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Enhancing the Effectiveness of the EU Public Procurement Framework

Case studies of Lithuania and Germany

by Asta Gerhardt (Author)
©2020 Thesis 246 Pages

Summary

The reform of the EU public procurement framework and recently adopted new public procurement rules in Lithuania were indisputably the most significant revisions of this regime since 2004. The aim of this thesis is to provide a critical examination of the EU Directive 2014/24/EU and its transposition into the national law systems of Lithuania and Germany. The author will discuss in more detail the advantages of transposition and disadvantages of Lithuanian national law system, and provide comparison analysis with German national law system. Further analysis will be provided on peculiarities of public procurement disputes in Germany and Lithuania. Through this examination, the thesis also aims to contribute toward a sound future development of public procurement rules, both at the EU level and national law and practice.

Table Of Contents

  • Cover
  • Title Page
  • Copyright
  • About the author
  • About the book
  • Citability of the eBook
  • Acknowledgement
  • Contents
  • Introduction
  • I. Public procurement legislation in the EU
  • 1 Treaty provisions relevant to public procurement
  • 1.1 Article 34 TFEU on free movement of goods
  • 1.2 Prohibition of measures interfering with the free market
  • 1.3 Article 34 TFEU on specification requirements and standards
  • 1.4 De minimis rule under Article 34 TFEU
  • 1.4.1 Introduction of the Dundalk case
  • 1.4.2 Case discussion and commentary remarks
  • 1.4.3 Introduction of the UNIX case
  • 1.4.4 Case discussion and commentary remarks
  • 1.5 Conclusions on the main cases
  • 1.6 Articles 49 and 56 TFEU on the right of establishment and right to provide services
  • 2 The EU public procurement Directive 2014/24/EU
  • 2.1 The principle of equal treatment
  • 2.2 The principle of non-discrimination
  • 2.3 The principle of transparency
  • 2.4 The principle of proportionality
  • 2.5 The principle of mutual recognition
  • 2.6 Conclusion of the fundamental principles
  • 3 Low-value contracts outside the scope of Directive 2014/24/EU
  • 3.1 The TFEU principles applicable to low-value contracts
  • 3.2 The counter arguments of General Advocate Sharpston
  • 3.3 Transparency obligation
  • 3.4 Interpretation of the further case law
  • 3.5 Conclusions
  • II The development of public procurement law in Lithuania
  • 1 The development of public procurement worldwide
  • 2 GPA
  • 3 The development of public procurement in Europe
  • 4 The development of public procurement in Lithuania
  • 4.1 First Lithuanian public procurement law
  • 4.2 PHARE assistance programme
  • 4.3 Pre-accession of Lithuania to the European Union
  • 4.4 Lithuanian accession to the EU
  • 5 Conclusion
  • III Implementation of the EU public procurement rules in Lithuanian and German national law systems
  • 1 Introduction
  • 2 The EU Public Procurement Reform
  • 3 Transposition of the Directive 2014/24/EU into national systems
  • 4 New legal framework of public procurement in Lithuania
  • 4.1 Primary legislation of public procurement
  • 4.2 Secondary legislation of public procurement
  • 4.3 Public Procurement Office
  • 4.4 Definitions of public procurement
  • 4.5 Thresholds
  • 4.6 Simplified procurement procedures
  • 4.7 Conclusions
  • 5 New legal framework of public procurement in Germany
  • 5.1 Act against restraints on competition (GWB)
  • 5.2 Regulation on the award of public contracts (VgV)
  • 5.3 Regulation on the award of works contracts (VOB/A)
  • 5.4 Regulation on the award of contracts below the EU thresholds (UVgO)
  • 5.4.1 Scope of UVgO
  • 5.4.2 Procedures below the thresholds
  • 5.5 Thresholds
  • 5.6 E-procurement
  • 5.7 Conclusions
  • 6 Public procurement procedures in Lithuanian and German legal frameworks
  • 6.1 Open procedure
  • 6.1.1 New provisions
  • 6.1.2 Provisions in German law
  • 6.1.3 Provisions in Lithuanian law
  • 7 Restricted procedure
  • 7.1 Provisions in Germany
  • 7.2 Provisions in Lithuania
  • 8 Competitive procedure with negotiation and competitive dialogue
  • 8.1 Provisions in Germany
  • 8.2 Provisions in Lithuania
  • 9 Negotiated procedure without publication
  • 10 Innovation partnership
  • 10.1 Provisions in Germany
  • 10.2 Provisions in Lithuania
  • 11 Conclusions
  • IV Key weaknesses of the EU procurement framework
  • 1 Wider application of competitive procedure with negotiation
  • 2 Administrative burden reduction opportunities
  • 3 Better participation opportunities for SMEs in public procurement
  • 4 The criteria of the most economically advantageous tender
  • 5 Promoting innovation in public procurement
  • 6 Pre-commercial procurement
  • 7 The need for professionalism among public contracting authorities staff
  • 8 Conclusions
  • V Enforcement of the EU public procurement rules in Lithuanian legislation
  • 1 EU provisions
  • 2 Evolution of legal regulation of public procurement disputes in Lithuania
  • 3 The system of remedies for suppliers in the Republic of Lithuania
  • 3.1 Judicial disputes in public procurement following the legislation of the Republic of Lithuania
  • 3.2 Litigation efficiency and volumes
  • 3.3 Pre-litigation procedures in public procurement
  • 3.4 Different and mandatory time limits of pre-litigation procedures
  • 4 Problem of the claim “on the same subject matter”
  • 5 Discretion of the public contracting authority as a factor for dispute
  • 6 Information exchange between the supplier and the public contracting authority during pre-litigation procedures
  • 7 Review of the decision by the same entity
  • 8 Conclusions and suggestions
  • VI Enforcement of the EU public procurement rules in German legislation
  • 1 History
  • 2 Remedies system above the thresholds
  • 2.1 Obligation to submit a claim to the public contracting authority
  • 2.2 First instance review
  • 2.2.1 Competence of the Public Procurement Tribunal
  • 2.2.2 Identification of facts and decision of Public Procurement Tribunal
  • 2.3 Second instance review
  • 2.4 Contracts that have already been concluded
  • 2.5 Preliminary ruling procedure pursuant to Article 267 TFEU
  • 2.6 Secondary legal protection
  • 2.7 Civil claims
  • 2.8 Costs
  • 2.9 Statistics of the review procedures
  • 2.10 Enforcement of decisions
  • 3 Public procurement protection below the thresholds
  • 3.1 Administrative law
  • 3.2 Civil law
  • 3.3 Jurisdiction of ordinary courts
  • 3.4 Interim legal protection
  • 3.5 Submission of a protective letter
  • 3.6 Disadvantages of legal protection below the thresholds
  • 3.7 Damages under § 181 GWB
  • 3.8 Damages under other provisions
  • 3.9 Conclusions
  • VII Advantages and disadvantages of remedies systems in Lithuania and Germany
  • 1 Pre-litigation proceedings
  • 2 Judicial proceedings
  • 3 Investigation of public procurement value which is below the EU threshold
  • 4 Compensation for damages in public procurement disputes
  • 5 Proposals for revision of German remedies system
  • Final conclusions
  • List of figures
  • Bibliography

←14 | 15→

Introduction

The reform of the EU public procurement framework and recently adopted new public procurement rules in Lithuania were indisputably the most significant revisions of this regime since 2004. The aim of this thesis is to provide a critical examination of the EU Directive 2014/24/EU and its transposition into the national law systems of Lithuania and Germany. The author will discuss in more detail the transposition advantages, disadvantages of Lithuanian national law system, and provide comparison analysis with German national law system. Further analysis will be provided on peculiarities of public procurement disputes in Germany and Lithuania. Through this examination, the thesis also aims to contribute towards a sound future development of public procurement rules, both at the EU level and national law and practice.

Methodology of the thesis

The objective of the thesis is to assess the effectiveness of the transposition of the EU public procurement Directive 2014/24/EU into the Lithuanian national law system and its impact on national remedies system in comparison with the German national law system.

To achieve this goal, the following tasks had to be undertaken:

1. Disclose and analyse the concept and specificities of the EU and Lithuanian public procurement history.

2. Analyse the EU public procurement reform and its impact on the national legislation of Lithuania and Germany.

3. Analyse the effectiveness of the transposition of the EU Directive 2014/24/EU into the Lithuanian and German national law systems.

4. Identify public procurement regulatory gaps and problems in public procurement procedures.

5. Analyse peculiarities and main problems of the dispute settlement process of public procurement in Lithuania and Germany.

6. Propose solutions, alternative methods and improvement ideas in order to promote procurement effectiveness and more efficient use of the remedies system.

←15 |
 16→

Research methods

Theoretical method

A variety of different categories of methods for collecting information were applied. Desk research to acquire theoretical information was used. Books, magazines, articles, previously conducted research, journals, websites, and online books as well as laws and regulation texts were used.

Empirical method

Field exploration was used for empirical research to support the findings of this thesis. Interviews were conducted and answers were obtained to questions from different procurement experts. Procurement professionals were also contacted to find fresh ideas and obtain examples on reporting procurement efficiency. The empirical research method was used for measuring procurement effectiveness.

Systemic method

The thesis covers the systematic assessment of the transposition of public procurement rules into the Lithuanian and German national law systems. The experience and issues in the application of public procurement rules of foreign countries were compared in order to come up with practical recommendations for decision making. The EU public procurement regulatory developments, challenges, and development of causation were assessed.

Statistical method

Statistical analysis, surveys and studies on public procurement were used. A series of documents such as legislation of the Member States, the EU directives and regulations, and the jurisprudence of the investigative measure were analysed.

Extrapolation method

The findings were analysed and summarised. The improvements and recommendations for the effectiveness of the EU public procurement framework were proposed.

Structure of the dissertation

The first chapter of the thesis will discuss the scope of the EU Directive 2014/24/EU and the fundamental principles including the major analysis of the case law. ←16 | 17→Historical development of the Lithuanian public procurement will be outlined in the second chapter of the thesis. The implementation of public procurement rules in Lithuanian and German legal frameworks will be addressed in the third chapter. The author will demonstrate a detailed analysis and suggestions for improvements of the EU public procurement procedures application at the national level. The fourth chapter presents key weaknesses of the EU public procurement framework. Through system analysis and comparative methods, the author has identified flexible procedures, reduction of administrative processes, and better conditions for small and medium-sized enterprises to enter public procurement procedures. The fifth part examines the remedies system in Lithuania and its effective enforcement. The enforcement of remedies system in Germany will be discussed in the sixth chapter of the thesis. The seventh chapter will provide analysis of advantages and disadvantages of remedies systems in Lithuania and Germany. The author will summarise the findings in the final chapter of the thesis.

←18 | 19→

I Public procurement legislation in the EU

This chapter looks at how the Treaty on the Functioning of the European Union (TFEU)1 applies to public procurement and guides through general principles of public procurement2. At first, the TFEU has references to public contracts and a number of generic provisions regarding free movement of goods3, which are important to the field of public procurement. These provisions are essential for proper operation of the single market. The TFEU is a primary source for public procurement-related legislation in the European Union, as well as the basis of all secondary legislation, adopted within the power of the European Union to establish regulations relevant to the internal market.

Secondly, case law plays a major role in public procurement, namely the European Court of Justice (CJEU) has an instrumental role in interpreting and applying EU rules on the subject. Those rules are contained both in the TFEU and in various public procurement directives adopted by the EU Council. The following articles of the TFEU are particularly relevant to procurement, which will be further analysed: Article 34 TFEU on free movement of goods, Article 49 TFEU on freedom of establishment, and Article 56 TFEU on freedom to provide services. These provisions apply to public purchasing in that they prescribe what public contracting authorities cannot do when awarding public contracts, namely, discriminate against bids or bidders from other EU Member States.

The overview of relevant TFEU provisions and fundamental principles of the EU public procurement legislation are important for this thesis as it lays the foundations for a proper functioning of public procurement in the EU and its Member States.

1 Treaty provisions relevant to public procurement

The European law on public procurement relies on the following pillars: certain provisions in the TFEU, EU directives on public procurement and fundamental principles deriving from the CJEU jurisprudence. The cornerstone of the European procurement regulations lies in the provisions of the TFEU, removing ←19 | 20→obstacles for intra-Union trade, and ensuring the freedom to provide services and freedom of establishment. The CJEU has identified a number of relevant cases, which have contributed to the interpretation of the TFEU provisions and fundamental principles. In this chapter, the most relevant cases such as Dundalk, UNIX, and Vestergaard will be discussed in more detail in order to further understand the importance of Article 34 TFEU4 on free movement of goods.

1.1 Article 34 TFEU on free movement of goods

Article 34 TFEU5 defines the goods that can move without restrictions between Member States. This provision puts a ban on quantitative restrictions on the free import and export of goods and other measures of equivalent effect between the Member States.

Technical requirements for goods introduced by the EU and other countries in the name of public policy can create significant barriers to international trade6. However, certain measures will not breach Article 34 TFEU if the necessary requirements are satisfied as stated in the Dassonville case7.

The Community has led the way of using mutual recognition to overcome such barriers. The central ruling in the achievement of free movement of goods in the Community has been the case of Cassis de Dijon8, which relies on the principle of mutual recognition9.

The ruling stipulates that a specific blackcurrant liqueur, a product recognised and approved in one of the EU Member States, should also be permitted to be imported and sold in any other EU Member State without the need to perform any additional testing and give approval. However, an authority may take measures to ban or limit the importation of products if they believe those products cause danger to the environment, consumer interests, or the health and life of ←20 | 21→humans, animals, or plants, and as long as these measures correspond to the risks arising from the product and are applied in a way that is non-discriminatory. Due to the exceptions arising from the case of Cassis de Dijon, the CJEU narrowed the meaning of the mandatory requirements, because they constitute an exemption from the fundamental principle of free movement of goods. The CJEU can limit its scope by applying the principle of non-discrimination and the principle of proportionality to such restrictions. These two principles must be applied hand in hand10.

1.2 Prohibition of measures interfering with the free market

Article 34 TFEU specifies that quantitative import restrictions and all measures of equal effect are prohibited. A “measure of equal effect” is any action by the Member States that could hamper intra-Community trade, directly, effectively or potentially11. Article 34 TFEU offers a number of (limited) grounds that would justify a regulation that is (in principle) banned.12 National rules are nevertheless prohibited if they result in arbitrary discrimination or in a disguised restriction to trade between Member States.

According to Article 34 TFEU, the EU is based on a customs union and therefore it bans the following three sets of restrictions to the free movement of goods in public procurement: 1) direct discrimination13 or quantitative restrictions on imports and exports between Member States 2) indirect discrimination14 or measures of equivalent effect and 3) measures that may restrict trade without being directly or indirectly discriminatory15.

These forms of restrictions will be further discussed in more detail.

←21 | 22→

1.3 Article 34 TFEU on specification requirements and standards

In 1983, the Commission stated that national standards, compliance with which is rendered obligatory de jure or de facto by the State involvement, would be considered under Article 34 TFEU, which implies that import restrictions stated in an agreement between undertakings not to accept products based on national standards would be subject to judgement under the competition law.16

The application of the Treaty regime on the free movement of goods to technical standards is found in the voluntary nature of standards. The CJEU held that in case 45/87, Commission v. Ireland (Dundalk)17 that Ireland failed to abide by its obligations under Article 34 TFEU by permitting a clause that required the asbestos cement pressure pipes in question to be certified as complying with a certain Irish standard in the contract specification. Such provision put a constraint on the supply of pipes that were necessary for the Dundalk scheme to Irish manufacturers alone and indirectly impeded the supply of equivalent pipes from countries outside Ireland. The Court ruled that Ireland should have verified compliance with the technical requirements by supplementing the reference to the Irish standard in the notice with the words ‘or equivalent’. This case shows elements of indirect discrimination.

In the next case Commission v. The Netherlands18, the Court ruled that the use of the mark of the product UNIX in the contract notice failed to comply with the principle of free movement of goods. The fact that the words ‘or equivalent’ were not added to the term UNIX19 did not only breach the provisions of the Directive, but could have also discouraged other suppliers from entering the tendering procedure.

The technical specifications must be drafted in such a way that it would objectively formulate performance requirements. When providing an accurate description, public contracting authorities must take precautions not to infringe the Treaty principles. Thus, specifications must not discriminate either directly or indirectly suppliers from other Member States. Industrial objectives are therefore generally ruled out.

In order to avoid the restriction of competition, the EU has adopted a standardisation and certification policy implemented by specific directives aimed at standardising the public contracting authorities. They have to adopt standards, ←22 | 23→i.e. technical specifications agreed upon by a recognised standardising body, for repeated and continuous application that will ensure competition to a greater extent.

Whether national standards belong to the regime seems to depend on the particular agreements between public contracting authorities and the National Standards Bodies. In 1985, the EC developed a “new approach” to technical harmonisation and standards. This means that European Institutions decide only on the essential health and safety requirements that products need to meet. Detailed guidance on how to meet these requirements is then provided by the European standards organisations: the European Committee for Standardisation (CEN)20, the European Committee for Electrotechnical Standardisation (CENELEC)21 and the European Telecommunications Standards Institute (ETSI)22. Product manufacturers must show that their goods conform to the European law by affixing the “CE” marking to the product concerned. The “CE” marking is the passport for the free circulation of this product on the internal market.

The CJEU outlined that even non-binding measures adopted by Member States may constitute a barrier to trade in that the measures may be capable of influencing the conduct of traders and consumers in that State23 and therefore, dismissed the argument that Article 34 TFEU applies only to binding measures.24

1.4 De minimis rule under Article 34 TFEU

Article 34 TFEU covers measures that may potentially hinder trade and which clearly may apply where products are excluded from the government market or any part of it. The question is whether there is a de minimis rule,25 which excludes Article 34 TFEU where the potential effect is negligible26. The de minimis rule exists in relation to the Treaty’s competition law provisions. This issue was raised ←23 | 24→in Dundalk case,27 were Advocate General Darmon suggested that given the importance of contracts with public bodies for suppliers in the industry and the importance of the particular contract, the effect of the measure was sufficiently significant not be de minimis. Even if there is no de minimis rule, a limitation of the applicability to “measures” of Article 34 TFEU has to be discussed further.

In the case Commission v. France28 concerning a complaint that the French authorities had persistently failed to approve a British company’s machines without good cause, the CJEU stated that to constitute a “measure” the administrative practice must exhibit a degree of consistency and generality29. Furthermore, in the Dundalk30 case Advocate General Darmon concluded that in the praxis the specifications should not be treated separately as it was referring to the Irish national standards in an Irish government contract.

Details

Pages
246
Year
2020
ISBN (PDF)
9783631813430
ISBN (ePUB)
9783631813447
ISBN (MOBI)
9783631813454
ISBN (Softcover)
9783631799765
DOI
10.3726/b16594
Language
English
Publication date
2020 (March)
Keywords
Procurement enforcement Remedies system Directive 2014/24/EU EU reform Public Procurement
Published
Berlin, Bern, Bruxelles, New York, Oxford, Warszawa, Wien, 2020. 246 pp., 11 fig. col., 2 tables.

Biographical notes

Asta Gerhardt (Author)

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Title: Enhancing the Effectiveness of the EU Public Procurement Framework
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248 pages