The European Union is updating the rules concerning procurement procedures in the water, energy, transport and postal services sectors. This revision is based on the fundamental principles of the internal market and basically strives for simplification, harmonisation and modernisation. It promotes the development of electronic procedures. Recourse to social and environmental criteria is authorised for the selection of economic operators and is based on Court of Justice case law.

The European Union is updating and simplifying the legislation on public procurement procedures. Applicable in a Union of 25 Member States, this revision merges the four existing European directives into two legal instruments:

- The so-called "traditional" Directive 2004/18/EC for public works contracts, public supply contracts and public service contracts;
- Directive 2004/17/EC on the "special sectors" of water, energy, transport and postal services.


Contracting entities

The "special sectors" directive applies to:

- all contracting authorities or public undertakings which pursue activities in one of the following fields: gas, electricity, water, transport services, postal services, the extraction of fuels, or the provision of ports or airports;
- all contracting entities which, when they are neither contracting authorities nor public undertakings, pursue one (or more) of the above activities and enjoy special or exclusive rights granted by a competent authority of a Member State.

Non-exhaustive lists of contracting entities are given in the Annexes. Member States must notify the Commission of any changes.

Activities concerned

The directive applies to the following activities:

- the provision or operation of fixed networks intended to provide a service to the public in connection with the production, transport or distribution of gas, heat or electricity, or the supply of gas, heat or electricity to such networks;
- the provision or operation of fixed networks intended to provide a service to the public in connection with the production, transport or distribution of water, or the supply of water to such networks;
where the contracting entity is active in the drinking water sector, contracts or design contests connected with irrigation, land drainage or hydraulic engineering projects, or contracts connected with the disposal or treatment of sewage;
- the provision or operation of networks providing a service to the public in the field of transport by railway, automated systems, tramway, trolley bus, bus or cable.

Bus transport services are excluded from the scope of the directive where other entities are free to provide those services, either in general or in a particular geographical area, under the same condition as the contracting entities;
- the provision of postal services. These services cover: postal services which are reserved under the terms of Directive 97/67/EC, as well as those which may not be reserved under Directive 97/67/EC; all of the following services are also covered, on condition that such services are provided by an entity which also provides postal services and that the market is not yet open to competition: mail management services (e.g. mailroom management services), added-value services linked to and provided entirely by electronic means (e.g. the secure transmission of coded documents, address management services), direct mail bearing no address, financial services (e.g. postal money orders and postal giro transfers), philatelic services and logistics services;
- the exploitation of a geographical area for the purpose of 1) exploring for or extracting oil, gas, coal or other solid fuels, or 2) the provision of airports and maritime or inland ports or other terminal facilities to carriers by air, sea or inland waterway.
Contracts awarded in the sectors in question are no longer subject to the Directive if effective competition exists. Since 30 April 2004, Member States have had the possibility of asking the Commission to adopt a decision testifying to the existence of effective competition in a Member State for a given sector in accordance with a specific procedure. This procedure is based on the characteristics of the goods and services under consideration, the existence of alternatives, prices and the presence of several competitors. On its own initiative or at the request of the national contracting entities, when the national transposition of the directive allows them to do so, the Commission may adopt a decision testifying to the existence of effective competition in a Member State and for a given sector. If no decision is made within the deadline set, the exclusion becomes applicable.

Revised thresholds

The directive applies to contracts that have a value excluding VAT estimated to be no less than the following thresholds:

- EUR 422 000 in the case of supply and service contracts;
- EUR 5 278 000 in the case of works contracts.
The Commission verifies the thresholds every two years. The calculation of their value is based on the average daily value of the euro, expressed in special drawing rights (SDR), over the 24 months ending on 31 August for the revision with effect from 1 January.

For those Member States that have not adopted the single currency, the European Commission publishes the values in national currencies of the applicable thresholds in the Official Journal. In principle, these values are revised every two years from 1 January 2004.

Certain contracts are excluded or reserved

The scope of the directive excludes:

- works and service concessions in the sectors of activity concerned;
- contracts awarded for purposes of resale, lease to third parties, for purposes other than the pursuit of an activity in the sectors concerned or for the pursuit of such an activity in a third country.
The Commission may publish in the Official Journal the list of the categories of products and activities excluded;
- contracts which are secret and require special security measures or are awarded pursuant to international rules;
- certain contracts awarded by a contracting entity to an affiliated undertaking or awarded by a joint venture formed exclusively by a number of contracting entities for the purpose of carrying out the activities concerned.

By definition, an affiliated undertaking has annual accounts which are consolidated with those of the contracting entity or is subject to a dominant influence by virtue of ownership, financial participation, or the rules which govern it.

Contracting entities must notify the Commission of the names of the undertakings or (joint) ventures concerned and the nature and volume of the contracts involved;
- service contracts awarded on the basis of an exclusive right;
- service contracts for the acquisition or rental of land, existing buildings or other immovable property or concerning rights thereon (excluding financial service contracts concluded at the same time as, before or after the contract of acquisition or rental); arbitration and conciliation services; financial services in connection with the issue, sale, purchase or transfer of financial instruments (such as transactions to raise money or capital); employment contracts; and research and development (RTD) services wholly remunerated by the contracting entity;
- contracts awarded by certain contracting entities for the purchase of water and for the supply of energy or of fuels for the production of energy;
- certain contracts subject to special arrangements in Germany, Austria, the Netherlands and the United Kingdom and in the field of the exploration or extraction of oil, gas, coal and other solid fuels.
Member States may reserve certain public contracts to sheltered workshops or provide for such contracts to be performed in the context of sheltered employment programmes where most of the employees concerned are handicapped persons.


Contract award criteria

The criteria used by the contracting entities are:

- either the lowest price only;
- or, where the contract is awarded to the most economically advantageous tender, various criteria linked to the subject-matter of the contract in question, such as: quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost-effectiveness, after-sales service and technical assistance, delivery date, and completion date.
The contracting entity should specify the relative weighting it gives to each of the criteria.
Rules on publication and transparency

Throughout the procedure, public contracts whose value exceeds the thresholds in the Directive are subject to obligations regarding information and transparency. This takes the form of publishing information notices drawn up in accordance with standard Commission forms. There are several types:

- the notice of the publication of a periodic indicative notice (not compulsory);
- the periodic indicative notice for supplies and services contracts in excess of EUR 750 000 and for works contracts of more than EUR 6 242 000. The contracting entity publishes this notice on its buyer profile itself (after having sent the notice of the publication of a periodic indicative notice) or sends it to the Office for Official Publications of the European Communities (Publications Office).

This publication is compulsory when the contracting entity wishes to reduce the time limits for the receipt of tenders or when the notice is used as a means of calling for competition;
- the contract notice or notice of a design contest (compulsory).

The contracting entity may publish this notice itself nationally and should send it to the Publications Office. Publication by the Publications Office is free. The notice is published in full in an official language of the Community, and a summary is translated into the other languages;
- the contract award notice and notice of the results of a design contest (compulsory).
- the notice on the existence of a qualification system.

The notices sent by the contracting entities to the Commission can be transmitted by traditional or electronic means. Standard forms and details on transmission procedures are accessible on the information system for public procurement (SIMAP)

The contracting entity shall provide information on the decisions reached concerning the award of a contract, including grounds for not awarding it. For all contracts, it must be able to justify its decisions and should keep all the appropriate information for at least four years. It shall, as soon as possible, inform:

- any unsuccessful candidate of the reasons for rejecting his/her application;
- any tenderer who has made an admissible tender of the relative advantages of the tender selected, as well as the name of the economic operator chosen.

The exchange and storage of information involving the various parties to the contract ensure the integrity of the data and confidentiality. The contracting entity only examines the content of the tenders after the time limit set for submitting them has expired. Use of electronic means is non-discriminatory and helps to speed up the procedures. Devices for the electronic receipt of tenders permit the use of electronic signatures, guarantee the authenticity, integrity and confidentiality of the data and are capable of detecting possible fraud.

Technical specifications

The technical specifications define the characteristics required of a material, supply or service such that they fulfil the use for which they are intended. They are out in the contract documentation (contract notices, contract documents or additional documents) without creating unjustified obstacles to competition. These characteristics include environmental performance, design, conformity assessment, performance, safety, dimensions, quality assurance, and production methods. For public works contracts, they also cover test, inspection and acceptance conditions, as well as construction techniques.

When drawing up its technical specifications, a contracting entity refers to national standards transposing European standards, European technical approvals, and international standards. It can also determine performance and functional requirements, particularly in the environmental domain (e.g. European eco-labels). The tender is valid if it manages to prove that it meets the requirements defined by the technical specifications in an equivalent fashion. An appropriate means may be constituted by the submission of a technical dossier or a test report from a recognised body (laboratory, certification and inspection body).

In principle, technical specifications do not mention a specific make or process nor do they refer to trade marks, patents or a specific production.

Combating fraud and corruption

European public procurement legislation imposes strict conditions regarding participation in public procurement. These conditions aim to check the suitability of economic operators tendering for contracts on the basis of criteria relating to their economic and financial capacity, and their technical and professional knowledge or abilities.

The conditions for participation also aim to effectively combat fraud and corruption, systematically excluding from public procurement contracts any economic operators who have been found guilty of participating in a criminal organisation or of corruption, fraud or money laundering. A contracting authority may ask tenderers for any document testifying to their professional conduct and/or economic situation. To obtain this information, it may turn to the competent national authorities or those of another Member State. It should be noted that the application of these exclusion clauses is only compulsory for contracting authorities. For other contracting entities (public enterprises and private enterprises with a special or exclusive right), these clauses are optional.

Any economic operator may be excluded from participation in a public contract where that economic operator:

- is bankrupt (or the subject of proceedings for a declaration of bankruptcy), is being wound up, has suspended business activities or his/her affairs are being administered by the court;
- has been convicted of any offence concerning his/her professional conduct;
- has been guilty of grave professional misconduct (e.g. misrepresentation);
- has not paid social security contributions or taxes.

Traditional and electronic means of communication are on equal footing

With regard to the exchange of information, the new directive places traditional and electronic means of communication on equal footing. It leaves market operators free to choose which means of communication to use for the procedures. If electronic means are used, the contracting entity is able to reduce the time limits (but within irreducible margins):

The electronic transmission of notices used as a means of calling for competition (depending on the individual case, a contract notice, periodic indicative notice or notice on the existence of a qualification system) makes it possible to reduce by seven days the time limit for the receipt of tenders in open procedures. The same applies for the receipt of requests to participate in restricted and negotiated procedures;
On top of the previous reduction, time limits for the receipt of tenders in open, restricted and negotiated procedures may be further reduced by five days where the contract documents are available on the Internet.
A new purchasing technique has entered the scene: the dynamic purchasing system. It is exclusively based on electronic means of communication.

Electronic auctions

A contracting entity may hold an electronic auction to award a contract. This is valid for all types of contract, with the exception of certain works and service contracts having as their subject-matter intellectual performances (e.g. the design of works). The electronic auction shall be based:

- either on prices when the contract is awarded to the lowest price,
- or on prices and/or the values of the features of the tenders, when the contract is awarded to the most economically advantageous tender.

The specifications shall contain the following details:

- the quantifiable features (figures or percentages) whose values are the subject of the electronic auction and the minimum differences when bidding;
- the electronic auction process and the technical specifications for connection.

Before proceeding with the electronic auction, the contracting entity shall make a full initial evaluation of the tenders. All tenderers who have submitted admissible tenders shall be invited to take part simultaneously by electronic means. The invitation shall state the date and time of the start of the auction and, if appropriate, the number of phases. It shall also state the mathematical formula to be used to determine automatic rerankings, incorporating the weighting of all the award criteria. Throughout each phase, the participants shall know their relative rankings compared to the other participants, but without knowing their identity.

The electronic auction shall close either at a date and time fixed in advance, or when a certain amount of time has elapsed after receipt of the last submission, or when the number of phases in the auction has been completed.

Rejection of tenders that are abnormally low or contain products originating in third countries

A contracting entity may reject a tender if it:

- is abnormally low, particularly because the tenderer has obtained State aid which was granted illegally; it should, however, give the economic operator the opportunity to justify the constituent elements of its tender.
- contains products amounting to over 50 % of its value which originate in third countries with which the Community has not concluded multilateral or bilateral market access agreements for Community enterprises.

Member States shall inform the Commission of any general difficulties encountered by their enterprises in securing the award of service contracts in third countries. They may, for example, report the non-observance of international labour law provisions. The Commission shall, at the same time, draw up an annual report to the Council on negotiations with third countries regarding access for Community enterprises to the markets covered by this Directive in these countries. It may propose that the Council restrict (or suspend) access to service contracts in the European Union covered by this Directive to enterprises with links to these third countries.


There are different public procurement procedures: the open procedure, the restricted procedure, and the negotiated procedure with or without the publication of a public contract notice.

Contracting entities may award a contract without a prior call for competition under the following conditions:

- when no suitable tenders or applications have been submitted in response to a prior call for competition; where a contract is awarded purely for the purposes of RTD; when, for technical or artistic reasons, or for reasons connected with the protection of exclusive rights, the contract may be executed only by a particular economic operator; in cases of extreme urgency brought about by unforeseeable events; for contracts based on a framework agreement, when this has been concluded in accordance with the Directive;
- supply contracts: for additional deliveries where a change of supplier would oblige the contracting entity to acquire material having different technical characteristics; for supplies quoted and purchased on a commodity market; for bargain purchases or purchases of supplies under particularly advantageous conditions from an economic operator definitively winding up his business activities or in receivership;
- for additional works or services which were not included in the initial project and have become necessary through unforeseen circumstances;
- for new works consisting in the repetition of similar works;
- as part of a design contest.

The open procedure
In an open procedure, any interested economic operator may submit a tender.

The minimum time limit for the receipt of tenders is 52 days from the date on which the contract notice was published. If a periodic indicative notice has been published, this time limit can be cut, as a general rule, to 36 days. In no case may the time limit for the receipt of tenders be less than 22 days.

The restricted procedure
In the case of restricted procedures, any economic operator may request to participate and only candidates invited to do so may submit a tender.

The time limit for the receipt of requests to participate is, as a general rule, 37 days from the date of the notice (or the invitation to confirm interest, when the call for competition is made by means of a periodic notice). In no case may it be less than 22 days (or 15 days if the notice is transmitted electronically). The contracting entity then, simultaneously and in writing, invites the selected candidates to submit their tenders. The time limit for the receipt of tenders, which is the same for all applicants, can be set by mutual agreement between the contracting entity and the selected candidates. If no agreement is reached, the contracting entity fixes a time limit that is, as a general rule, at least 24 days - and never less than 10 days - from the date of the invitation to tender.

The negotiated procedure
In a negotiated procedure, the contracting entity consults the economic operators of its choice and negotiates the terms of the contract with them.

In negotiated procedures with the publication of a contract notice, the procedure and the minimum time limits for the receipt of requests to participate and for the receipt of tenders are identical to those for the restricted procedure.


The directive applies to design contests for service procurement procedures worth over EUR 499 000 or where the contest prizes and payments are in excess of this value (this threshold will be updated by a Commission Regulation which is to be adopted shortly).

A design contest may not be held for:

- contracts awarded for purposes other than the pursuit of an activity in the sectors concerned or for the pursuit of such an activity in a third country;
- contracts which are secret, require special security measures or are awarded pursuant to international rules;
- any activity which is exposed to competition.

The contracting entity publishes a contest notice drawn up in accordance with the rules for public procurement procedures. The exchange and storage of information ensures the integrity and the confidentiality of data. The contracting entity examines the projects only after the time limit set for submitting them has expired.

Admission to design contests may not be limited to the territory (or part of the territory) of a Member State or by the legal nature of the participants. The selection criteria are clear and non-discriminatory, ensuring genuine competition. The jury shall be composed exclusively of independent natural persons. Where a professional qualification is required of participants in a contest, at least a third of the jury members shall have this qualification. The jury is autonomous in its decisions and examines the plans on the basis of the selection criteria. Anonymity must be observed until the jury has reached its final decision.


In order to ensure that the Directive is implemented, the Member States may appoint or establish an independent body.

By 31 October of each year at the latest, Member States shall send the Commission a statistical report on contracts awarded which are subject to this directive.

The Advisory Committee for Public Contracts shall assist the European Commission.

This directive repeals Directive 93/38/EC coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors with effect from 31 January 2006.


Public procurement accounts for over 16% of the EU's GDP.

The EU action seeks to create a European area for public procurement in the context of the internal market. It is based on the fundamental principles enshrined in the Treaty establishing the European Community: equal treatment, a transparent and non-discriminatory call for competition, mutual recognition, the fight against fraud and corruption.

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