Sustainable EU Public Procurement: between ideal and reality

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UPERVISOR

P

ROF

.

D

R

.

G.W.

VAN DE

M

EENT

Sustainable EU Public Procurement:

between ideal and reality

MASTER THESIS EUROPEAN UNION LAW

EYLEM KOSEOGLU

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P

REFACE

Writing a thesis is a challenging and long process. This thesis is the final step in a long education. During this process, there were some people who helped me reach my goal and cross the finish line. Firstly, I want to express gratitude to Professor G.W. van de Meent for supervising the thesis and providing guidance, encouragement, and most of all, for being patient with me. His inspiring and engaging lectures in Procurement law inspired me to write my thesis within this area of law. Secondly, my dear husband and love, who stood by me through the whole process and continues to support me in everything I do.

Assendelft, 15th of June 2015 Eylem Koseoglu

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A

BBREVIATIONS

CJEU Court of Justice of the European Union

EU European Union

GPA Government Procurement Agreement GDP Gross Domestic Product

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C

ONTENTS

Preface ... 1 Abbreviations ... 2 1 INTRODUCTION ... 5 1.1 Background ... 5

1.2 Purpose and question formulation ... 6

1.3 Delimitation ... 7

1.4 Research approach and method ... 7

1.5 Disposition ... 8

2 LEGAL FRAMEWORK OF EU PUBLIC PROCUREMENT ... 9

2.1 The EU Public Procurement regime ... 9

2.2 TFEU and the General principles op law ... 10

2.2.1 Free movement of goods, establishment and services ... 10

2.2.2 General principles of EU law... 13

2.3 Secondary legislation ... 14

2.3.1 Directive 2004/18/EC ... 14

2.4 The Public procurement process ... 15

2.4.1 Qualification ... 15

2.4.2 Award criteria ... 16

2.4.3 Contract performance criteria ... 16

2.5 Concluding remarks ... 17

3 SOCIAL AND ENVIRONMENTAL CONSIDERATIONS IN EU PUBLIC PROCUREMENT: SCOPE OF DISCRETION ... 18

3.1 Concept of sustainable procurement ... 18

3.2 Provisions in primary law recognizing social and environmental considerations ... 18

3.3 Reference to social and environmental criteria and the approach of the court ... 19

3.3.1 Specific reference to environmental requirements ... 20

3.3.2 Specific reference to social requirements ... 22

3.4 Limits of imposing social and environmental considerations ... 24

3.5 Concluding remarks ... 25

4 ANALYSIS OF SUSTAINABLE PUBLIC PROCUREMENT: BETWEEN IDEAL AND REALITY ... 26

4.1 Directive 2014/14/EU a carte blanche? ... 26

4.2 How can European procurement policy become more sustainably reconciled? ... 27

4.2.1 Subject matter of the contract: liberal application of a strict rule ... 27

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4.2.3 Burden of proof ... 30

5 CONCLUSION ... 32

BIBLIOGRAPHY ... 34

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1 INTRODUCTION

1.1 B

ACKGROUND

Public authorities strive to achieve the best value for money when they procure works, goods, and services.1 With the reference to public procurement different policy considerations are increasingly relevant. Social and environmental issues are being recognised as issues that deserve to be taken into along with concerns about value for money, so that the taxpayer’s money is spent in the most effective way and brings the best benefit for the community. 2 Therefore, public procurement plays an important role in the overall economic performance of the EU. 3_{This gives the public sector a significant market power, which can be used for social}

and environmental purposes.4_{The European Commission highlights the importance of public}

spending that achieves social and environmental objectives via Commission Strategy5_and

Guidance.6_{One of the aims of the Commission is to facilitate a greater ‘strategic use of public}

procurement’.7_{Thus, Member States may use their purchasing power through public}

procurement and ensure that public contract contribute to social and environmental policy goals espoused by the governments, such as reduction of gas emission, the procurement of fair trade goods, or the promotion of employment and social inclusion. 8

However, imposing social and environmental requirements can make it more difficult for suppliers of goods and services from other Member States to participate in public procurement.9 The public procurement rules’ objective is to strengthen the internal market. From an EU

1_{Caranta, R. (2013). Sustainable Procurement. In M. Tyrus, R. Caranta, & G. Edelstam (Eds.), EU Public Contract}

Law (pp. 1-60). Brussel, Belgium: Bruyland. P. 1

2_{Caranta, R. (2010). Sustainable Public Procurement in the EU. Retrieved from}

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1704446, p. 1, See also: European Commission, Green Paper on Modernization of EU Public Procurement Policy: Towards a more efficient European Procurement Market, COM (2011)15.

3_{See: Commission Communication: Proposal for a Directive of the European Parliament and of the Council on}

public procurement. COM(2011) 896 final. P.2: In Europe, public authorities spend approximately 18% of the

Gross Domestic Product (GDP) in supplies, works, and services.

4_{Schulten, T., Alsos, K., Burgess, P., & Petersen, K. (2012). PAY AND OTHER SOCIAL CLAUSES IN EUROPEAN}

PUBLIC PROCUREMENT. Retrieved from

http://www.boeckler.de/pdf/wsi_schulten_pay_and_other_social_causes.pdf p. 4

5_{Commission Communication, ‘Europe 2020, A Strategy for smart, sustainable and inclusive growth’, [2010]} 6_{European Commission, ‘Buying Social: A guide to Taking Account of Social considerations in Public}

Procurement’, European Commission publication, [2010]

7_{M. Monti, A new strategy for the Single Market, Report of the European Commission, 9 may 2010, p. 76} 8_{European Commission, Green Paper on modernization of EU Public Procurement policy: Towards a more}

efficient European Procurement Market, COM(2011) 15.

9_{Arrowsmith, S., & Kunzlik, P. (Eds.). (2009). Social and Environmental Policies in EC Procurement Law. New}

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perspective, these ambitions raise concerns due to their impact on limiting market access.10_This

thesis discusses the use of public procurement as a tool to achieve goals in social and environmental fields. It also describes how the balance should be struck with the functioning of the internal market.

1.2 P

URPOSE AND QUESTION FORMULATION

There is a contradiction within the EU that remains to be solved. The Commission speaks ambitiously about how Europe must remain in the forefront of social and environmental development and may use public procurement as a strategic tool. 11_{However, legislative acts}

of public procurement policy and the area of free movement, that aims to protect the full functioning of the internal market, partly prevents this.12 This thesis’ purpose is therefore to examine the conditions under which EU public procurement functions as an instrument for generating a maximum of social and environmental benefits, and how it may be reconciled with EU internal market law. This thesis provides an overview of the use of social and environmental requirements in public procurement with a focus on the award criterion ‘most economically advantageous tender’. 13

The primary question is as follows:

To what extent can the EU public procurement system be used as a strategic tool for further sustainable development and to incorporate social and environmental considerations in the award criterion, without undermining the internal market?

In order to answer this question, I focus on three main sub questions:

 What overriding EU principles control the interpretation of the award criterion ‘most

economically advantageous tender’?

 To what extent does the existing EU legal framework and case law offer public authorities the possibility take into consideration social and environmental factors as award criteria in public procurement?

10_{Arrowsmith, S. (2010). EU Public Procurement Law: An introduction.}

http://www.nottingham.ac.uk/pprg/documentsarchive/asialinkmaterials/eupublicprocurementlawintroduction .pdf P. 335

11_{Commission Communication, ‘Europe 2020, A Strategy for smart, sustainable and inclusive growth’, [2010]} 12_{Hetnne, J. (2013). Sustainable Public Procurement and the Single market - Is there a conflict or interest?}

Retrieved Retrieved from http://www.sieps.se/sites/default/files/2013_7epa.pdf p. 31

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 Is current EU public procurement efficient enough to include social and environmental

considerations, and does the newly proposed Directive14 grant public authorities sufficient freedom to set social requirements for the award of public contracts?

1.3 D

ELIMITATION

As indicated, this thesis has an EU law perspective. This thesis does not discuss the other prerequisites in the same article (‘lowest price’). The public procurement process consists of several steps, from rules on specification15, the award of these contracts based on prescribed procedures16, rules on qualification of bidders, and award criteria.17 This thesis’ focus is on the final stage of public procurement process and only examines the award criteria. The award criteria are significant since the award of the tender depends on them, and because of their correct valuation, use, and definition, the public interest is guaranteed.18

Finally, this thesis is primarily concerned with the public procurement Directive on the procurement of public works, supplies and services.19 It is important to note that at the end of 2011, the Commission published its proposals on public procurement, which include the revision of the current Directive, and the adoption of a new directive (20014/24/EU).20 This thesis will give attention to the new Directive in Chapter 4.

1.4 R

ESEARCH APPROACH AND METHOD

When investigating the main research question, the abovementioned sub questions offer guidance. Therefore, this thesis consists of three parts. The first part provides an introduction to the EU legislation with regard to the internal market. Furthermore, a more detailed definition and overview of public procurement is given. Moreover, this part introduces the subject of regulating public procurement. The second part focuses on social and environmental policies in EU public procurement law. In addition, this part includes legal instruments that recognize

14_{Directive 2014/24/EU of the European Parliament and of the Council on public procurement and repealing}

Directive 2004/18/EC ( the Public Procurement Directive)

15_{See: Chapter IV (Artt. 23-27) Directive 2004/18/EC} 16_{See: Chapter V (Artt 28-34) Directive 2004/18/EC} 17_{See: Chapter VII (Art. 53) Directive 2004/18/EC}

18_{Franch, M., & Grau, M. (2013). Contract Award Criteria. In M. Tyrus, R. Caranta, & G. Edelstam (Eds.), EU Public}

Contract Law (pp. 1-89). Brussel, Belgium: Bruyland. P.2

19_{Directive 2004/18/EC}

20_{The Directive were voted by the European Parliament on 15 January 2014 and adopted by the Council on 11}

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social policies, a review of literature, and a presentation of the case law. Finally, the third part evaluates further considerations relating to imposing social and environmental requirements and explores how EU’s sustainable policies can be reconciled with EU internal market. This thesis employs the traditional legal method, which establishes the legislative framework applicable to public procurement. Additionally, relevant legislation, preparatory work on proposed laws, and case law is examined. This thesis concentrates on EU law and case law from the Court of Justice of the European Union (CJEU). Furthermore, the analysis of social and environmental criteria as a strategic tool within public procurement is conducted from an EU perspective. In addition, commission guidelines and communications are assessed since these are strong factors in the development of the EU social and environmental policies.

1.5 D

ISPOSITION

Firstly, Chapter 1 offers the framework for exploring the research questions.

Secondly, Chapter 2 describes the area of free movement and why it must be studied in conjunction with general principles of EU Law, how it aims to maintain a full functioning of the internal market, and how public authorities may derogate from the free movement provisions. Moreover, the chapter provides an overview of the procurement process.

Subsequently, Chapter 3 employs the findings of the previous section to discuss the limits of using social and environmental criteria. This section also investigates whether the existing EU legal framework offers public authorities the opportunity to take social considerations in public procurement into account. The relevant case law of the CJEU will be evaluated, as it has been instrumental to the development and acceptance of social and environmental requirements in public procurement.21

Based on the findings, Chapter 4 analysis the possibilities for finding a balance between social and environmental considerations and the internal market. This chapter assesses the newly proposed in 2014.22_{and whether it is a carte blanche for social and environmental consideration}

in public procurement.23

21_{Eriksson, E. (2014). Green public procurement as a policy instrument. Retrieved from}

http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=4451209&fileOId=4465017 p.14

22_{Directive 2014/24/EU}

23_{Hetnne, J. (2013). Stategic use of Public Procurement - Limits and Opportunities. European Policy analysis, 7,}

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2 LEGAL

FRAMEWORK

OF

EU

PUBLIC

PROCUREMENT

2.1 T

HE

EU

P

UBLIC

P

ROCUREMENT REGIME

This section provides a brief introduction to the EU objectives, namely the objective of the internal market. This aim has influenced the EU procurement regime to secure the proper functioning of the internal market by coordinating public procurement law.24 The creation of a common ‘internal market’, where there are no barriers to trade between Member States, represents the main foundation of the EU.25 In other words, the aim is to reduce the opportunity for Member States to use public procurement that prevents foreign service providers and suppliers from entering their public market, thus guaranteeing non-discriminatory access to public tenders.26_{Regulating public markets is thus an integral part in achieving the internal}

market objective.27_{Using public procurement as a tool to promote social and environmental}

benefits present a particular treat to the internal market objective. Promotion of policy objectives does not necessarily have to be economically efficient. Instead, public authorities can conclude that a certain financial loss is tolerable in light of the social or environmental objective to be attained. However, the pursuit of such objectives needs to be compatible with EU law. It is therefore crucial to study the legislative framework of public procurement to grasp the possibilities as well as the limitations of using public procurement as a tool to promote social and environmental benefits.

Public contracts are subject to two sets of provisions. First, the EU Treaty and the Treaty’s free movement provisions. Although the Treaty does not include provisions that deal specifically with Member States’ procurement, it generally guarantees free movement within the internal market. It contains general rules that prohibit Member States from discriminating against other Member States. Moreover, contracts that are awarded by public authorities under public procurement are subject to the Treaty provisions. This applies in particular to the freedom of goods (Art. 34), freedom of establishment (Art. 49), and freedom of service (Art. 56) which are contained in the Treaty of the Functioning of the European Union (TFEU). These rules apply to all public procurement measures and all types of public contracts. They are referred to as the

24_{B. Bercusson and N. Bruun, Labour law Aspects of Porcurement in the EU in R. Nielsen and S. Treumer, The}

new EU Public Procurement Directive, Djof Publishing, Copenhagen [2005], pp. 97-116, p. 97

25_{C. Bovis, EC public procurement: case law and regulation, Oxford Univ. Press, Oxford, [2006], p. 9} 26_{C. Bovis, EU Public Procurement law, 2.ED., Edward Elgar, Cheltenham, 2012, p. viii-ix}

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TFEU’s ‘negative’ obligations.28_{In addition, these rules are directly applicable and enforceable}

in Member States.29_{These provisions are further discussed in section 2.2. Second, public}

contracts are also subject to secondary legislation in the form of a Directive that governs major public contracts.30 This Directive instructs public authorities to award public contracts using transparent procurement procedures, and not to favour national tenderers by direct or indirect discrimination. According to Arrowsmith and Kunzlik, non-discrimination is essential. This is set out both in the Treaty and in the preamble to the Directive. Additionally, procurement rules aim to reduce disproportionate restrictions to free market access.31

Both the EU institutions and the Member States have certain obligations to the common internal market. Additionally, Member States are required to take all appropriate measures to ensure the fulfilment of their obligations.32 Member States should abstain from measures that could jeopardize the attainment of the Treaty’s objective.33

2.2 TFEU

AND THE

G

ENERAL PRINCIPLES OP LAW

2.2.1 Free movement of goods, establishment and services

The basic rule of the TFEU, contained in article 34, states that goods should move freely in the internal market without being subject to quantitative restrictions between Member States and measures having equivalent effect. The TFEU rules and their interpretation are similar to the rules , contained in article 34, in order to ensure the freedom to provide services article 5634_and

the freedom of establishment article 49.35

28_{S. Arrowsmith and P. Kunzlik, Social and Environmental Polices in EC Procurement law – New Directive and}

New Directions Cambridge University Press [2009] p.33

29_{Arrowsmith, S. (2010). EU Public Procurement Law: An Introduction.} _{Retrieved from}

http://www.nottingham.ac.uk/pprg/documentsarchive/asialinkmaterials/eupublicprocurementlawintroduction .pdf P. 53

New Directions Cambridge University Press [2009], p. 79

New Directions Cambridge University Press [2009], p. 30

32_{Sigma. (n.d.). Public Procurement Training for IPA Beneficiaries. Retrieved from} http://www.sigmaweb.org/publicationsdocuments/46189707.pdf p. 10

33_{Trepte, P. (2007). Public Procurement in the EU, A Practioners Guide (2nd ed.). New York, United States of}

America: Oxford University Press. p. 4

34_{Art. 56 TFEU: lays down the freedom to provide services. This provision prevents public authorities from}

discriminating directly or indirectly against firms from other Member States in relation to public service contracts. Obviously, it again prohibits practices such as reserving contracts for national firms. It also covers favouritism.

35_{Art.49 TFEU: concerns the right of establishment for companies and self-employed. It provides that}

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This provision has been interpreted broadly, and the prohibition of measures having equivalent effect to the quantitative restrictions therefore has a considerable scope. In Dasonville36_{, the}

court ruled that a measure having equivalent effect could be ‘all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade’.37 In Cassis de Dijon,38 the Court held that, in the absence of common

rules relating to production and marketing, it is for the Member States to regulate all matters relating to the production of the products in their own territory. Member States must, in principle, recognize products that are lawfully produced and marketed in other Member States.

39_{The Court created a ‘rule of reason’ making it possible to take other interest different interests}

into account40. Discriminatory specifications, unequal information provided to bidders, unauthorised use of non-competitive procurement procedures, or discriminatory award criteria that make a market entry less attractive or outright discriminates against non-domestic bidders, can amount to measures having equivalent effect to quantitative restrictions under free movement of goods. This amounts to a violation of the freedom to provide services or establishment, or discrimination on grounds of nationality contained in article 18.

There are, however, exceptions to the above-mentioned principles as discriminatory measures can be justified when they promote legitimate interests of Member States that override the interest in promoting free trade. Thus, they can be justified under certain exceptions stated in the TFEU. For article 34, article 36 provides exceptions on grounds of ‘public morality, public policy, or public security’. These grounds mentioned in article 36 of the TFEU cannot be invoked for the protection of economic objectives by a Member State. In order to invoke these derogations there has to be an objective reason in support thereof. The use of these derogations cannot constitute arbitrary discrimination or disguised restrictions on intra-community trade.

prohibited. In practice, this means that self-employed have the right to establish themselves in another Member State and to operate under the same conditions as nationals.

36_{Case 8/74 Procureur dur Roi v Dassonville [1974] ECR 837 par. 16} 37_{Arrowsmith, S. (2010). EU Public Procurement Law: An introduction.}

http://www.nottingham.ac.uk/pprg/documentsarchive/asialinkmaterials/eupublicprocurementlawintroduction .pdf p. 67 See also: C. Barnard, THE SUBSTANTIVE LAW OF THE EU; the four freedoms, Oxford University Press, Third edition, New York [2010] p. 92

38_{Case C-120/78 Rewe Zentrale AG/Bundesmonopol verwaltung fur Brandwein [1979] ECR 649 para.12,13,14} 39_{Case C- 45/87 Commission v Ireland (Dundalk) ECR 4929}

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The Court has determined in the Case Gebhard41_{and Conste}42_{a test that is necessary before a}

restriction can be put in place on the free movement rules. The Court stated that: - They must be applied in a non-discriminatory manner;

- They must be justified by imperative requirements in the general test;

- They must be suitable for securing the attainment of the objective which they pursue; - They must not go beyond what is necessary to attain the objective.43

Furthermore, similar exceptions to the provision on free movement of services and establishment apply under article 52 in combination with article 62, which provides for derogations on grounds of public policy, public health, or public morality. The same test also applies within the services and establishment areas.

Member States may in addition maintain restriction on the free movement provisions on the grounds established by the CJEU.44 Thus, hindrances to trade of goods and services can be justified under by mandatory requirements established by the CJEU.45 These include for example, environmental protection , public health, consumer protection, fair trading practices and working conditions. 46

Thus, any award criterion that makes market access less attractive or hinders suppliers from other Member States could be caught under the free movement rules.47_{A subject matter of a}

public contract may fall within one of the categories to be found in the Treaty exceptions or justifications established by the CJEU. If the subject matter of a public contract falls within the abovementioned justifications this does not mean that the procurement can act outside the scope of the TFEU. The Member State must demonstrate that the subject matter falls within one of the specified ground and that there is a threat to that specific interest.48

41_{Case C-55/94 Gebhard [1995] ECR I-4165, par. 37}

42_{Case C-234/03 Contse and others v. Ingesa [2005] ECR I-9315, par. 25}

1-20. Retrieved from http://www.sieps.se/sites/default/files/2013_7epa.pdf p.10, See also: Pappers, L. (n.d.). The Free Movement of Capital in relation to Third Countries.

Retrieved from http://arno.uvt.nl/show.cgi?fid=43753 p 43

44_{Eriksson, E. (2014). Green public procurement as a policy instrument. Retrieved from Retrieved from} http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=4451209&fileOId=4465017 p. 18

45_{Case C-120/78 Rewe Zentrale AG/Bundesmonopol verwaltung fur Brantwein [1979] ECR 649}

46_{Case C-21/88, DU Pont de Nemours Italiana SpA v Unita Sanitaria Locale No. 2 Di Carrara [1990] ECR I-889} 47_{Arrowsmith, S. (2009). EC Regime on Public Procurement. In K. V.Thai (Ed.), International Handbook for Public}

Procurement (pp. 251-291). See also: Case C-3/88 Commission v Italy [1989] ECR 4035

48_{Arrowsmith, S. (2010). EU Public Procurement Law: An Introduction. Retrieved from}

http://www.nottingham.ac.uk/pprg/documentsarchive/asialinkmaterials/eupublicprocurementlawintroduction .pdf p. 71

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2.2.2 General principles of EU law

The EU’s general principles are intended to assist the interpretation of the provisions relating to free movement; the general principles can be observed as an integral part of EU law, including both primary and secondary law, and given full effect and precedence in the legal areas governed by EU law. The meaning of the general principles has largely been developed through the CJEU’s interpretation of the free movement provisions, and ultimately helps to secure and enable the functioning of the internal market49_.

The Procurement Directivebuilds on the principle of non-discrimination. It strictly prohibits the discrimination of tenders directly or indirectly on grounds of nationality, and develops it further into a principle of equal treatment of tenderers.50 This equal treatment is a widely recognised principle of EU law. Moreover, it is a principle to be respected by all courts as confirmed through case law of the CJEU. All suppliers submitting a tender must be treated equally and be given equal opportunities to be awarded a public contract. This has not only been recognised as fundamental for free movement, but as a core principle underpinning the public procurement directives.

In addition, equal treatment can be expressed as a concept that generally requires comparable situations to be treated in the same manner and precludes different situations from being treated in the same way.51 This implies that contracting authorities will not consider the different abilities faced by individual economic operators, but judge them purely on the tender criteria. It provides an objective assessment of tender qualities and ignores any considerations that are irrelevant to the discovery of the economically most efficient tender.52 Accordingly, the specification requirements cannot be used by a public body or by a tender in order to ‘direct’ the award of the contract to a specific tenderer. This principle is applicable to both direct and indirect discriminatory measures, and is therefore overriding in nature, and - in the context of public procurement - has been expressed by the CJEU.53_{The CJEU had further acknowledged}

49_{Arrowsmith, S. (2009). EC Regime on Public Procurement. In K. V.Thai (Ed.), International Handbook for}

Public Procurement (pp. 251-291). p.267

50_{Recital 2 of Directive 2004/18/EC}

51_{Case C-324/98 Teleaustria [2000] ECR I-10745 para 61-62, See also: Arrowsmith, S. (2010). EU Public}

Procurement Law: An Introduction.Retrieved from

52_{Sigma, Public procurement in the EU: Legislative Framework, Basic Principles and Institutions, Retrieved from}

www.sigmaweb.org p. 13

53_{Case C-324/98 Teleaustria [2000] ECR I-10745 para 61-62, See also: Arrowsmith, S. (2010). EU Public}

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that the requirements and award criteria used in the procurement procedure must be proportional to the purported objective. The requirement cannot go beyond what is necessary to achieve the purpose of the procurement. This is the principle of proportionality. The transparency principle is another principle underpinning the area of public procurement; the public authority must give adequate information about the public contracts and how the tenderer will be assessed, so that the suppliers or service providers from other Member States can draw up competitive tenders accordingly.54 This principle is also imperative in order to enable fair competition among tenderers.55

2.3 S

ECONDARY LEGISLATION

2.3.1 Directive 2004/18/EC

The current Directive is founded on the free movement provisions and the principles derived there from.56_{It must be borne in mind that the purpose of regulating public procurement at EU}

level is to eliminate barriers to the freedom to provide services and goods and therefore also protecting interests of economic operators established in a Member State who wish to offer goods and services to public authorities in another Member States.57

The Directive is also based upon case law of the CJEU who had elucidated the lawfulness of using social and environmental criteria in four important cases, especially with regard to the award criteria which will be discussed in section 3.3 of this thesis. This clarifies the conditions for public authorities to meet the needs in the social and environmental area, provided that such criteria are linked to the subject matter of the contract and do not confer unrestricted freedom to the contracting authority when awarding a tender. 58

The directive is applicable to works and service or supply contracts between economic operators and a contracting authority. 59 The term economic operator refers to contractors or suppliers and service providers that belong to the private realm of trade.60 The latter term

http://www.nottingham.ac.uk/pprg/documentsarchive/asialinkmaterials/eupublicprocurementlawintroduction .pdf p.79

54_{Case C-470/99 Universale-Bau and others [2002] ECR I-11617}

55_{C. Bovis, EU Public Procurement law, second edition, Elgar European Law [2012], pp.250-251, See also Case C-}

324/98 Teleaustria [2000] ECR I-10745, para. 61,62

http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=4451209&fileOId=4465017 p. 21

57_{Case C-360/96 Gemeente Arnhem, Gemeente Rheden v BFI Holding [1998] ECR I-6821 P. 41} 58_{Recital 1 Directive 2004/18/EC}

59_{Directive 2004/18EC, Art. 1(2)(a)} 60_{Directive 2004/18/EC, Art. 1(8)}

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comprises entities within the realm of a state, regional, or local government, and bodies governed by public law.61_{Furthermore, the public contract must be of a value exceeding certain}

thresholds as stated in the Directive. Those thresholds will be reviewed every two years in order to align them with the Government Agreement Procurement (GPA). This will ensure that non-EU nationals are not benefitting from more advantageous thresholds than non-EU nationals. The thresholds vary depending on the sector in question.62 Contracts that fall below the threshold are exempted from the Directive’s scope, yet these contracts are still subjected to the Treaty provisions, especially the free movement principles and the non-discrimination principle.63

2.4 T

HE

P

UBLIC PROCUREMENT PROCESS

2.4.1 Qualification

The public procurement process is regulated in detail in the Directive64_{, and as mentioned}

above, it is a complicated process. In the context of this thesis, it is sufficient to point out that there are two processes: the selection of the tenderers and the award of the public contract. The selection of the tenders gives the public authority the opportunity to ensure that the suppliers have the necessary qualities to fulfil their obligations under the eventual contract.65 Such qualification assessments can be subdivided into three aspects, namely personal finding, technical capacity, and financial capability. 66 Only economic operators fulfilling the qualification criteria set forth by the contracting public authority can proceed with the procurement procedure.67 The discretion of Member States in this stage is limited as they can only select economic operators on certain grounds listed in the Directive.68

61_{Directive 2004/18/EC, Art. 1(9)} 62_{Directive 2004/18/EC, Art. 7}

63_{Case C-507-03, Commission v Ireland (An Post) [2007] ECR I-9777, par. 29}

64_{Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination}

of procedures for the award of public work contracts, public supply contracts and public service contracts

1-20. Retrieved from http://www.sieps.se/sites/default/files/2013_7epa.pdf p. 3

66_{The rules on qualification in the Directive 2004/18/EC can be found in Articles 45-52} 67_{EU public contract law hst 5 1 van 11 (Again, Dutch!)}

68_{Directive 2004/18/EC, Art. 44, Art. 47 , Arrowsmith, S. (2010). EU Public Porcurement Law: An Intrdocution.}

Retrieved from

http://www.nottingham.ac.uk/pprg/documentsarchive/asialinkmaterials/eupublicprocurementlawintroduction

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2.4.2 Award criteria

The selection stage is followed by the award procedure, where the best tender is chosen. Contracting public authorities must base the award of public contracts on the award criteria. For this reason, award criteria are an essential part of public procurement.69_{The Directive}

provides a criteria list that can be considered by a public authority if the award of contract is based on the ‘most economically advantageous tender’. Regarding discrimination, the CJEU has stated that the mere fact that award criteria may exclude some providers does not infringe upon the fundamental freedoms. Factors that are not purely economic may still have effect on the value of the tender. In this respect, the Court’s case law permits the use of other criteria, such as social and environmental criteria, in the contracting process. 70 Social and Environmental criteria can be economically advantageous but still need to be subject to the manner in which the public contract is carried out. The list of criteria for determining the most economically advantageous tender is illustrative and not exhaustive.71 Nevertheless, these criteria can only be used when they are linked to the contract’s subject matter. They do not confer an unrestricted freedom of choice to the contracting public authority.72

In other words, the Directive and the Court attempt to limit the use of discretionary powers by the public authorities in relation to selecting and evaluating award criteria.73 This constitutes an important restriction of the option to take social and environmental considerations into account. The CJEU has developed certain other conditions in its case law that may limit the scope of social and environmental criteria in the awarding phase. The relevant case law with regard to award criteria will be discussed below in Section 3.2.

2.4.3 Contract performance criteria

A public authority can award a public contract and demand that the awarded tenderer complies with certain requirements relating to the performance of the public contract. Such requirements must comply with EU law and be explicitly enunciated in the contract notice. Such requirements

69_{Franch, M., & Grau, M. (2013). Contract Award Criteria. In M. Tyrus, R. Caranta, & G. Edelstam (Eds.), EU}

Public Contract Law (pp. 1-89). Brussel, Belgium: Bruyland. P. 2

70_{Case C-513/99 Concordia Bus Finland, para. 55}

71_{S. Arrowsmith, An Assessment of the New Legislative Package on Public Procurement, Common market law}

review, Volume 41, issue 5, 2004. P. 1316

72_{Directive 2004/18/EC, Art. 53(1), See also Case C-31/87, Gebroeders Beentjes B.V. v Netherlands [1988] ECR}

4635, par. 19

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can comprise social considerations. The aim of these criteria is to influence the performance of the public contract, which can be used to combat unemployment. Public authorities would prefer to see local people employed in the performance of the public contract, but this puts strain on the principle of non-discrimination on the basis of nationality.74and to fulfil requirements, if the social criteria are not directly or indirectly discriminatory. With regard to clarifying the scope available for public authorities to impose social criteria at this stage of the procurement process, Article 26 of the Directive is essential. Contract performance criteria do not have to be considered as a restriction to trade if the criteria do not go beyond the performance of the contract. If the criteria go beyond the performance of the contract they can be considered as hindrances to trade, and must therefore be justified. This goes for both discriminatory and non-discriminatory measures. The principle of equal treatment is of great importance when determining the conditions for performance of the contract.

2.5 C

ONCLUDING REMARKS

It can be concluded that the TFEU, particularly the provisions on the free movement of goods, services, and establishment, influence public authorities in their ability to impose requirements in public procurement. The area of public procurement is complementary to the internal market and is essential to develop and improve that market.75 The TFEU does not expressly mention public procurement on the internal market. However, it contains certain general provisions, such as the internal market regulations on the free movement of goods and services that, inter

alia, prohibit states from discriminating against firms, products and services from other EU

Member States are the most relevant for public procurement.76 Therefore, the award of public contracts concluded by the State, regional or local authorities, or other bodies governed by public law entities, is subject to the TFEU provisions and the principles derived therefrom, such as the principles of non-discrimination, proportionality, and transparency.77

74_{Ibid., p. 3-5}

75_{See: Commission Communication; A strategy for smart, sustainable and inclusive growth, COM 2020 [2010]}

Retrieved from http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:52010DC2020

76_{Arrowsmith, S. (2009). EC Regime on Public Procurement. In K. V.Thai (Ed.), International Handbook for Public}

Procurement (pp. 251-291). P.257

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3 SOCIAL AND ENVIRONMENTAL CONSIDERATIONS IN

EU

PUBLIC

PROCUREMENT

:

SCOPE OF DISCRETION

3.1 C

ONCEPT OF SUSTAINABLE PROCUREMENT

Sustainable Public procurement means that public contracts integrate social and environmental considerations into all stages of the procurement process with the goal to contribute to a broader social and environmental policy, such as to reduce the impact on human health and the environment through saving materials and energy and reducing pollution. The concept of social considerations includes combating unemployment, social inclusion, and preferential clauses for the reintegration of the disadvantaged or excluded persons from the labour market.78 The different considerations relating to environment and social considerations has traditionally been labelled as secondary considerations in opposition to ‘best value for money’ being the primary objective. Arrowsmith79 suggests the term ‘horizontal policies’ as an alternative. The Commission refers to ‘complementary objectives’ in a recent Green paper80 as a way of placing sustainability on the same footing as other economic objectives. 81

3.2 P

ROVISIONS IN PRIMARY LAW RECOGNIZING SOCIAL AND ENVIRONMENTAL CONSIDERATIONS

The TFEU deals with social and environmental policies in many ways. According to article 4, the European Union shares competence with Member States in economic, social, and territorial cohesion, and on environmental issues. Article 9 provides that in defining and implementing its policies and activities, the European Union must take into account requirements linked to the, the guarantee of social protection, the fight against social exclusion, and a high level of education. In article 11 states that requirements regarding environmental protection must be integrated into the policies and activities of the EU. Finally, article 145 states that in relation to employment, Member States have to work towards developing a coordinated strategy for employment, and promote a skilled, trained, and adaptable workforce as well as labour markets responsive to economic change, with a view to achieving the objectives of the Treaty on the

78_{Caranta, R. (2013). Sustainable Procurement. In M. Tyrus, R. Caranta, & G. Edelstam (Eds.), EU Public Contract}

Law (pp. 1-60). Brussel, Belgium: Bruyland. P. 2

York, United States of America: Cambridge University Press. P. 12

80_{Caranta, R. (2014). Public procurement law: limitations, opportunities and paradoxes. Retrieved from} http://fide2014.eu/pdf/FIDE_2014_Topic_3_Questionnaire_EN.pdf P.7

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19

European Union.82_{All these articles are a concrete expression of the general principle of}

consistency listed in article 7, which declares that the EU shall ensure consistency between its policies and activities.83_{These articles declare that the EU has to consider many different}

interests in the European integration project. The TFEU legal framework is a result of the reconciliation of different interests and is not only an expression of free movement and free trade. However, these provisions are instructive to the EU legislator, and therefore not directly applicable. It should be noted that the TFEU refers to social and environmental policies as expressions of intention. It is worth surveying the wording of the TFEU, because the CJEU is placing emphasis on the principles in its judgements as we will see in the next section.84

3.3 R

EFERENCE TO SOCIAL AND ENVIRONMENTAL CRITERIA AND THE APPROACH OF THE COURT

Some rulings are invoked to demonstrate that the CJEU accepts a large range of social considerations in public procurement.85 In the case of Cambridge University,86 the CJEU stated

that the purpose of the coordinating procedures for public contract awards at EU level is to eliminate barriers to the freedom to provide goods and services, and to protect the interests of tenderers who wish to offer goods or services within the EU. The CJEU balances the divergent interests of a functioning internal market and social considerations. In its balancing exercise, the court interprets relevant Treaty provisions and applies the general principles of the EU. This is important to understand the complexities linked to sustainable development as well as the role of the CJEU in social and environmental considerations within the award criteria. The CJEU has mostly chosen an interpretation of the internal market objectives. The internal market objectives neither exclude the possibility for social concerns, nor undermine the internal market.

82_{Konkurrensverket - Swedish Competition Authority. (n.d.). Social and Green Clauses in EU Public}

Procurement Law: The Scope of Discretion. Retrieved from

http://www.konkurrensverket.se/globalassets/forskning/projekt/2015/social-and-green-clauses.pdf p. 2

83_{Ibid., p. 2}

84_{Arrowsmith, S. (2010). EU Public Procurement: An introduction. Retrieved from}

85_{Hetnne, J. (2013). Sustainable Public Procurement and the Single market - Is there a conflict or interest?}

Retrieved from Retrieved from http://connection.ebscohost.com/c/articles/89568531/sustainable-public-procurement-single-market-there-conflict-interest p. 8

86_{CaseC-380/98 The Queen v H.M. Treasury, ex parte The University of Cambridge [2000] ECR I-08035,}

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3.3.1 Specific reference to environmental requirements

Environmental policy has become important, as confirmed by the Commission in the Green

paper on Public Procurement in the European Union.87_{The Directive states that environmental}

criteria can be included in the award criterion ‘most economically advantageous tender’.88_This

is a codification of the rules laid down by the CJEU in the Concordia Bus89_{case. This is the}

first case where CJEU made clear that criteria used to determine the most economically tender do not have to be of a purely economic nature and that environmental criteria can be considered in the award criterion ‘most economically advantageous tender’90_{. In the Concordia Bus case,}

the dispute referred to the CJEU was whether environmental considerations could be part of the award criteria. One of the criteria to assess which tender was the most advantageous overall to the city was the operator’s quality and environment management. This last criterion could lead to additional points to tenderers which met certain specific and objectively quantifiable requirements.91 The transport company belonging to the public authority that organized the tender procedure was one of the few that could supply vehicles that met the environmental criteria. CJEU found that a public authority has the freedom to determine which factors will be used for choosing the most economically advantageous tender. 92

All award criteria relating to environmental protection must meet four conditions: they must relate to the subject matter of the contract, they must not give the public authority unrestricted freedom of choice, the conditions must be listed in the tender documents, and they must respect EU internal market law and general principles, in particular the principle of non-discrimination.93_{In addition to the principle of non-discrimination, the CJEU held that the fact}

that only a few companies met one of the award criteria did not constitute discrimination.94

87_{Commission, Green Paper on modernization of EU Public Procurement policy: Towards a more efficient}

European Procurement Market, COM(2011), See also: M. Monti: A new strategy for the Single Market at the Service of Europe’s economy and Society, Report to the President of the European Commission of the European Commission J.M. Barroso by Mario Monti, (2010).

88_{Directive 2004/18/EC, Recital 46}

89_{Case C-513/99, Concordia Bus Finland Oy ab ve Helsinki Kapupunki and HKL-Bussiliikenne [2002] ECR I-7213} 90_{Ibid. paras 54,55, 58 ff}

http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=4451209&fileOId=4465017 p. 37

92_{Ibid., p. 36-37}

93_{Case C-513/99, Concordia Bus Finland Oy ab ve Helsinki Kapupunki and HKL-Bussiliikenne [2002] ECR I-7213}

paras. 59, 63-64

94_{Case C-513/99, Concordia Bus Finland Oy ab ve Helsinki Kapupunki and HKL-Bussiliikenne [2002] ECR I-7213}

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21

The findings in the Concordia case on environmental requirements in the award criterion were further developed in the EVN95_{. In this case, the limits to this possibility were in focus. The}

CJEU strengthened the requirement for award criteria to be linked to the subject matter of the contract;96 the award involved an electricity supply contract that required energy from renewable resources.97The award criterion of the public contract that was distributed points to tenderers that are able to supply an amount of renewable electricity exceeding the stated needs of the public authority. Again, the CJEU held that EU legislation did not preclude a public authority from using such an award criterion in question. Nevertheless, the CJEU restated that the criterion must be clearly formulated to satisfy the requirements of equal treatment and transparency of procedures for awarding public contracts.98 Thus, tenderers must be equally positioned when they drew up their tenders. Furthermore, the award criterion was not considered to be linked to the subject matter of the public contract and was thus not compatible with EU law on public procurement.99 The CJEU concluded that this does not confer an unrestricted discretion to public authorities, because it has to comply with the fundamental principles of EU law and in particular the principle of non-discrimination.

Another example is the Dutch Coffee100case. In this case, the Dutch public authority had used award criteria to favour tenders with specific eco- and fair-trade label.101 The CJEU interpreted the EVN to mean that an award criterion does not have to relate to an intrinsic characteristic of the product, but can denote whether the product is from a fair trade origin.102_{Such a criterion}

would still be linked to the subject matter of the contract. 103_{These criteria that relate to a}

particular means of production or distribution could be considered to be linked to the subject matter of public contract for product supply. 104In this case, the criteria themselves were

95_{Case C-448/01 EVN AG and Wienstrom GmbH v Austria [2003] ECR I-14527} 96_{Arrowsmith, S. (2010). EU Public Procurement law: An introduction, p.63}

Public Contract Law (pp. 1-89). Brussel, Belgium: Bruyland. P.57

98_{Ibid., p. 57 See also: Case C-448/01 EVN AG and Wienstrom GmbH v Austria [2003] ECR I-14527 par. 51 See}

also: Arrowsmith, S. (2010). EU Public Procurement Law: An introduction . Retrieved from

99_{Case C-448/01 EVN AG and Wienstrom GmbH v Austria [2003] ECR I-14527 par. 70}

100_{Case C-368/10 Commission v Kingdom of the Netherlands (‘Dutch Coffee’), judgement of May 10, 2012} 101_{Ibid., par. 61}

http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=4451209&fileOId=4465017 P. 41

103_{Case C-368/10 Commission v Kingdom of the Netherlands (‘Dutch Coffee’), judgement of May 10, 2012}

paras 91, 92

104_{Semple, A. (2014). The Link to the Subject-Matter: A Glass Ceiling Sustainable Public Contracts?. Retrieved}

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22

problematic because they only referred to the names of labels and not the underlying criteria, and therefore lacked transparency.105

According to Kunzlik, the Directive allows public authorities a degree of discretion to favour environmentally preferable products. However, the precise extent of that discretion controversy arises. This reflects a tension between the objectives of the EU procurement regime and the potential consequences of acknowledging that the procurement directive confers sufficient discretion upon public authorities to enable them to use the procurement to further environmental goals. When public authorities have a certain discretion, there will always will be a risk that public authorities will use that discretion for protectionist policies.106

3.3.2 Specific reference to social requirements

Social criteria are not specifically mentioned in the illustrative lists of criteria contained in the Directive, although they are mentioned in the recitals.107 There has been over the last years an intense debate as to what extent Member States may take into account social considerations in public procurement

The first case to be mentioned in this regard is the case of Beentjes108, where the CJEU ruled

that public authorities that award a contract to the most economically advantageous tender could include social considerations in the award criteria. This case in particular aimed at combating long-term unemployment. The CJEU admitted this possibility in general terms for the first time. Therefore, discretion is left to public authorities to specify what they would consider the most economically advantageous tender.109_{As a result, a public authority stipulated in the tender}

documents that 70 percent of the contract workforce should consist of local long-term unemployed persons engaged through the unemployment office. According to the CJEU, such a condition was a not lawful ground for exclusion, since it was not listed in the Directive in question. Such a condition could infringe the non-discrimination principle if it is likely to only be satisfied by national tenderers, or if tenderers from other Member States have difficulty complying with such condition. Thus, the CJEU held that a condition relating to the

105_{Case C-368/10 Commission v Kingdom of the Netherlands (‘Dutch Coffee’), judgement of May 10, 2012 par.}

93

Public Contract Law (pp. 1-89). Brussel, Belgium: Bruyland p.58

107_{Ibid., P. 59., See also: Recital 46 Directive 2004/18/EC}

108_{Case 31/87 Gebroeders Beentjes B.V. v State of Netherlands [1988] ECR 4635}

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23

employment of long-term unemployed people is compatible with the Directive.110_However,

the discretion of public authorities is restricted by the requirement that it has no direct or indirect discriminatory effect on firms from other Member States.111_{Furthermore, such a condition}

must be mentioned in the tender notice. The CJEU maintained that considerations relating to employment could be utilised as a feature of the award criteria only if they are not contrary to the principles of the TFEU; they must comply with all the relevant provisions flowing from the principles laid down in the TFEU.112

The Beentjes judgement was thus important in stating that award criteria may also be criteria other than purely economic elements. It cannot be read as a support for social considerations with regard to sustainable public procurement, since the non-discrimination principle and free

movement objectives are very much at the centre of this judgement. 113

The next case illustrating permitted award criteria is the Nord-Pas-de-Calais114. In this case, the CJEU clarified that choosing the most economically advantageous tender does not preclude the possibility of using a criterion linked to a campaign against unemployment, provided that the conditions comply with general EU law principles, particularly the TFEU principles of non-discrimination derived from the provisions on the right of establishment and the freedom to provide services.115 Furthermore, even if such a criterion was not in itself incompatible with the Directive, its application must conform to all the procedural rules in the applicable directive.116

In this case, the court accepted employment considerations as one of the criteria for the most economically advantageous tender. Thus, a provision aspiring to combat unemployment could be regarded as a legitimate award criterion. In the Rüffert case 117_{the CJEU made clear that,}

when social considerations are subject of harmonisation, EU law must be respected in public procurement proceedings. In this case the CJEU made clear that the freedom to provide services and the Posted Workers Directive preclude requirements in public contracts that go beyond

110_{Arrowsmith, S. (2010). EU Public Procurement law: An introduction, Arrowsmith, S. (2010). EU Public}

Procurement Law: An introduction . Retrieved from

http://www.nottingham.ac.uk/pprg/documentsarchive/asialinkmaterials/eupublicprocurementlawintroduction .pdf p.335

111_{Ibid., p 336}

112_{Case 31/87 Gebroeders Beentjes B.V. v State of Netherlands [1988] ECR 4635} 113_{Arrowsmith, S. (2010). EU Public Procurement law: An introduction Retrieved from}

114_{Case C-225/98, Commission v France (‘Nord-pas-de-Calais’) [2000] ECR I-7445} 115_{Arrowsmith, S. (2010). EU Public Procurement law: An introduction Retrieved from}

116_{Ibid., p. 170}

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those compatible with their provisions. Public authorities must respect all the relevant provisions of EU law. 118

3.4 L

IMITS OF IMPOSING SOCIAL AND ENVIRONMENTAL CONSIDERATIONS

The abovementioned cases cannot be underestimated. In all these cases the CJEU has shown that when a public authority decides to award a public contract to the tenderer who submits the most economically advantageous tender, it may take into account social and environmental considerations, provided that they are linked to the subject matter of the contract.119_However,

this does not confer an unrestricted freedom of choice on the public authority. The CJEU has shown that the primary objective of public procurement is to ensure that Member States base their conduct on economic considerations that ensure free movement. They must comply with all the fundamental principles of EU law and, in particular, the principle of non-discrimination. The principle of non-discrimination was developed by the CJEU in the Conste case as discussed in Chapter 2. This raises concerns, because the ambitious policies of the Commission and under the current public procurement system and legal framework make it difficult to realize a more sustainable procurement.

Thus there is a certain contradiction within the EU between the vision of the Commission and the legislative acts. This needs to be resolved if the EU wants to achieve the ambitious goals it has set out. Arrowsmith120 suggests that public authorities define the market instead of limiting market access when they procure products or services. There is a strong connection between public procurement and free movement and this connection must be removed.121 However, such a view gives public authorities the position of market participants and puts them outside the scope of EU law. Public authorities are not merely market participants but form part of the Member States. Because they are part of a state, they possess the power of a market regulator.

118_{Arrowsmith, S and Kunzlik, P., Editors’ note – the decision in Rüffert v. Land Niedersachsen in Arrowsmith,}

S., & Kunzlik, P. (Eds.). (2009). Social and Environmental Polices in EC Procurement law – New Directive and New Directions. Cambridge, UK: Cambridge University Press. p. 125, See also: Konkurrensverket - Swedish Competition Authority. (2015, January 31). Social and Green Clauses in EU Public Procurement Law: The Scope of Discretion. Retrieved from http://www.konkurrensverket.se/globalassets/forskning/projekt/2015/social-and-green-clauses.pdf p. 8

1-20. Retrieved from http://www.sieps.se/sites/default/files/2013_7epa.pdf p.10

York, United States of America: Cambridge University Press.

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The Directive has always aimed to ensure the free movement of goods and to provide services and establishment.122

The award criteria in the directive refers mainly to economic considerations. The award of public contracts has to comply with the general principles of the TFEU as well as the principles derived therefrom, such as equal treatment, non-discrimination, proportionality, and transparency.

We can conclude that requirements that go beyond economic considerations carry a burden of proof. As demonstrated in Chapter 2, this requires an internal market test.123 Within the public procurement process, as mentioned above, all requirements in the tender must be connected to the subject matter of the contract.124 This means that when social and environmental requirements are set out in the tender they must be relevant to the specific product or service. Thus, further requirements must be fulfilled in order to go beyond economic considerations. There is judicial support for expanding the award criteria beyond economic requirements. However, as discussed in Chapter 2, it will only be defendable if it complies with the legal framework. This demonstrates that one cannot focus only on the Directive and the principles contained therein in order to be certain that a procurement process is judicially correct and does not restrict trade between Member States. Free movement and the general principles of the EU must be considered superior to the provisions of the Directive.125

3.5 C

ONCLUDING REMARKS

The current system for public procurement has an economic prerequisite for awarding contracts, and this limits the possibility of public procurement where social and environmental considerations are not equal to economic considerations. It may be concluded from this brief overview of European Public Procurement Policy and the internal market, that it is not at all easy for social and environmental objectives to be included in the award criterion ‘most economically advantageous tender’ of the procurement process.

122_{Directive 2004/18/EC, Recital 2}

123_{Case C-55/94 Gebhard [1995] ECR I-4165 par.37}

124_{Case C-234/03 Conste and others v. Ingesa [2005] ECR I-9315 par. 70}

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4 ANALYSIS

OF

SUSTAINABLE

PUBLIC

PROCUREMENT:

BETWEEN

IDEAL

AND

REALITY

4.1 D

IRECTIVE

2014/14/EU

A CARTE BLANCHE

?

The proposal from the Commission has its roots in the Green Paper published in 2011.126 The Directive shows a possible way to improve environmental and social conditions. These are the significant issues in the current revision of the EU public procurement directive. However, the use of public procurement to reach certain social and environmental goals is associated with corresponding limitations that previously applied under EU law. As stated above in Section 2.5, public authorities has to comply with the free movement of goods, establishment and service of the TFEU as well as the principles deriving therefrom, such as equal treatment, transparency, proportionality and non-discrimination. When it comes to procurement the context is much more specific, these requirements is not sufficient, the CJEU has held that a public authority must not go beyond the subject matter of the contract. 127

Accordingly, the present legal situation would not be altered with the new Directive, which means that public authorities who want to impose social and environmental considerations must respect EU law and apply criteria in a non-discriminatory manner. Requirements must be justified by the general interest, be suitable for securing the attainment of their objective, and must not go beyond what is necessary. The new Directive is founded on the same premises as the present Directive.128

The new Directivedoes not significantly change the function or meaning of the award criterion ‘most economically advantageous tender’. Moreover, it contains a partial definition of the concept, drawing upon the Dutch Coffee Case. Award criteria shall be considered to be linked

126_{European Commission, Green Paper on Modernization of EU Public Procurement Policy: Towards a more}

efficient European Procurement Market, COM (2011)15. See also: Konkurrensverket - Swedish Competition Authority. (2015, January 31). Social and Green Clauses in EU Public Procurement Law: The Scope of Discretion. Retrieved from http://www.konkurrensverket.se/globalassets/forskning/projekt/2015/social-and-green-clauses.pdf p.3

1-20. Retrieved from http://www.sieps.se/sites/default/files/2013_7epa.pdf p. 13

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27

to the subject matter of the public contract where they relate to the works, supplies, or services to be provided under that contract in any respect and at any stage of their life cycle.129

There is a perceptible tension underlying the new directive: the desire to use public procurement to achieve social and environmental goals, against the desire to strengthen the internal market.130 In this context public authorities should pay attention to following two subjects: link to the subject matter and award criteria.131 To make sure that incorporation of social and environmental considerations is not done in isolation from the TFEU and in particular the free movement rules and the general principles deriving therefrom.132

4.2 H

OW CAN

E

UROPEAN PROCUREMENT POLICY BECOME MORE SUSTAINABLY RECONCILED

?

4.2.1 Subject matter of the contract: liberal application of a strict rule

In two cases: Concordia and Wienstrom the CJEU clarified that social and environmental considerations for public contracts must be linked to the subject matter of the contract. The CJEU held consistently that award criteria for public contracts must be linked to the subject matter of the contract. Thus, the first step of the public procurement process, i.e. how the subject matter is defined, lays de foundation for the criteria that can be concluded in the award stage. It is necessary to include sustainability in the subject matter of the contract in order to apply social and environmental criteria. And should specify social and environmental concerns in the subject matter of the contracts. It should be noted that the Directive contains rules on how to procure, not on what to procure.133 This is a task for public authorities to decide. Public authorities can generally procure what they need according to their own preferences, as long as the principles of the free movement of goods and services and freedom of establishment are

129_{Art. 67(3) Directive 2014/24/EU. See also: Semple, A. (2014). The Link to the Subject-Matter: A Glass Ceiling}

Sustainable Public Contracts? Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2565051 p. 9

130_{Semple, A. (2014). The Link to the Subject-Matter: A Glass Ceiling Sustainable Public Contracts? Retrieved}

from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2565051 p. 4

131_{Hetnne, J. (2013). Sustainable Public Procurement and the Single market - Is there a conflict or interest?}

Retrieved from http://connection.ebscohost.com/c/articles/89568531/sustainable-public-procurement-single-market-there-conflict-interest p. 40

1-20. Retrieved from http://www.sieps.se/sites/default/files/2013_7epa.pdf p.13

133_{ClientEarth. (2011). Clarifying the Link to the Subject Matter for Sustainable Procurement Criteria (Briefing}

No.4). Retrieved from http://www.clientearth.org/reports/procurement-briefing-no-4-clarifying-link-to-the-subject-matter.pdf p. 5