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14.07.2016 | KPMG Law Insights

Reforms in public procurement law and public price law

Dear Readers,

Reforms, reforms, and more reforms – no, this is not a summer trend, but a hard reality: Not only is public procurement law to be tackled, but public price law is also to be modernized.

If one gives the modernization effort and the envisaged measures a chance, one quickly notices some simplifications due to the new regulation. This applies both to the design of procurement procedures and to pricing, price calculation and determination in the course of drawing up procurement contracts. If these positive effects, which were intended and (partially) promised with the reforms, then also occur, this would probably be a blessing for every awarding authority or every procurement office.

For the friends of Union law among you, we have summarized the main findings recorded by the ECJ in its recently published decision on the application of the basic rules and general principles of the TFEU in public procurement. This concerns those contracts which – for example because of their low contract value – do not fall under EU procurement law, but in which there are cross-border interests. The ECJ draws clear boundaries for these contracts – in the underlying case a contract in the IT sector – which public contracting authorities must observe. Surely an exciting topic for you!

We wish you interesting reading!

Sincerely yours

Public Sector Team of KPMG Rechtsanwaltsgesellschaft mbH

Mathias Oberndörfer Dr. Anke Empting

Lawyer Attorney

EU state aid/procurement law

TFEU to be observed in contracts with cross-border interests

The basic rules and general principles of the TFEU must be observed in public contracts with a cross-border interest. Even if these contracts do not fall under EU procurement law because they do not exceed the threshold values. This is what the European Court of Justice recently ruled.

 

EU state aid/procurement law

Union law applicable even if thresholds are not reached

In its ruling of April 16, 2015, the ECJ found that public contracts – in this case the supply of computer systems and computer hardware – cannot be made bird’s-eye even if they are not covered by the EU Directive on the coordination of procedures for the award of public contracts.

Rather, according to the ECJ, the general principles of the TFEU, in particular equal treatment and non-discrimination as well as transparency, must be observed. This applies in any case if there is a clear cross-border interest in the public contracts in view of certain objective criteria.

Some key findings of the study:

  • Essential functions of public price law, such as consolidating market-based price formation, are not covered by public procurement law, EU state aid law or antitrust law.
  • Sovereign price law requirements including a neutral auditing authority as an external control body are justified.
  • Public pricing law does not violate EU state aid law, German constitutional law or European Union law. However, changes to the price law are recommended with regard to the basic regulatory structure and its linkage with public procurement law.
  • Price law (Regulation PR No. 30/53) is often not observed by public purchasers during the procurement process.
  • The price law is particularly relevant in practice in the case of unprofitable tenders (only one bid) and in the case of direct awards, especially in the field of research.

Middle class:

Potential for improvement lies primarily in the following areas:

Institutions of higher education and those research institutions that are classified as public contractors should be prepared to reform their pricing laws. The solutions proposed in the study commissioned by the German Federal Ministry for Economic Affairs and Energy promise to simplify the application of price law.

 

Public procurement modernization law passes federal cabinet

On July 08, 2015, the Federal Cabinet adopted the draft law on the modernization of public procurement law. The draft bill is the first step in a two-stage legislative and regulatory process.

As already outlined in our Issue 21 from May 2015, the reform centers on the amendment of Part 4 of the Act against Restraints of Competition (GWB). The aim of the reform is to modernize the legal framework for public procurement.

 

Simplification through European self-declaration

One of these simplification measures is considered to be the Uniform European Self-Declaration (EEE), which in the future is to pre-structure the suitability test in the award of public contracts in the upper threshold range. It is planned that the EEE will provisionally replace the proof of suitability with a self-declaration in the award procedure. After a transition period, the EEE is to be available only in electronic form.

The EEE shall include, among other things, an assurance by the bidder that there are no grounds for exclusion, and that the bidder meets the requirements of the contracting authority regarding suitability as far as the bidder’s ability to exercise the profession, economic and financial capacity, and technical and professional capability are concerned. Further, the EEE shall include a statement by the bidder that it meets the contracting agency’s objective and nondiscriminatory criteria for reducing participants in the competition.

In order to simplify the procedure, it is also necessary to provide the possibility for the tenderer to submit at any time the evidence by means of which he/she wishes to demonstrate the fulfillment of the selection criteria. The contracting authority only has to request this evidence from the company that is to be awarded the contract before the contract is awarded. However, the contracting authority shall be free to request the evidence from all bidders at any time if this is necessary for the execution of the procedure. Contracting authorities must accept the EEE if it is submitted by the company.

However, the fate of the European Self-Declaration is not yet sealed and still requires coordination with the EU member states.

 

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Contact

Mathias Oberndörfer

Geschäftsführer
Mitglied des Vorstands Service Tax - KPMG AG Wirt­schafts­prüfungs­gesell­schaft

Theodor-Heuss-Straße 5
70174 Stuttgart

tel: +49 711 781923410
moberndoerfer@kpmg-law.com

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