Official Journal of the European Union

C 93/16

Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts

COM(2006) 195 final/2 — 2006/0066 (COD)

(2007/C 93/04)

On 29 June 2006 the Council decided to consult the European Economic and Social Committee, under Article 95 of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 14 November 2006. The rapporteur was Mr van Iersel.

At its 432nd plenary session, held on 17 and 18 January 2007 (meeting of 18 January), the European Economic and Social Committee adopted the following opinion by 140 votes to 14 with 10 abstentions.





Consultation and content


General comments


Specific issues




Standstill periods


Annulment of contracts




Conciliation and settlement of disputes







1.   Introduction


In 1991 and 1993 two directives came into force regarding the application of review procedures for the Classical and Utilities Directives respectively. They were introduced to provide an element of enforcement and remedy which had been missing from the earlier Classical directives (1).


As the Public Procurement Directives are intended to create an open, fair and transparent climate for companies across the EU to compete on an equal basis, these Remedies Directives provide procedures for companies wishing to complain about the tendering and award of public contracts in which they are interested.


The Remedies Directives have two linked purposes:

to provide a means to coerce Awarding Authorities to comply with the Directives; and

to provide a means whereby a tenderer who believes that an Awarding Authority has breached the Directives can take action to protect his interests.


All action by an aggrieved tenderer against an Awarding Authority has to be taken through national courts, tribunals or similar bodies which are established within that Member State; the Commission only takes action against a Member State, not against an Awarding Authority, and then only when there is evidence that a Member State is not regulating its Awarding Authorities properly.


It is noteworthy that the Court of Justice had already specified in 1999 that the provisions of both Remedies Directives should seek to reinforce existing arrangements for ensuring effective application of the Public Procurement Directives, in particular at a stage where infringements can still be rectified (2).


Effective Remedies Directives are an integral part of public purchasing law, and the amendments provided by the New Directive should ensure a more effective functioning of the Public Purchasing Directives.


In June 2006 the Commission proposed the New Directive which amends above mentioned Remedies directives and which, it is hoped, will improve them and make them more effective.


The main proposals in the New Directive are the introduction of a 10-day standstill period between the decision to award a contract and finalisation of the award so that anyone who believes they have been badly treated can protest, and the repeal of the attestation and conciliation procedures.

2.   Consultations and content


In March 2003 the Commission started consultations on the validity of the Remedies Directives. Two questionnaires were carried out. The Member States were consulted in the framework of the Advisory Committee for Public Procurement. In addition to that consultation enquiries were carried out among Awarding Authorities and through Interactive Policy Making on the internet among lawyers, business associations and NGOs and enterprises.


The New Directive is based on a thorough impact assessment. This assessment mentions two main problems: the lack of effective remedies against the practice of illegal direct awards of public contracts, and the ‘race to signature ’of public contracts by Awarding Authorities which actually deprives economic operators of the possibility to put Remedies actions effectively in place before the contract has been started (3).


The impact assessment contains a number of excellent analyses of the opinions of stakeholders. The impact assessment itself is an illustrative example of an open and transparent way of communicating in a very complex area.


Quite interestingly the outcome shows that there are substantial differences between the Member States in handling complaints which can make for confusion in the minds of tenderers:

Awarding Authorities — among them in particular regional and local authorities — were reluctant to respond to the enquiries;

individual economic operators were not yet accustomed to participating and to reviewing procedures in this area;

quite substantial reactions came from law firms, business associations and NGOs.


The overall conclusion among the respondents is that illegal awards have to be fought and that competition, particularly cross-border, must be fostered.


Business is usually very reluctant to challenge Awarding Authorities, whereas experience shows that some Member States are as yet rather hesitant over adopting legislation that promotes transparency and opening of markets. This underlines the need for action at EU level. Other Member States, however, have invested considerable effort in implementing the Directives.


The proposed amendments provide two important new safeguards for tenderers:

notification of the intention to award a contract must be given at least ten days before the intended award date — the ‘standstill period’; and

if a tenderer lodges a protest, the procedure must be suspended for a period, in principle while the problem is resolved.


There is, however, provision — for example, in cases of urgency — for contracts to be awarded without going through the normal tendering process. There is also provision for the standstill period to be ignored in cases where it is obviously irrelevant. The Competitive Dialogue procedure, however, must always have a standstill because of the way in which it operates. Amongst other aspects, the probability that the tendering process will be left with only one ‘preferred bidder ’in its final stages could be seen to open the way to abuse and the standstill is obviously necessary to avoid such a situation.

3.   General comments


The impact assessment proves very useful in making clear that Member States and the Awarding Authorities do, in many cases, often take a different line over the need to open public markets.


The Commission offers five potential solutions to tackle the issue of complaints: ‘do-nothing’, a communication or a directive on a standstill period, and a communication or a directive on an Independent Body (4).


The EESC agrees with the Commission that:

do-nothing is not a viable solution, as shortcomings and substantial differences between Member States will persist;

neither will communications be an attractive approach, as these are insufficiently compelling: long lasting traditions, mutual relationships and dependencies in the Member States will continue to prevail.


Consequently, to put pressure on the public sector and to increase professionalism on both sides, the choice is between the establishment of an Independent Body or a standstill period between the decision to award a contract and the actual award itself.


Independent Bodies exist in some Member States (5). It is noteworthy that the majority of private stakeholders are in favour of this approach although it would mean a rise in costs and administrative procedures. Some Member States recommend the appointment of experts to such bodies.


By contrast the large majority of Member States are in favour of a limited standstill period which directly affects public purchasers and complaining companies, halting the procedure for the duration of the standstill.


The EESC agrees with the Commission's proposal on the introduction of a standstill period. It accepts that such an arrangement at EU level, if well implemented, should conceivably promote on the one hand effectiveness, clarity and legal certainty, and, on the other a more open and transparent public procurement regime leading to increased competition. Standstill should not necessarily, however, be seen as an exclusive alternative to Independent Bodies, which Member States are, of course, at liberty to establish.

4.   Specific issues

4.1   Drafting


The numbering of the New Directive is confusing as the section on Utilities is Article 2 notwithstanding that a large part of the Classical section on the previous pages and of the Utilities on the following pages is numbered Articles 2a through 2f. It would be easier if the Classical and Utilities sections were headed as Chapters. Once the amendments provided in the New Directive have been implemented it will, of course, cease to be of interest but, in the meantime, ease of comprehension would be a help.


It would also have been helpful if consolidated versions of the two Directives could have been made available.


There are also a few typographical errors which will doubtless be corrected in later versions.

4.2   Standstill periods


The concept of standstill periods is generally well accepted.


The possibility — favoured by some respondents to the Commission's consultation — of the establishment of Independent Bodies to act as referees was rejected in favour of standstill, largely at the urging of Member States. The concept has been discussed since the early days of the directives but, superficially attractive though it is, it suffers the same defects as did the conciliation procedure, itself a similar concept. There remains, however, a persisting problem which is discussed infra under ‘Conciliation and settlement of disputes’.


With the exception of periods of five days (which are working days) all other periods, including references to three days, are calendar. That obviously raises problems. The matter is expanded upon infra under ‘Standstill’.

4.3   Annulment of contracts


Although the objective of the directive is to catch problems before the contract is actually awarded, provision is made for the annulment of contracts which slip through and are thus awarded illegally.


Two circumstances may exist: firstly where the parties are in collusion and both are well aware of the consequences of the contract being found to be illegal, and secondly where the economic operator is innocent and unaware that the contract risks being annulled.


In the first case, there is little need to have concern for any losses which the economic operator may suffer.


In the second case there is concern that, bearing in mind that a challenge to an award may in some instances be launched up to six months after commencement of the contract, an innocent economic operator may suffer serious damage. Because the contracting authority will have been found to be acting ultra vires the economic operator may have no means of claiming damages against it (6). Although such an outcome may be unlikely to recur, the EESC believes it appropriate to warn of the danger.


It may be argued that a tenderer should satisfy itself that the Awarding Authority has observed the standstill and has published the necessary notices regarding the intention to award the contract and furthermore that, should the tenderer still not be satisfied, it should seek formal confirmation from the purchaser. The New Directive provides (Article 2 f 2) that the only grounds for annulling a contract once it has been awarded are that an Awarding Authority has failed to give proper notice of its intention to award a contract or has failed to apply a standstill period. Those limited conditions, particularly in large and important contracts, would seem to be easily capable of verification. But the thresholds for Supply and Service contracts cannot be described as ‘large and important’, even to SMEs, although the consequences of unrecoverable damages in the event of annulment most certainly are. Offloading to the tenderer the risk of error, and the serious consequences thereof, does seem to the EESC to be unbalanced and should be reconsidered; caveat vendor with its potentially draconian consequences is not an appropriate mechanism to prevent illegality on the part of Awarding Authorities. Whilst the consequences in Hazell vs Hammersmith and Fulham might not be possible in other circumstances or in other countries, legislation either at Community level or at national level is desirable to the point of being essential if tenderers are not to be put at unmanageable risk in annulment of contracts.

4.4   Attestation


The New Directive proposes that the attestation procedure should be deleted because it has been little used. Attestation was included in the Utilities Remedies Directive as a form of audit similar to that in quality assurance or to some aspects of modern financial audit. At the time it was suggested that a Utility which obtained a clean attestation report might be able to derogate from some or all of the detailed provisions of the directive as long as it abided by the principles, but this suggestion was not acceptable to the Commission.


There was thus little incentive to use attestation and its lack of use is little surprise. It has also been subject to criticism on the basis that it only demonstrates compliance at a particular point in time, giving no assurance that compliance will continue on the morrow. That is to misunderstand the process, whose equivalent processes work effectively in quality and modern financial audit. The essence is to ensure that a system of procedures is in place which, if followed, will lead to satisfactory compliance with the directive, and that the contracting entity did in fact comply with its own procedures. Most substantial organisations operate on the basis of internal procedures and, in the absence of fraud or drastic corporate breakdown, follow those procedures reliably. Certification provided by attestation that the procedures are satisfactory in principle and being followed in practice gives reasonable assurance that the organisation is compliant; it would, of course, need to be revalidated at intervals.


Effective attestation could provide a mechanism whereby individual Utilities could obtain all or most of the benefits offered by Article 30 (7) of the Utilities Directive in circumstances where the general criteria of that Article were not met.


In the absence of an incentive to use the procedure it is obviously of little use. However, if it were to be amended to include a tangible incentive, its retention in such a form should be envisaged.

4.5   Conciliation and settlement of disputes


The EESC notes that there is a generally accepted opinion that the deletion of the little-used procedure is appropriate.


There is, however, quite a widely-held view, which the EESC endorses and has argued for extensively in a number of opinions, that some form of alternative dispute resolution is desirable. The existing mechanisms available differ widely between the various Member States, ranging from relatively informal bodies with easy access and low cost, to recourse to litigation with all the cost and diversion of resources which that entails. Independent Bodies are evidently effective in those Member States which have adopted them but the practice is not universal (see also 3.4.1 supra and its footnote).


A universal solution to the problem is not obvious, given the differing cultural and legal backgrounds in the various Member States.


The conciliation procedure has not been popular because, apparently, it cannot produce enforceable decisions and, if unsuccessful, eats up the time within which a formal complaint can be launched. But enforceable decisions — absent agreement by the parties as in arbitration — must inevitably require litigation. This paradox may create problems in dispute resolution.


Further examination of alternative dispute resolution mechanisms in use in other countries or in other contexts might well yield a useful tool which would overcome the objections to the conciliation procedure whilst retaining low cost, thereby contributing to improvement in compliance with the directives.

4.6   Standstill


The standstill periods provided in the draft directive require further consideration.


Firstly, most of them (except the five-day periods) are defined as calendar days and are fairly short (three, seven or ten days). In some Member States and at certain times of the year, ten calendar days can be as short as three working days and three calendar days can include no working days at all. This can plainly be unsatisfactory. In 2006 there are at least 42 weekdays (out of 260 in the whole year) which are public holidays somewhere in the EEA. There is one ten-day period with only two working days and there are three periods with only three working days.

A balance has to be struck between allowing economic operators a reasonable time in which to lodge a protest and not introducing an unnecessary delay into all the contracts with which there is no problem.

Ideally, the standstill should be defined as working days but this raises the problem of different public holidays in different Member States.


Secondly, in the case of a tender which has been properly conducted, the tenderers will be expecting the notice which will, in any case, be sent to each of them personally; they should thus have little difficulty in responding promptly should they have reason so to do.


In the case of a directly-awarded contract or one awarded on an ‘in-house ’basis to an entity which is not in-house, the problem of awareness is more acute.


Potential tenderers may have no knowledge that the contract is even in contemplation and will be dependant on seeing the public notice to alert them to its existence. Even if the ten calendar days only include one week-end and thus amount to eight working days, there will be very little time to take action from a standing start.


Since it is the general consensus that directly awarded contracts constitute the majority of abuses, more consideration needs to be given to the duration of the standstill period as well as to a mechanism which ensures that interested potential tenderers can become aware of the proposed contract as early as possible. A reasonable increase in the standstill period for this type of contract — not applicable to those which have been offered properly for competitive tender — would be helpful.


The Remedies Directive applies, of course, only to contracts above the thresholds, but contracts slightly below the threshold — and thus outwith the Directives — upon occasion ‘creep ’until the value is above the threshold, sometimes quite substantially. This is an all too common area of abuse.


A requirement to publish all contracts including those well below the thresholds and those placed with in-house entities would be disproportionate. Attention is drawn in this context to the fact that in-house services are not covered by the Directive on the awarding of contracts. In this context, too, the fundamental question arises as to why the standstill period is to be applied in this case.


In order to provide an easy and timely means of alerting potentially interested economic operators to the imminent award of a contract above the thresholds (or, possibly, above a lower value of, say, 80 % of the thresholds) a special web site hosted or sponsored by the Commission and used exclusively for this purpose might be beneficial. If such a website were to be established, its use should be compulsory.


Furthermore, the development of an automatic search tool for use on such a site to alert tenderers to published notices likely to be of interest to them would make a great difference to the effectiveness of the notices. Trawling the website each night and flagging up an alert for anything which it recognised as of interest, it would improve the likelihood that tenderers would become aware in a timely manner of impending contract awards which they wanted to challenge.

5.   Fees


It has been suggested that a fee should be payable by a tenderer wishing to launch a bid challenge in order to discourage vexatious or tactical challenges. The EESC is not in favour of such a measure because, on the one hand, the effort necessary to mount a challenge is already expensive enough and, on the other hand, the Review Body (8) to whom the protest is addressed is well able to dismiss frivolous applications.


In countries where the Review Body has no power to dismiss frivolous complaints, a fee might be justified but it would have to be set at an appropriate level so as not to deter genuine complainants and thereby act as a defensive measure for contracting authorities which have abused the Directives.


Whilst not strictly part of consideration of the New Directive, it has come to the EESC's notice that some Awarding Authorities have adopted the practice of requiring a fee from tenderers who wish to submit a bid. The EESC is strongly opposed to such a measure which is not only prejudicial to SMEs but is also too easy to use as a means of covert discrimination contrary to the spirit — and, possibly, to the letter — of the Directives.

6.   Glossary

Classical Directive

Directive 2004/18/EC on the coordination of procedures for the award of public works contracts, public supply contracts and public services contracts. Applies to all public authorities (central, regional, municipal etc) except those which are subject to the Utilities Directive (see below).

Utilities Directive

Directive 2004/17/EC coordinating the procurement procedures of entities operating in the water, energy, transport and postal sectors. Applies to all entities operating in these sectors regardless of their ownership, be it public or private.

Public Procurement

Procurement by public authorities (subject to the Classical Directive) and public utilities (subject to the Utilities Directive).

Remedies Directives

In 1991 and 1993 two directives now being amended came into force regarding the application of review procedures for the Classical (9) and Utilities Directives (10) respectively. They were introduced to provide an element of enforcement and remedy which had been missing from the earlier Classical directives. (11)

New Directive

Amendment to Remedies Directives that is the subject of this Opinion.


Any or all, as the context may admit, of the directives defined above.

Awarding Authority

A contracting authority (Classical sector) or a contracting entity (Utilities sector) which is involved in the processes contemplated by the Directives.

Independent Body

An independent body which would receive complaints, as outlined in paragraph 2(3) in the explanatory memorandum on page 5 of the New Directive.

Review Body

A judicial or quasi-judicial body ‘independent of the contracting authority ’which is appointed to hear complaints and which has the power to adjudicate thereon.

Brussels, 18 January 2007.

The President

of the European Economic and Social Committee


(1)  See Glossary footnote 9.

(2)  Impact assessment report — Remedies in the field of public procurement, SEC(2006) 557, of 4 May 2006, page 5: Alcatel judgement, Case C-81/98, paragraph 33.

(3)  Impact assessment report — Remedies in the field of public procurement, SEC(2006) 557, of 4 May 2006.

(4)  See the Glossary for a definition of an Independent Body and the distinction from a Review Body as used in this paper.

(5)  For example, the Competition Authority in Denmark and the Swedish central government Agency for Public Procurement.

(6)  See Hazell vs Hammersmith and Fulham Councils UK House of Lords 1992 in which the local authorities had entered into interest rate swaps in order to reduce their costs or to generate profits for themselves. In the event, interest rates moved against the local authorities and the banks called for the difference. The local authorities, unable to pay, then claimed that such contracts were outwith their powers and were thus void. The court found in favour of the local authorities and the participating banks, who had entered into the contracts in good faith, stood a substantial loss.

(7)  Article 30 (1) states ‘Contracts intended to enable an activity mentioned in Articles 3 to 7 [the definition of a Utility] to be carried out shall not be subject to this Directive if, in the Member State in which it is performed, the activity is directly exposed to competition on markets to which access is not restricted. ’The rest of Article 30 sets out in more detail the criteria and the procedure to be followed in seeking exemption.

(8)  See the Glossary for a definition of Review Body and the distinction from an Independent Body as used in this paper.

(9)  92/50/EEC of 18 June 1992 (services), 93/36/EEC (supplies) and 93/37/EEC (works) both of 14 June 1993.

(10)  93/38/EEC of 14 June 1993.

(11)  71/305/EEC of 26 July 1971 (works) and 77/62/EEC of 21 December 1976 (supplies). There was no services directive at that time.


to the Opinion of the European Economic and Social Committee

The following Section Opinion text was rejected in favour of an amendment adopted by the assembly but obtained at least one-quarter of the votes cast:


The principles of economy and efficiency are without doubt important criteria in respect of such a transparent climate of competition with regard to procurement transactions. We must, however, not lose sight of the fact that public investment does, at the same time, represent an instrument of economic policy and, with an eye to the Lisbon objectives, employment-policy aspects and social and environmental aspects should also be taken into account when taking decisions. Importance should consequently also be attached to this principle in the review procedures with regard to the award of public contracts.


78 votes for deleting the paragraph, 67 against and 10 abstentions.