Latest news, Public procurement

IPI: Council finds compromise, paves way for trilogue

The Portuguese presidency of the European Union fulfilled its pledge to finalise internal negotiations within the Council to allow a long-awaited regulation on international procurement bids in Europe to proceed.

The new regulation allows the European Union to interfere with public tenders when bidding companies are involved whose home country does not offer market access to European bidders in a reciprocal manner. Such bids would need to be reported to the European Commission, who would then start negotiations with the third country.

If said third country does not agree to open up their markets to EU bidders, then the bid would need to be adjusted in its price and its contents – dubbed “add-on” provisions in the jargon. In some extreme cases the bidder would be excluded from the market. Different monetary thresholds apply to services and goods bids vs public work bids.

The de facto target of this regulation are Chinese companies engaged in a range of public works in Europe. But any non-EU company not having reciprocal terms within the WTO’s GPA or a free trade agreement with the EU could also be caught by the regulation. Member states agreed to exclude least-developed countries from the scope of the agreement and European SMEs exempted from the obligations.

“There is a possibility of applying exceptions under very strict conditions (including due to certain public policy needs and to a disproportionate increase of price or costs),” writes the Portuguese presidency.

The original legislative proposal was tabled in 2012 but it was long stuck in the meanders of the Council as member states were long divided over the topic. A recent political U-turn on this issue by countries such as Germany and the Netherlands as well as of some Central and Eastern European member states amidst souring political relationships with China have helped bring the regulation closer to conclusion.

The new compromise now paves the way for ‘trilogue’ negotiations with the European Parliament and the European Commission. The new regulation could be ready by the end of the year if negotiations with Parliament go smoothly.

The European Parliament will now start its own internal position. Daniel Caspary, the German centre-right INTA committee MEP who acts as rapporteur will now coordinate a new report on this issue and a new response. “After years, INTA will now be finally checking the Councils’ IPI text meticulously. IPI is a market-opening tool and was never designed to be protectionist. Overall, it’s a promising sign on our path towards a level-playing field in procurement,” said Daniel Caspary.

MEPs can be expected to make the regulation overall more stringent than it already is, especially to make it easier to exclude bidders altogether from the market.

The new compromise is vague in terms of when the adjustments or market exclusions should be removed or cancelled: when the counterpart changes its market access rules in practice or only after it commits to change those rules in future. This is the kind of topic area where we might see MEPs pick a fight.

MEPs can also be expected to take on board the views of European business groups such as the umbrella group for twenty industry sectors AEGIS Europe. The group’s chair Inès van Lierde said the Council compromise is “a major step in finally ensuring a level-playing field in international public procurement.”

“However, we still have concerns on some aspects that could limit the instrument’s actual effectiveness, particularly on the use, notification, and monitoring of exceptions,” van Lierde said.

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