March 30
2020
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18th March 2020
Covid-19 Internal Market

Analysis: “European Union public procurement during the coronavirus outbreak” by Piotr Bogdanowicz

In general, the award and performance of public contracts by or on behalf of Member States’ authorities has to comply with the principles of the Treaty on the Functioning of the European Union (TFEU), and in particular the free movement of goods, freedom of establishment and the freedom to provide services, as well as the principles deriving therefrom, such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency. However, in very exceptional circumstances, such as the need to face the coronavirus outbreak, these principles may be relaxed.

First of all, Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement allows contracting authorities to shorten certain deadlines applicable to open and restricted procedures and to competitive procedures with negotiation (for example to shorten the time limit for the receipt of tenders from 35 days to just 15 days) where the deadlines in question would be impracticable because of a state of urgency which should be duly substantiated by the contracting authorities. These shortened procedures can be an interesting option if, for instance, normal procedures would no longer guarantee the required supply of medical equipment (such as surgical masks) required to fight the coronavirus outbreak.

However, it may be the case that even such expedited procedures may not result in the applicable supplies being available in a suitable time frame. In such a case contracting authorities may consider using the negotiated procedure without prior publication. This procedure may be used where the works, supplies or services can be supplied only by a particular economic operator in so far as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with. The circumstances invoked to justify extreme urgency shall not in any event be attributable to the contracting authority.

Thus, Directive 2014/24/EU imposes very strict conditions on contracting authorities. In addition, one should remember that in light of fixed case law of the Court of Justice (see for example Commission v Italy, C-57/94, paragraph 23; Commission v Germany, C-318/94, paragraph 13; Joined Cases Commission v Germany, C-20/01 and C-28/01, paragraph 58; Commission v Italy,  C-385/02, paragraph 19; Stadt Halle, C-26/03, paragraph 46; and Commission v Spain,C-84/03, paragraph 48), the use of the negotiated procedure without prior publication, as an exception from competitive procedures, must be interpreted strictly and the burden of proving the existence of exceptional circumstances justifying a derogation rests on the contracting authorities seeking to rely on those circumstances. Contracting authorities should provide the reasons behind the need to use the procedure in question. Given the above, one should not be surprised that to date the Court of Justice, in general, has not been sympathetic to Member States that were trying to invoke the grounds to use the negotiated procedure without prior publication.

Notwithstanding the procedure in which the contract is awarded, economic operators that have participated in a criminal organisation or have been found guilty of corruption, fraud to the detriment of the EU’s financial interests, terrorist offences, money laundering or terrorist financing should be excluded from public procurement proceedings. The non-payment of taxes or social security contributions should also lead to mandatory exclusion at the level of the EU. However, Member States should be able to provide for a derogation from those mandatory exclusions in exceptional situations where overriding requirements in the general interest make a contract award indispensable. This might, for example, be the case where urgently needed vaccines or emergency medical equipment can only be purchased from an economic operator to whom one of the mandatory grounds for exclusion otherwise applies. It is because one of such overriding requirements in the general interest is the protection of health and life of humans.

Finally, contracting authorities can be faced with external circumstances that they could not foresee when they awarded the contract, in particular when the performance of the contract covers a long period of time. In this case, a certain degree of flexibility is needed to adapt the contract to those circumstances without a new procurement procedure. In such a case, Directive 2014/24/EU provides three conditions under which the contract may be modified. Firstly, the need for modification has been brought about by circumstances which a diligent contracting authority could not foresee. The provision does not specify how the notion of ‘circumstances which could not have been foreseen’ should be understood. It must be considered that they include, primarily, cases of so-called force majeure, that is, events which cannot be influenced by parties and due to which performance of the original contract’s obligations by one or both parties become impossible. Secondly, modification cannot change the overall nature of a contract. This refers primarily to the type (kind) of the contract and the subject-matter of procurement. Thirdly, the possible increase in price related to an unforeseen change may not exceed 50% of the value of initial contract, and this limitation shall apply to each modification unless modifications aim at circumventing the Directive 2014/24/UE.

The abovementioned examples show that EU public procurement law contains a number of solutions that may be used in the context of the coronavirus outbreak, both at the stage of awarding and performing a contract. One should, however, remember that the balance between, on the one hand, immediate actions, and observing specific principles, on the other, is always required. The situation we are facing now should not be used in order to abuse principles of EU public procurement law. This could have happened in Poland where two wholesalers terminated contracts with hospitals for supplying personal protective equipment to obtain significantly higher prices for, among other things, surgical masks. Fortunately, the President of the Office of Competition and Consumer Protection was informed on time and initiated proceedings on unfair conduct against these two entities.

 

Dr hab. Piotr Bogdanowicz is Associate Professor of EU Law and EU Procurement Law at Warsaw University.

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