1. Bangor University – 30 March 2012 Antitrust, Competition and Economic Regulation The proposed new EU procurement directive: do the new rules enhance SMEs' ability to compete for public contracts? Ciara Kennedy-Loest Partner

2. www.hoganlovells.com Improving access for SME's - "lots" New rules on "lots" to help SME's Article 44 Public contracts may be subdivided into lots: –homogenous –heterogeneous For all procurements valued at €500,000 or more: –contracting authority must divide into lots or –give a specific explanation in OJEU notice why it hasn't "apply or explain" rule "No judicial control of the reasons put forward" 2

3. www.hoganlovells.com Improving access for SME's - "lots" Contracting authorities may: –limit the number of lots any one contractor may bid for; or –may limit the number one contractor may win provided: the maximum number is clearly specified and the objective and non-discriminatory criteria or rules for awarding the different lots are set out in advance No provision allowing contracting authorities to reserve/limit access to certain lots to SME's only Specific provision allowing the award of a "co-ordination lot" 3

4. www.hoganlovells.com Improving access for SME's - "lots" But what the Commission giveth……… Not so helpful for SMEs is Article 44(3) Contracting authorities may award: –one contract per lot –one or more contracts covering several lots Provided: –reserved right to do so and –identified which lots may be grouped together in a contract 4

5. www.hoganlovells.com Improving access for SME's - shortlisting New substantive and procedural rules on shortlisting Article 56 – selection criteria Contracting authorities shall limit any conditions for participation to: –those that are "appropriate"…. in addition to the requirement to be related and strictly proportionate to the subject-matter of the contract 5

6. www.hoganlovells.com Improving access for SME's - shortlisting Re: establishing adequate financial and economic capacity: –a minimum annual turnover requirement can be imposed –as can a minimum turnover in the area covered by the contract BUT : –this must not exceed 3 x the value of the contract –special rules re calculating values of lots and frameworks problematic? –absent "special risks attached to the nature of the works, supplies or services" Any such exceptional circumstances –must be listed in the procurement documents –eg particularly high security of supply 6

7. www.hoganlovells.com Improving access for SME's - shortlisting Excessive documentation required at shortlisting is a problem for contractors, particularly SME's Self-declarations (Article 57) and the European Procurement Passport (Article 59) –Are these the answer? Contracting authorities shall accept self-declarations as preliminary evidence that: –no grounds for exclusion apply –the selection criteria are met –any required documentary evidence can be produced quickly upon request 7

8. www.hoganlovells.com Improving access for SME's - shortlisting Before contract award –Contracting authority must request supporting documentary evidence from the putative winner identified –although there is the power to request earlier if necessary to ensure the proper conduct of the procedure Can't require re-submission of a certificate or other documentary evidence if: –it has already been submitted to the same contracting authority –within the past 4 years and –it is still valid Winning contractor may provide some of the evidence via a "European Procurement Passport" 8

9. www.hoganlovells.com Improving access for SMEs - shortlisting The European Procurement Passport –any contractor may request one from the competent authorities of its Member State if it fulfils the conditions The EPP will detail: –the contractor's name; –certification that it has not been convicted of a bribery or money laundering or terrorism offence (but not that it passes the other mandatory ground re payment of taxes and social security); –certification that it is not the subject of insolvency or winding up proceedings; –certification of enrolment in a professional or trade register prescribed in the Member State concerned; –where applicable, certification that the contractor possesses a particular authorisation or is a member of a particular organisation (where membership of that organisation is compulsory in order to conduct an activity in that Member State) –period of validity of passport (not less than 6 months) 9

10. www.hoganlovells.com Improving access for SMEs - shortlisting The key provision is Article 59(4): –"The European procurement passport shall be recognised by all contracting authorities as proof of fulfilment of the conditions for participation covered by it and shall not be questioned without justification. Such justification may be related to the fact that the passport was issued more than six months earlier." Member States are required to issue EPPs to any contractor who qualifies for one: –which UK body is going to take this on and how will it be funded? –will they charge for the issue of the EPP? Can be rejected if issued more than 6 months earlier –need new one on a regular basis? It may be up to six months out of date; –top-up information, especially for bribery, money laundering and terrorism offences might be required in any event? 10

11. www.hoganlovells.com Improving access for SME's – direct payments A71 allows for procurers to pay sub-contractors directly (if Member States choose to implement it): –"At the request of the sub-contractor and where the nature of the contract so allows, the Contracting Authority shall transfer due payments directly to the sub-contractor for services, supplies or works provided to the main contractor." Requirements: –arrangements for those payments must be stated in advance in procurement documents; and –main contractor must be able to object to "undue payments" 11

12. www.hoganlovells.com Improving access for SME's - experience Existing "Lianakis" debate about whether previous experience of team put forward to perform contract can be considered at the award stage Commission recognised this can be a key differentiator, especially in services contracts New award criterion for contracts involving services or the design of works: –"organisation, qualifications and experience of staff assigned to performing the contract" Helpful to SMEs – quality not quantity? NB – where those staff need to be replaced, the CA must consent and verify that replacements ensure equivalent organisation and quality" –potentially more problematic? 12

13. www.hoganlovells.com Improving access for SMEs – sub-contracting Can CAs prohibit sub-contracting? Commission considers CAs may have a –legitimate interest in having chosen contractor personally perform certain tasks So Article 62(2) provides that the CA can require: –"critical tasks" be performed by contractor itself –in case of works or services or supplies contracts involving siting and installation Helpful to SMEs? 13

14. www.hoganlovells.com But SME's (and others) won't like... Article 55(3)(d) –Contractor may be rejected at shortlisting stage where it has shown significant or persistent deficiencies in the performance of any substantive requirement under a previous contract or contracts of a similar nature with the same CA Procedural requirements: –CA must have objective, measurable way of assessing performance –must apply it systematically, consistently and transparently –must give contractor opportunity to object and obtain judicial protection 14

15. www.hoganlovells.com Conclusions Greater clarity New provisions But will it make much difference? 15