Session International standards for planning and conducting procurement

Session “International standards for planning and conducting procurement process” Contracting entities and contracts covered – coverage issues according to international standards Johannes S. Schnitzer EBRD-Consultant, WOLF THEISS Kiev, 1 -2 March 2012 1/3/2012 1

Agenda § Which Entity is Covered? § Which Contract is Covered? § Exceptions and limits § Financial Thresholds and Valuation of Contracts 1/3/2012 2

state Public-Sector Administration Private-Sector Administration Procurement Planning Request to participate t Transmission of tender documents Evaluation of eligibility company Bid submission company Company Bid opening Transmission of tender documents Bid submission Evaluation of eligibility Bid evaluation Request to submit bid company Award decision company market Bid evaluation Award decision Notification about award decision Stand-still period Contract award Open procedure 1/3/2012 Two-stage tender procedure rac on t ic C One-stage tender proceudre l Pub Tender Notice Restricted / negotiateded procedure (with prior publication) 3

Steps Is the procuring entity covered? Is the contract a works, supply or service contract? Is the contract excluded? Are there other limits? Is the contract above threshold? 1/3/2012 4

Covered Entity? (1) § EU Public Procurement Directives (EU-PPD) § Contracting Authority (CA) § The state § Local and Regional Authorities; § “Bodies governed by public law” § Utilities § Bodies engaged in the sectors of water; transport; energy; and postal services § CA § “Public undertakings” § Private companies operating on the basis of a “special or exclusive right” 1/3/2012 5

Covered Entity (2) § WTO Government Procurement Agreement (GPA) § Positive, negative, discpriptional approach § Central-Government Entities (Annex 1) § Sub-Central Government Entities (Annex 2) § Other Entities (Annex 3) § (General Notes) § UNCITRAL Model Law on Public Procurement (UNCITRAL-LAW) § „Any governmental, department, agency, organ or other unit, or any subdivision or multiplicity thereof, that engages in procurement, except…“ § „Any department, agency, organ or other unit, or any subdivision or multiplicity thereof, or the [Government] that engages in procurement, except…; “ 1/3/2012 6

Covered Entity (2) § Examples § (German) Public Broadcasting Company (ECJ, C-337/06) § (Austrian) Funeral Company (ECJ, C-373/00) § (Austrian) Printing Company providing support services for government services (ECJ, C-44/96) § (Italian) Trade promoting company (ECJ, C-233/99 and C 260/99) § (English) University (ECJ, C-380/98) § (Spanish) Prison company (construction and operation) (ECJ, C-283/00) § German statutory sickness insurance fund (ECJ, C-300/07) 1/3/2012 7

Covered Contract (1) § wrong classification: risk of legal challenge ! § Public contracts in writing for pecuniary interest which are (1) § Work contracts § E. g. : Construction of a hospital; renovation of a office building; design and construction of a sport stadium; construction of a waste-water disposal plant, etc § Annex 1 to EU-PPD (NACE code) http: //eurlex. europa. eu/Lex. Uri. Serv. do? uri=OJ: L: 2004: 134: 0114: 0240: EN: PDF § Supply contracts § E. g. : Purchase of software; purchase of office equipment; supply of energy; purchase of pharmaceuticals; lease of cars § CPV-Codes http: //eurlex. europa. eu/Lex. Uri. Serv. do? uri=OJ: L: 2008: 074: 0001: 0375: EN: PDF 1/3/2012 8

Covered Contract (2) § Public contracts in writing for pecuniary interest which are (2) § Service contracts § E. g. : Architect and engineering services; cleaning services; marketing and PR services; legal services § Annex 2 a and 2 b to EU-PPD http: //eurlex. europa. eu/Lex. Uri. Serv. do? uri=OJ: L: 2004: 134: 0114: 0240: EN: PDF § UNCITRAL-LAW § Applies to all public procurement acquisition of goods, conduction or services by a procuring entity § GPA § Applies to any procurement by any contractual means 1/3/2012 9

Covered Contract (3) § Mixed Contracts (1) § Contain work, supplies and/or services in a single contract § E. g. Purchase of vehicles and their maintenance § Classification of either works, supply or service contract ! § Boundary between supplies and services: § Main-Value test: which value is higher (supplies or services) ? § Boundary between works and services § Main-object test: what is the principal object of the contract ? § Boundary between works and supply § Predominant-purpose test 1/3/2012 10

Covered Contract (4) § Mixed Contracts (2) § Boundary between works and supply contract § Tunnel radio system – case law Austria § The renewal of a tunnel radio system is – despite the scope of supply – classified as a works contract § Works serve the functionality of the building § Equipment for waste-water treatment plant– case law Austria § Equipment (electrical distributor, electrical installation, process control system) and installation of equipment classified as works contract § fixed connection with the plant 1/3/2012 11

Covered Contract (5) § Mixed Contracts (3) § Boundary between works and service contract § Fire alarm system – case law Austria § Service contractor was not only responsible for the renewal of the fire alarm system but also for the maintenance for an unlimited period (value of service part prevailed) § landfill remediation – case law Austria Service contract transport, waste disposal, waste recycling was main objective of the contract (not excavation works, digging activities, etc) 1/3/2012 12

Covered Contract (6) § Mixed Contracts (4) § Boundary between supplies and service contract § Data processing system – ECJ case law § Supply contract if value of supplies is higher than value of „immaterial services“ 1/3/2012 13

Covered Contract (7) § Mixed Contracts (5) § Boundary between priority and non-priority services § Differentiation via main value test! § Principal purpose of the service package is irrelevant § Value is decisive (ECJ, C-76/97 Tögel; ECJ, C 411/00 Felix Swoboda) § Prevailing of the priority part means the entire order is treated as a priority service § Prevailing of the non-priority part on the contrary means the entire order is treated as a priority service 1/3/2012 14

Covered Contract (8) § Mixed Contracts (6) § Further Examples – case law Austria § Design, financing, construction and operation of a lorry toll § main purpose of the contract was not the construction of the toll system but rather its operation § supply of goods was also not subject matter of contract since the service provider (responsible for the operation of the system) had to use the technical equipment in order to operate the system § = service contract since contract‘s main purpose is toll collection 1/3/2012 15

Exemptions (1) § Contracts for defense purposes and contracts affected by security considerations § GPA excludes defense procurement § EU Defense Procurement Directive § Certain International Contracts § Joint projects with, for instance, United Nations § International agreements on the stationing of troops § Broadcasting services § E. g. purchase of advertisements by BBC § Central bank services § Contracts for the acquisition of land 1/3/2012 16

Exemptions (2) § Service Concessions § = service contract under which provider is remunerated by exploiting the service provided § provider has the right to exploit for payment of its own service § provider assumes the economic risk arising from the provision and management of the service § E. g. private firm operates a transport service and obtains payment by passengers § ECJ, C-324/98 Teleaustria § transparency obligation: “degree of advertising sufficient to enable the service concession to be opened up to competition” 1/3/2012 17

Exemptions (2) § In-House Procurement (1) § Contracts performed with contracting authority's own internal resources are excluded market state Public contracting entity CO NT ES AC SEN TIV TIA ITI L ES RO L Provider private sector 1/3/2012 18

Exemptions (3) § In-House Procurement (2) § Two criteria (“Teckal conditions”) 1. the procuring entity exercises over that person a control similar to that which its exercises over its own departments; and § No control if § Any of suppliers capital is owned by private entities (ECJ, C-26/03 Stadt Halle) § Some or all of its capital will be sold to private entities in short time (ECJ, C-29/04 Stadt Mödling) § Supplier enjoys management independence (ECG, C 458/03 Paking Prixen) 2. that person “carries out the essential part oft its activities with the procuring entity ” § 1/3/2012 In-house-company is mainly active for procuring entity (ECJ, C-295/05 Asemfo) 19

Exemptions (4) § In-House Procurement (3) § ECJ, C-573 Sea Srl § Italian local authorities awarded waste disposal contracts to the company “Setco” (which they jointly owned) § the public shareholders collectively exercised decisive influence over Setco’s strategic objectives and decisions § Award to Setco with waste disposal services was exempted from public procurement law 1/3/2012 20

Other limits § Only one possible provider § if only one firm is authorized by law to provide a particular service § ECJ, C-220/06: the provision of certain postal services (by the Spanish government) was entrusted exclusively to one company § competition law (nowadays) might prohibit that states my reserve certain rights to one provider 1/3/2012 21

Financial Thresholds and Valuation of Contracts (1) § Applicability of rules only to contracts above certain financial values (thresholds) § EU-PPD seek to identify contracts for which there is likely to be cross-boarder competition Above Threshold „classical“ CA Zentral CA Utilities EUR 200. 000 130. 000 400. 000 § GPA depends on each GPA-party and “Annex-entity” (e. g. Armenia see below) Country Annex 1 Annex 2 Annex 3 Goods SDZ 1/3/2012 Services Works Goods Services Works 130, 000 5 m 200, 000 5 m 400, 000 5 m 22

Financial Thresholds and Valuation of Contracts (2) § Estimated value net § § E. g. past experience § § total amount payable External expert opinion (if necessary) Time at which CA commences the procedure § § Obligation to take account of the highest possible value § including options (EU-PPD) § § normally, time at which contract notice is send off all forms of remuneration, including, inter alia, feeds, commissions, etc (GPA) Aggregation rules § prohibition of “contract splitting” to avoid thresholds § EU’s aggregation rules are quite complex not replicated under GPA and UNCITRAL-Law 1/3/2012 23

Contact Johannes S. Schnitzer, Dr. iur, LL. M. Tel: + 43 / 1 / 51510 – 2350 Fax: +43 / 1 / 51510 – 665355 E-Mail: johannes. schnitzer@wolftheiss. com WOLF THEISS Attorneys-at-Law Schubertring 6 1010 Vienna Austria 1/3/2012 24