1 TOWARDS A CLEARER INTERACTION BETWEEN THE STATE AID RULES AND THE RULES ON PUBLIC PROCUREMENT Global Competition Law Centre, Bruges, 30 Sept 2011 Klaus Wiedner Internal Market & Services DG Head of Unit, Public Procurement Policy

2 Concomitant application of SA and PP rules State aid (SA) Rules and public procurement (PP) rules have a common basis: both sets of rules aim at ensuring fair competition in the internal market, but with a different finality: SA rules: aim at ensuring fair competition in order to avoid undue advantages to certain economic operators, which may distort competition PP rules: aim at ensuring fair competition in order to obtain best value for public money

3 Concomitant application of SA and PP rules When the establishment of an SGEI gives rise to the award of a public contract or a concession, public authorities must comply with both sets of rules. Public authorities expect more convergence between the SA and PP rules

4 Interaction between SA and PP rules Need to clarify the interaction between SA and PP rules (eg. as regards compliance with the 4th Altmark criterion, thresholds, etc) The reform o the « SGEI State aid package » and the reform of the EU public procurement perspective is the opportunity to improve the existing rules and to clarify their interaction

5 Public procurement and the Altmark judgment According to the Altmark judgment, if: - an SGEI is awarded as part of a public procurement procedure allowing the selection of the candidate able to provide these services at the least cost to the community, (1st leg of the 4th criterion) and -the other conditions of the Altmark judgment are complied with, the compensation awarded does not constitute SA

6 Public procurement and the Altmark judgment What does the Court understand by « allowing the least cost for the Community » ? In general, a PP procedure in line with EU requirements is regarded as allowing the « least cost for the community » However, there are number of scenarios where this assumption was called into question, depending on: (a) the nature of the award criteria (lowest price or MEAT) (b) the type of procedure (c) the extent to which the contract is covered by the PP Directives

7 Public procurement and the Altmark judgment (a)Which award criteria allow « the least cost for the Community » ? Lowest price v. /Most economically advantageous tender (MEAT) (eg. quality, environmental and social considerations) Reasons pleading for the acceptance also of MEAT

8 Public procurement and the Altmark judgment (b )Which procedures allow the « least cost for the community»? Ordinary procedures (open, restricted) v./Negotiated procedures with publication? Reasons pleading for the acceptance of all procedures with publication of a tender notice Negotiated procedure without publication of a tender notice: - unlikely to give rise to genuine competition, and therefore - not sufficient to satisfy the 4th Altmark criterion.

9 Public procurement and the Altmark judgment (c) Which type of tenders allow the “least cost for the community” ? -Public contracts fully covered by the PP directives v. Public contracts not or not fully covered by the PP Directives (eg. concessions) What SA rules for contracts out of the scope of the public procurement rules (e.g. in house contracts) ?

10 Non-compliance with the Altmark judgment What happens if the tender does not comply with the 1st leg of the 4th Altmark criterion ? - possibility to prove compliance with the 2 nd leg of the 4th Altmark criterion - if the 4th Altmark criterion is not met, than compensation is State aid - such State aid may be compatible, but on a different basis (not requiring the existence of a public procurement procedure: see the “General Block Exemption Decision” and the “Framework”). Therefore, no SA incentive to organize a public procurement compliant with EU PP rules

11 More flexible thresholds SSIEG: SA v./ PP rules SA rules: - proposal to introduce a specific SGEI de minimis threshold for compensation granted by small public authorities -proposal to enlarge the categories of social services which are exempted of notification, irrespective of the amount

12 More flexible thresholds PP rules: -Possible specific higher threshold for the application of the PP directives to social services of economic general interest (SSIEG) -presumption of no cross border interest below Directive’s thresholds

13 More flexible thresholds Even if thresholds may not be the same, given that: - SA rules are reasoning in terms of overall annual compensation for an undertaking, while - PP rules are reasoning in terms of value of a public contract, the idea is that both sets of rules go in the same direction to offer more flexibility and better take into account the specificities of SSIEG