used, negotiations are not permitted once final tenders have been submitted. However, where the competitive dialogue procedure is used, final tenders may be clarified, specified and optimised at the request of the contracting authority. Limited (non-substantive) negotiations may also take place after the identification of the most economically advantageous tender, with a view to finalising the terms of the contract.
The legislation permits the conduct of an open or restricted procedure at the discretion of the contracting authority. The use of the other procedures, as outlined in 2.3 Tender Procedure for Award of Contract, is only permissible where specific conditions are met.
The competitive procedure with negotiation and the competitive dialogue can be used only where one of the conditions below applies:
As noted earlier, the innovation partnership, which also involves negotiations, may be used where there is a need for the development of new products, services or works, whilst the use of the negotiated procedure without prior publication is considered an exceptional procedure which can only be used in limited and narrowly construed circumstances (see also 5.2 Direct Contract Awards).
The legislation generally requires contracting authorities to offer online unrestricted and full direct access to the procurement documents from the date of the publication of the contract notice in the OJEU (although certain exemptions apply).
The definition of the “procurement documents” in the legislation is broad and essentially captures all documents which are relevant to the carrying-out of a procurement process, including the contract notice, the technical specifications, an invitation to tender or negotiate, any document that describes the requirements or the rules of the competition and the proposed conditions of contract. Although the wording of the legislation does not clarify this issue, it is arguable that this obligation applies only in relation to documents which are capable of publication at the start of the process. However, this interpretation has yet to be confirmed by the courts. In view of the uncertainty over this issue, it is not unusual for contracting authorities to issue some of the procurement documents as drafts at the start of the process and re-issue these in a final form at a later stage of the process.
The legislation sets certain minimum time limits, but these vary depending on which procedure is used and whether certain conditions are met.
As a general rule, the minimum time limit for the receipt of tenders is 35 days from the date on which the contract notice was sent to the OJEU for publication. However, this time limit may be shortened to 30 days where the contracting authority accepts the submission of tenders by electronic means and to a minimum of 15 days in certain circumstances, including where the requirement is urgent.
Restricted Procedure and Competitive Procedure with Negotiation
The minimum time limit for receipt of requests to participate in the process is generally 30 days from the date on which the contract notice was sent to the OJEU for publication. This period may be reduced to a minimum of 15 days if the requirement is urgent. The minimum time limit for the receipt of tenders (or initial tenders in the case of the competitive procedure with negotiation) is 30 days from the date on which the invitation is sent. This limit may be shortened to between 10 and 25 days in certain circumstances, including where the requirement is urgent.
Competitive Dialogue Procedure and Innovation Partnership
The minimum time limit for the receipt of requests to participate is 30 days from the date on which the contract notice is sent to the OJEU.
Irrespective of any minimum time limits permitted by the legislation, contracting authorities have an obligation to take into account the complexity of the contract and the time required for drawing up tenders when fixing the time limits for the receipt of tenders and requests to participate.
In determining whether interested parties might be eligible for participation in a procurement process, contracting authorities may only take into account a candidate’s suitability to pursue a professional activity, its economic and financial standing, and its technical and professional ability.
The legislation sets out detailed rules as to how these criteria may be taken into consideration at the selection stage of a procurement process and the type of evidence that contracting authorities may ask applicants to provide, so as to prove compliance with specific requirements in this regard. In this context, contracting authorities have an obligation to ensure that any selection requirements they impose are related and proportionate to the subject-matter of the contract.
Separately, the legislation requires contracting authorities to consider whether applicants have committed certain offences which would normally require their exclusion from the competition (the mandatory exclusions). Contracting authorities may also exclude, or may be required by a member state to exclude, from the competition interested parties which find themselves in certain situations (the discretionary exclusions).
The exclusion period is five years from the date of the economic operator’s conviction, in relation to mandatory exclusions, and three years from the date of the relevant event (a reference which case law has interpreted as the date when the wrongful conduct was established), in relation to discretionary exclusions. The right or obligation to exclude is limited to a maximum of three years where discretionary grounds for exclusion apply and to five years where the grounds for exclusion are mandatory. In both cases the legislation permits a longer or shorter exclusion period if this is set by final judgment.
An economic operator who finds itself in one of the circumstances that require or permit disqualification may avoid this if it can demonstrate to the satisfaction of the contracting authority that it has taken appropriate "self-cleaning" measures.
When using one of the competitive procedures other than the open procedure, contracting authorities may restrict participation in a competition to only a small number of qualified applicants. The legislation requires that the decision as to which applicants should be shortlisted must be made on the basis of objective and non-discriminatory criteria or rules, which must be disclosed at the start of the process.
The legislation requires the shortlisting of a minimum of five applicants when using the restricted procedure and a minimum of three when using the competitive process with negotiations, the competitive dialogue and the innovation partnership. However, where the number of applicants meeting the relevant requirements is below the minimum number set in the legislation, the contracting authority may continue with the procedure by inviting the applicants that meet the minimum conditions for participation, provided that there is a sufficient number of qualifying applicants to ensure genuine competition.
A contracting authority must award the contract to the bidder with the most economically advantageous tender, from the point of view of the contracting authority. The tender which is the most economically advantageous must be determined by reference to price or cost alone, or the best price-quality ratio, which must be assessed on the basis of criteria that are linked to the subject-matter of the contract. These may include qualitative, environmental or social aspects. The cost element may also take the form of a fixed price or cost, on the basis of which bidders then compete on quality criteria only.
The criteria must not have the effect of conferring an unrestricted freedom of choice on the contracting authority (which would be the case if, for example, the criteria were not clearly defined). The criteria must also ensure the possibility of effective competition, enabling an objective comparison of the relative merits of the tenders. They must also be accompanied by specifications that allow the information provided by the tenderers to be effectively verified in order to assess how well the tenders meet the award criteria.
The selection criteria, including the grounds for exclusion as well the objective and non-discriminatory criteria or rules on the basis of which the contracting authority will determine the qualified applicants that will be invited to participate in the competition, must be disclosed at the start of the process. Equally, the award criteria and their weightings must be disclosed in the procurement documents which are published at the start of the process.
Over and above the specific obligations in the legislation that relate to the disclosure of selection and award criteria, the case law of the CJEU has clarified that a contracting authority must disclose all elements to be taken into account in the evaluation (which are likely to affect the preparation of tenders) including, for example, sub-criteria and their weightings.
In practice, and in order to limit the risk of non-compliance in this context, contracting authorities in many member states tend to disclose the full evaluation methodology at the start of the procurement process, or at the very least well in advance of the submission of tenders allowing a reasonable opportunity for bidders to take account of the methodology when preparing their submissions.
The legislation does not create an explicit obligation on contracting authorities to inform unsuccessful applicants of the decision to reject their application to participate in a competition and the reason for that decision in a timely manner.
Instead, the legislation provides that, where the contracting authority has not informed an applicant of its decision to reject its application and the reasons for that decision at an earlier stage in the process, the contracting authority must do so before commencing the standstill period that must precede the award of the contract (see further 3.4 Requirement for Standstill Period).
In practice, contracting authorities choose to inform unsuccessful applicants of their rejection and the reasons for this without undue delay, not least so as to limit the risk of a challenge against that decision at a later stage in the process.
Separately, the legislation provides that where an unsuccessful applicant requests in writing information about the reasons for the rejection of its request to participate in the competition, the contracting authority is required to provide this information as quickly as possible and in any event within 15 days from receipt of the written request.
Bidders must be informed about the contract award decision as soon as possible after that decision has been made. In notifying bidders of that decision, the contracting authority must specify:
The notice communicating the contract award decision is normally sent electronically, although facsimile and “other means” are, in principle, also permissible.
In certain circumstances, the contracting authority also has an obligation to also notify the contract award decision to rejected applicants, as well as to bidders that might have been eliminated at earlier stages of the competition.
The relevant legislation requires the contracting authority not to conclude the contract before the expiry of a standstill period, following the notification of the contract award decision to bidders. The length of that period depends on the means of communication used to notify the contract award decision. Where all bidders have been notified of that decision electronically, the standstill period must be a minimum of ten clear calendar days.
It is for member states to determine which body or bodies should be responsible for review procedures. At the same time, the Remedies Directives require that a review body which is not judicial in character must always give written reasons for its decisions.
In addition, any allegedly illegal measure taken by a non-judicial review body or any alleged defect in the exercise of the powers conferred on it must be capable of judicial review or review by another body that is a court or tribunal within the meaning of Article 267 of the TFEU and independent of both the contracting authority and the review body.
A party that has concerns about the validity of a contracting authority’s decision (and irrespective of whether or not it has standing to bring a challenge under procurement legislation) may complain to the European Commission. The European Commission is not obliged to pursue that complaint further, but if it does, this may ultimately lead to infraction proceedings, under Article 258 of the TFEU, against the member state of the contracting authority for breach of an EU law obligation.
Member states must ensure that review procedures available for the breach of the legislation include provision for powers to:
Where damages are claimed on the grounds that a decision was taken unlawfully, the relevant legislation also allows member states to require first the setting-aside of the contested decision.
Separately, member states must ensure that a contract is considered ineffective by a review body independent of the contract authority, where:
It is for member states to decide whether the consequences of a contract being rendered ineffective should be the retrospective or prospective cancellation of contractual obligations. If the latter, this must also be accompanied by a fine that must be effective, proportionate and dissuasive.
As noted in the previous section, member states must ensure that review procedures include provision for powers to take interim measures.
In addition, when a body of first instance, which is independent of the contracting authority, reviews a contract award decision, member states must ensure that the contracting authority cannot conclude the contract before the review body has decided either an application for interim measures (to lift the prohibition on concluding the contract) or the claim.
The relevant legislation permits member states to require that a complainant first seeks review with the contracting authority. In that case, member states must ensure that the submission of such an application for review results in the immediate suspension of the possibility to conclude the contract. This suspension must last at least until after the expiry of ten calendar days, with effect from the day following the date on which the contracting authority has sent a reply by electronic means.
A breach of the legislation is actionable by any economic operator which is owed a duty under the legislation and which has been, or risks being, harmed by an alleged infringement of the legislation. As noted in 1.4 Openness of Regulated Contract Award Procedure, a contracting authority owes a duty of compliance with the legislation to economic operators from: (i) the EEA, (ii) a GPA state (other than an EEA state), or (iii) a country with which the EU has a bilateral agreement, but in relation to (ii) and (iii) only to the extent that the procurement in question is covered by the GPA or that agreement, respectively.
The relevant legislation requires a claim seeking the remedy of “ineffectiveness” to be made within a period of six months starting from the day following the date of the conclusion of the contact. Where the contracting authority has published a contract award notice in the OJEU, or has informed the relevant economic operator of the conclusion of the contract and provided a summary of the reasons leading to the award of that contract, the period for bringing a claim is shortened to 30 days from the date of publication of the contract award notice, or the date on which notice of the conclusion of the contract (together with a statement of reasons) was provided to the relevant economic operator.
As regards the limitation period that may apply to claims for other types of remedies, this is for member states to decide, subject to certain conditions. These include a requirement for the minimum time period to be ten calendar days starting from the day after the date on which the decision was notified electronically to a tenderer or candidate or, where a decision is not subject to any specific notification requirements, ten calendar days from the date of the publication of the decision concerned.
Separately, in Case C–406/08, Uniplex, the CJEU concluded, among other things, that the period for bringing proceedings seeking to have an infringement of the public procurement rules established or to obtain damages should start to run from the date on which the claimant knew, or ought to have known, of that infringement.
All member states are required to ensure that decisions taken by contracting authorities in relation to regulated contracts are reviewed effectively and, in particular, as rapidly as possible. At the same time, the length of proceedings varies greatly between member states. National review systems where alleged breaches of procurement law are dealt with (in the first instance) by specialist tribunals or boards tend to deal with claims more quickly than court-based review systems.
The number of claims varies between more than a thousand to fewer than ten per year, depending on the member state.
The costs vary greatly between member states, with court-based review systems likely to be more costly.
The 2014 Procurement Directives incorporate provisions that regulate the modification of contracts, following their award. These prohibit substantial modifications. In brief, a modification will be deemed substantial when it:
At the same time, the relevant legislation incorporates certain provisions that specify the conditions under which a modification would not be deemed to constitute a substantive modification, and, as such, would be permissible (generally referred to as the safe-harbour provisions). These rules differ in certain respects, depending on whether the contract is subject to the Public Sector or the Utilities Directive or whether a concession contract is awarded by a contracting authority in the exercise of an activity that is not regulated under the Utilities Directive. Briefly, modifications would not be deemed to be substantive where they:
The second and third safe-harbour provisions also require the publication of a "modification of contract" notice in the Official Journal of the EU (OJEU).
As noted earlier in this chapter, the legislation permits member states to allow contracting authorities to award contracts without having to advertise the requirement in the OJEU and conduct a competitive tender process, in certain limited circumstances, including where:
In its judgment in the Autorità Garantecase (Case C-216/17), the CJEU provided some important guidance on whether contracting authorities, which are not signatories to a framework agreement, may use them and, separately, the extent to which contracting authorities wishing to use a framework agreement need to specify in advance the quantity of services they may require under that framework. As to the first issue, the court confirmed that in order to be able to award contracts under a framework, a contracting authority did not have to be a direct signatory to the relevant framework agreement. Instead, it was sufficient for it to be clearly identified as a potential user of that framework in the procurement documents. As to the second issue, the court concluded that, although contracting authorities were only subject to a requirement to use best endeavours to stipulate in advance the value and frequency of each individual contract likely to be awarded under a framework agreement, it was imperative that they should state the total quantity of services which these contracts might comprise.
The EU is not currently contemplating any substantive changes to its public procurement legislation.