Government procurement in the European Union
Government procurement or public procurement is undertaken by the public authorities of the European Union and its member states in order to award contracts for public works and for the purchase of goods and services in accordance with principles derived from the Treaties of the European Union. Such procurement represents 13.6% of EU GDP as of 2023, and has been the subject of increasing European regulation since the 1970s because of its importance to the European single market.
According to a 2011 study prepared for the European Commission by PwC, London Economics and Ecorys, the UK, France, Spain, Germany, Poland and Italy were together responsible for about 75% of all public procurement in the EU and European Economic Area, both in terms of the number of contracts awarded through EU-regulated procedures and in value. The UK awarded the most contracts in value terms and France had the highest number of contracts.
Although the United Kingdom left the EU on 31 January 2020, the existing regulations continued to apply until 31 December 2020 in accordance with the Brexit withdrawal agreement.
Scale
The European Commission estimated in 2023 that government procurement was around €2 trillion, which represented 13.6% of EU GDP. An earlier estimate looking at procurement activity in excess of the [|thresholds] suggested that 3.7% of EU GDP was covered by the full operation of the public procurement directives. A Commission statement issued in 2006 stated that about €80 billion of this expenditure was [|defence expenditure].Legislative history
Primary legislation
The basis of European procurement regulation lies in the provisions of the European Union treaties which prohibit barriers to intra-Union trade, provide the freedom to provide services and the right to establishment, prohibit discrimination on the basis of national origin and regulate public undertakings and public monopolies. But these rules, being prohibitive in character, proved insufficient to eliminate the protection afforded by the Member States to domestic enterprises by preferential procurement practices. For this, positive regulation through secondary legislation which harmonized the procurement laws of Member States appeared to be needed.First generation of secondary legislation: Supply and Works Directives
The European Communities Council of Ministers adopted General Programmes in 1962 which envisaged the abolition of national quotas and restrictions in public procurement. Directive 66/683/EEC prohibited rules requiring the use of national products or prohibiting the use of foreign products in public procurement, and Directive 70/32 applied the same rule to public supply contracts.The procedures for awarding public supply contracts were co-ordinated with Directive 77/62/EEC, which introduced three fundamental principles: contracts had to be advertised community-wide, discriminatory technical specifications were prohibited, and tendering and award procedures had to be based on objective criteria. The terms "open procedure" and "restricted procedure" appeared in this directive. However, it did not apply to public utilities, or to products originating outside the EC, until its amendment by Directive 80/767 following Community approval of the 1979 General Agreement on Tariffs and Trade Agreement on Government Procurement.
Similar principles of transparency and non-discrimination were applied to the awarding of public works contracts with Directive 71/305, taking the form of the "prohibition of technical specifications that have a discriminatory effect", a requirement for "adequate advertising" and "the fixing of objective criteria for participation"; these, however, did not replace national tendering procedures and practices with a set of common rules.
Second generation of secondary legislation and the first Utilities Directive
The European Commission's 1985 White Paper for the Completion of the Internal Market identified Member States' public procurement policy and practice as a significant non-tariff barrier to the free circulation of goods and provision of services in Europe because it tended to favour national providers, thereby sheltering markets from competition and distorting trade patterns. The paper and the Single European Act of 1986 which it led to are the conceptual foundation of current EU procurement law.On this basis, Directive 88/295/EEC amended all previous public supplies directives. Open tendering procedures were now the norm and negotiated contracts agreed with suppliers chosen by the authority concerned were allowed only in exceptional circumstances. Purchasing authorities now had to publish advance notices of their annual procurement programmes as well as details of each award decision. National technical standards now had to be mutually recognised, and the exempted sectors were more clearly defined.
Directive 89/440 likewise amended the previous public works directives. Their scope of application was widened, now also covering concession contracts and certain state-subsidized works, and consortial participation in contracts was allowed.
The most important change was the adoption of the first Utilities Directive, Directive 90/531, on 17 September 1990. Public utilities – the energy, telecommunications, transport and water sectors – had so far escaped European procurement law harmonisation because of the strongly divergent national legal regimes governing them, and possibly also because their large purchasing volume constituted an instrument of national industrial policy that governments were reluctant to give up. The removal of market access barriers in this sector was largely enabled by the concurrent liberalisation of the European telecommunications industry and by the envisaged global liberalisation of public procurement in the Uruguay Round of GATT negotiations. The first Utilities Directive, which included a requirement for national transposition by 1 July 1992, generally followed the approach of the Supply and Works directives, but provided for the exemption of several sectors such as broadcasting, or for utilities operating under competitive conditions.
Moreover, with the first Remedies Directives, 89/665/EEC and 92/13/EEC, Member States were required to ensure rapid and effective review of decisions made by contracting authorities. The directives also introduced the "attestation procedure" as a way for contracting authorities to certify the compliance of their purchase procedures and practices with procurement law.
Third generation of secondary legislation: Services Directive and closer alignment
Following the official completion of the single market project in 1992, the attention of the European institutions shifted towards the service sector, in view of its ever-increasing macroeconomic importance. The Services Directive, 92/50, attempted to contribute to the liberalisation of public sector services by introducing a régime similar to that governing the procurement of goods, works and by public utilities. It also introduced a new award procedure, the Design Contest. But its scope excluded several specific services, as well as service concessions, which may have been due to certain national constitutional restrictions against the outsourcing of public services. It also distinguished between "priority" services, to which the whole range of procurement disciplines applied, and "non-priority" services, whose procurement was subject only to basic non-discrimination and publicity rules.On 14 June 1993, the older supplies and works directives and the directive on procurement in the water, energy, transport and telecommunications sectors were re-adopted as Directives 93/36/EEC, 93/37/EEC and 93/38/EEC respectively, with a degree of alignment between them. The aim was to make the legal framework more homogeneous, but the changes to the Works Directive included significant clarification and a special, mitigated régime for the award of concession contracts.
Fourth generation of secondary legislation: consolidation
In 2004, procurement legislation was consolidated following the principles of simplification and modernisation. The new legal framework was based on a clear-cut dichotomy between utilities and the rest of the public sector. While the procurement of the former remains governed by a new Utilities Directive, Directive 2004/17 "coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors", the other three directives were amalgamated into a single "Public Sector Directive", Directive 2004/18 "on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts", which now governs procurement by public authorities other than utilities. The 2004 directives, apart from simplifying and clarifying the existing law, introduce a new procurement procedure, the competitive dialogue, and allow the procurement of framework agreements. They were required to be transposed into national law by 31 January 2006.In 2007, the Remedies Directives were also updated by Directive 2007/66/EC, also called "the new remedies directive", which amended Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts.
Fifth generation: 2014 Directives
New Directives on Public Procurement, Utilities Procurement and Concessions were adopted by the European Council on 24 February 2014. The Member States were allowed until 18 April 2016 to transpose the new rules into their national laws. In the UK, the Public Contracts Regulations 2015 implementing the 2014 Directive on Procurement came into force on 26 February 2015. The Irish Office of Government Procurement undertook a public consultation process between 31 October and 12 December 2014 with a view to transposing the new Directives into Irish law by 17 April 2016.The 2014 Public Procurement Directive introduced an obligation to take into account accessibility criteria for disabled persons in the specification for any works, goods or services intended for use by the general public or by staff of the contracting authority, unless there was justification for not doing so, and allowed for consideration of third party labels as proof that goods and services met required social and environmental characteristics "linked to the subject-matter of the contract".
On 26 May 2016 the European Commission issued letters of formal notice to 21 member states who had failed to notify the Commission of their transposition of one or more of the three new directives into their national law by the due date. The commission's letter of formal notice was sent to Austria, Belgium, Bulgaria, Croatia, the Czech Republic, Cyprus, Estonia, Ireland, Greece, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovenia, Finland, Spain and Sweden.