1. Anticorruption Provisions in the New Public Procurement Directives
BUDAPEST
Bogdan STEFAN
Directorate General Internal Market, Industry, Entrepreneurship and SMEs
Directorate G – Single Market for Public Administrations

2. Introduction/structure
“Snapshot” of public procurement in Europe
Importance of public procurement for the internal market
The new public procurement rules - a stronger anti-corruption focus
Taking forward integrity policy in PP
Background
From the outset – tackling corruption is not an objective per se of the There are no specific anticorruption rules linked to procurement at local level
The last anti-corruption report showed that there are no corruption free zones in Europe
corruption harms all member states and the EU as a whole, lowering investment levels, hampering the fair operation of the internal market and reducing public finances
corruption costs Europe around €120 billion each year. That amounts to about 1% of EU GDP and represents only a little less than the annual budget of the European Union.
according to the Eurobarometer attached to the report, a vast majority (76%) of Europeans think that corruption is widespread in their own country. Also, more than half of Europeans (56%) think the level of corruption in their country has increased over the past three years
PP has a special coverage in the AC report. It is one of the areas most vulnerable to corruption. We must face a reality where a lot of companies still make good business out of corrupt contracts in many parts of Europe. Given that the corruption risk level in the public procurement process is rather high, anti-corruption and anti-fraud safeguards in public procurement should be a matter of priority for both EU Member States and EU institutions
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3. A “Snapshot” of public procurement in Europe Indicators used – Single Market Scoreboard Overall performance is a weighted average of all the performance indicators “Performance” measures whether purchasers get good value for money. Corruption, the administrative burden and professionalism are not part of the assessment. Although the Scoreboard provides very useful information, it gives only a partial view of EU countries' public procurement performance. WEBSITE:
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4. “Snapshot” of public procurement in Europe
Public procurement performance in Europe
Single Market Scoreboard 2016
“Snapshot” of public procurement in Europe
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5. B1. Public Procurement is of crucial importance for the Internal Market
Every year public authorities in the EU spend around 14% of EU GDP (~€2 trillion) on works, goods and services
The estimated value of tenders published in TED is ~ 3.0 % of EU GDP (~€450 billion in 2015; including utilities and defence)
One of the main tools for MS to achieve their policy objectives
"hot spot" for corruption exposed to significant integrity risks
Strategic field covered by extensive EU legislation
Thresholds : EUR works, EUR most supplies and services supplies - central
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6. B2. Public Procurement is covered by extensive legislation
Classic Public Procurement and Utilities (water, postal, energy, transport) Directives + new Concessions Directive which are under various degrees of transposition among the MS (deadline elapsed in April 2016)
Remedies Directives for classic and utilities procurement allowing judicial oversight of the procurement process
Defence procurement Directive to regulate procurement in very sensitive sector.
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7. B3. Public Procurement is a "Hot spot" for corruption
High level of financial interests at stake, in various sectors (e.g. energy and transport infrastructure, construction, defence).
The costs of corruption are difficult to quantify. However, it is a fact that corruption in PP impedes on the sound management of public money, competition and undermines the trust of citizens in democratic institutions
Public procurement is an area prone to corrupt practices. According to 2008 research on public procurement and corruption, the costs added to a contract as a result of corrupt practices may
amount to between 20 % to 25 %, and in some cases even 50 % of the total cost of the contract
A 2013 study on identifying and reducing corruption in public procurement in the EU concluded that in 2010 the overall direct costs of corruption in public procurement for only five sectors (i.e. road and rail; water and waste; urban/utility construction; training; research and development) in eight Member States ranged from EUR 1.4 billion up to EUR 2.2 billion.
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8. C1. Public Procurement rules fight corruption by enhancing Transparency
Rules for public procurement are in place to guarantee transparent and non-discriminatory procedures
Contracting entities play a key role in ensuring transparency of the procedure.
Transparency is the worst enemy of corruption, if followed in their letter and spirit, public procurement rules can prevent corruption and malpractices.
Transparency would help them getting the best value for money and remain the master of the process by applying the "fair" rules of the game, set by the PP directives such as the prior publication of tenders, the use of Clear and unbiased technical specifications, applying Equal treatment of bidders in all stages of the process, Objective evaluation of tenders according to an appropriate methodology, unbiased award criteria and avoidance of conflicts of interests, Conclusion of contracts as tendered, Execution of the contracts as concluded
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9. C2. Public Procurement rules fight corruption by enhancing Transparency
Novelties introduced by the new directives, directly enhancing transparency :
E-procurement is generalised and becomes mandatory – notification, access, submission (by October 2018)
Separate legal framework for concession contracts enhances transparency in this field
Introduction of a standard form self-declaration for bidders, the "European Single Procurement Document"- it more difficult to exclude tenderers in the selection phase [ESPD: Art. 59]
Copies of 10 Mio EUR works + 1 Mio EUR supplies and services contracts must be made available on request; exceptions allowed only in the case of commercially sensitive information [Art. 83(6)]
As for the new directives, there are novelties, measures directly enhancing transparency and tackling corruption:
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10. C3. Public Procurement rules fight corruption by enhancing Transparency
5. The scope of the public procurement directives is extended to the post-award phase (particularly vulnerable to corruption; the modification of contracts during their term without a new tender procedure is now regulated [Art. 72]
6. Guidance for contracting authorities by Member States and administrative exchange of information e.g. on exclusion grounds are mandatory.
7. Ensuring a level playing field by preliminary market consultations: participation of a previously consulted company must not affect competition; any information must be shared with all bidders [Art. 40, 41]
Since the post-award period is particularly vulnerable to corruption, the rules for modifying contracts during their term have been clarified and simplified to remove any doubt in this regard. In particular a new call for tenders will not be required for any modifications where the modifications have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses and changes that are not substantive, i.e. do not change the nature or the economic balance of the contract.
Preliminary market consultations for the preparation of calls for tenders - public purchasers must ensure that the participation of a previously consulted company does not affect competition within the tender procedure and that any information shared with a company as a result of its prior involvement must be sent to the other participating companies as well.
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11. C4. Public Procurement rules fight corruption by enhancing Transparency
The new Directives have a stronger anti-corruption purpose by introducing the following provisions:
1. Stronger exclusion grounds, extended to situations where bidders [Art. 57(4)]
have entered into agreements aimed at distorting competition
have tried to influence or mislead the contracting authority
have tried to obtain confidential information.
where a conflict of interest cannot be effectively remedied by other less intrusive measures;
2. The notion of "conflicts of interests" is for the first time defined at EU level [Art. 24]
3. The obligation for the Member States and contracting authorities to take appropriate measures to effectively prevent, identify and remedy conflicts of interests
4. Member States must monitor and report on measures to prevent and detect procurement fraud, corruption and conflicts of interest and other serious irregularities [Art. 83]
• MS should be aware that, for the first time, under the 2014 PP rules (article 24 of the classical directive, article 42 of the Utilities Directive and article 35 of the Concessions Directive) contracting authorities are under a strict mandate to detect, investigate and effectively tackle conflicts of interest.
Notion of "conflicts of interest" defined at EU level in the new Directives covering at least:
"any situation where staff members of the contracting authority or of a procurement service provider acting on behalf of the contracting authority who are involved in the conduct of the procurement procedure or may influence the outcome of that procedure have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure". [Art. 24]
• MS have an obligation of result to take appropriate measures and put in place systems capable to deliver on the ground in terms of detecting, preventing and redressing the conflicts of interests.
• National authorities should be aware that they will need to carry out a thorough review of their processes and procedures and ensure that all arrangements are made in practice to be compliant with the Directives, once transposed.
• The wording of the directive is not prescriptive in relation to the measures and mechanisms to achieve these objectives. It is within the margin of appreciation of the MS to identify the most appropriate solutions, as allowed by the national jurisdictions.
• The Commission could assist MS in identifying and disseminating the best practices existing in the MS. This would facilitate their mission to identify the optimal legislative and institutional model, adapted to their national contexts.
• PP Directives identify two possible situations where CoI may arise: 1) linked to the the conduct of procurement officers within the contracting authorities and 2) to the involvement of external actors in the conduct of the procurement procedure (i.e. where economic operators participated in the drafting the technical specifications). Therefore, MS should be aware of the situations where consultants acting on behalf of contracting authorities are prone to affect the result of the procedure.
MS should be informed that the provisions on the CoI are complemented by the new ground for exclusion of economic operators in CoI.
The new definition will make it easier to identify and manage such cases and Member States and contracting authorities are asked to take appropriate measures to effectively prevent, identify and remedy such cases.
The widespread practice that public purchasers undertake preliminary market consultations for the preparation of calls for tenders can lead to situations that favour the companies involved. Therefore, in future public purchasers must ensure that the participation of a previously consulted company does not affect competition within the tender procedure and that any information shared with a company as a result of its prior involvement must be sent to the other participating companies as well.
Member States are required to report violations of rules to the competent national authorities, make the results of their monitoring activities public and submit a report to the Commission every 3 years on the most common sources of misapplication or legal uncertainty. Public purchasers must also keep copies of contracts of higher value for their entire duration and available to the public. Moreover any public procurement award procedure must be covered by a specific report by the public purchaser explaining the main decisions relating to the procedure concerned, report any conflict of interests detected and steps taken in this regard and be forwarded to the Commission/national authorities if they so request.
MS are required to report violations of rules to national authorities, make the results of their monitoring activities public and submit a report to the Commission every 3 years on the most common sources of misapplication or legal uncertainty, possible structural or recurring problems as well as prevention, detection and adequate reporting of cases of procurement fraud, corruption, conflict of interest and other serious irregularities.
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12. D 1. Taking forward integrity policy in PP: Public procurement package Adopted 3 October 2017
1) a Communication on Public Procurement - Commission's strategy for improving PP 2) a Communication on a voluntary ex-ante mechanism for large infrastructure projects (SMS) 3) a Recommendation on professionalisation of public procurement to Member States 4) a draft guidance document on procurement of innovation – launch of targeted consultation
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13. Communication: Making public procurement work in and for Europe
PP is 14% GDP: a strategic area
A partnership to improve the PP in practice
The Commission is ready to play its part
6 Priority areas :
1. Boost strategic procurement (green, social, innovative)
2. Professionalise public buyers
3. Increase access to procurement markets (e.g. SMEs)
4. Improve transparency, integrity, data
5. Boost the digital transformation of PP
6. Cooperate to procure together
PP is a strategic area for policy makers.
not just an administrative process, but an opportunity to deliver value for public money (14% of GDP!).
A partnership to improve the PP in practice. Beyond 2014 legal reform, improvement needs smart implementation of the new rules.
The Commission is ready to play its part. We will develop a range of support tools, (guidelines, best practices) for authorities.
6 PRIORITIES :
1. Wider uptake of strategic procurement
55% of tenders use lowest price only
Boost green, social and innovative procurement through guidance and best practices
Support for strategic sectors (IT, health, construction)
2. Professionalising public buyers
Encourage Member States to develop professionalisation strategies
Ensure buyers have the needed skills and competences
Provide necessary tools and support
3. Increase access to procurement markets
SMEs win only 45% of contracts
Make PP more atttractive for companies, also Xborder
Open international procurement markets (IPI!)
4. Improving transparency, integrity, data
Enable reporting of corruption
protecting whistleblowers against retaliation
More and better data, setting-up contract registers
5. Boosting the digital transformation of PP
Legal obligation in October 2018, but real benefits if all steps of PP process are digitalised
Roll-out of eProcurement is slow
Continue to provide technical & financial support to MS
6. Cooperating to procure together
Only 11% of procedures through cooperative PP
More cooperation leads to better outcomes
Joint procurement by multiple MS facilitated
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14. Thank you for your attention
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Contact:
Bogdan.
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