EU: The European Commission has proposed a Public Procurement Act that lets public buyers favour European suppliers and restrict bidders from countries without reciprocal market access. Certain public transport contracts fall outside its scope, and industry association CER says rail services in liberalised markets are exempted.
The proposal replaces the three procurement directives from 2014 with a single regulation applying directly in all member states. Contracts are as a rule to be awarded on the best price-quality ratio rather than on price alone. Regulation 1370/2007 on public passenger transport is amended in the same package.
CER, which represents operators and infrastructure managers, said rail freight, high-speed, other commercial passenger services and public service obligation contracts are exempted from the procurement rules when operated in a liberalised market segment. It has asked the European Parliament and the Council to keep the exemptions through the legislative process.
What the European preference allows
Public authorities in the EU spend around EUR 2.6tn a year on procurement, 15% of GDP, according to the Commission. Buyers would be able to restrict participation to operators and goods covered by the EU’s international commitments, require a minimum share of Union origin, or give covered tenders an advantage in the evaluation. Where the Union’s strategic interests so require, the Commission could close an individual procurement to operators, goods or services that are not covered.
The proposal names railways as one of the sectors where that Union interest can arise. It describes rail and shipbuilding as manufacturing sectors of a dual-use nature whose infrastructure, mobile assets and traffic management systems are critical to military mobility and security.
It follows the first concluded investigation in a rail tender under the Foreign Subsidies Regulation (FSR), in which the Commission in April cleared a Lisbon metro bid on condition that Chinese supplier CRRC was replaced. The FSR screens individual bids for state support from outside the EU. The Public Procurement Act would give buyers a general rule to apply before any bid is examined.
The rail exemption
Procurement rules continue to apply to entities operating in water, energy, transport and postal services. An entity can be exempted where its activity is directly exposed to competition on a market to which access is not restricted, which the Commission establishes on request from a member state or from the entity itself.
CER says operators competing in the same liberalised market today follow different purchasing rules depending on who owns them, and that the exemption would put them on an equal footing with each other and with exempted sectors elsewhere.
CER puts the procurement of new rolling stock at up to eight years and major infrastructure projects at up to 15. Shorter procedures would cut transaction costs and limit exposure to price increases during long tenders, it said. Executive Director Alberto Mazzola called the exemption logical, saying rail operators should not face procurement processes their competitors in the same market avoid.
Public service contracts
Certain contracts and concessions awarded for public service transport within the scope of Regulation 1370/2007 are excluded from the proposed regulation. The chapters on security and resilience and on European preference would still apply to them, and 1370/2007 is amended to that effect.
The rule covers public service contracts for passenger transport by rail and road, awarded and compensated by competent authorities. Competitive tendering became the general rule for rail public service contracts under the Fourth Railway Package. Competent authorities awarding them would be able to apply European preference requirements without following the procurement procedures.
Suppliers asked for cost of ownership
Ahead of the proposal, rail supply association UNIFE and three construction and dredging federations – EIC, EuDA and FIEC – called for tenders to be evaluated on the best price-quality ratio and on total cost of ownership over the life cycle. They also asked for a level playing field with bidders from third countries.
The proposal sets a minimum weighting of 30% for quality criteria, and 50% for contracts that are labour-intensive by nature, with a right for buyers to deviate where quality is secured by other means. UNIFE wants the preference and the quality weighting applied to rolling stock and infrastructure contracts. CER wants its members’ purchases outside the rules when they compete in open markets.
The proposal goes to the European Parliament and the Council. The Commission proposes that the rules apply two years after the regulation enters into force.