European Commission proposes new public procurement regulation

In brief

The proposal contains a large number of changes. These include the following:

• A single regulation replaces three directives and becomes directly applicable in all Member States.

• Provisions from around fifty sector-specific regulatory frameworks are incorporated into the regulation.

• Negotiation will be available in all procurement procedures.

• The best price-quality ratio becomes the general rule for contract award, with a minimum weighting for quality.

• More grounds for exclusion are consolidated in the regulation, and self-cleaning is removed for the mandatory grounds.

• Framework agreements are given new maximum durations, differentiated according to the number of suppliers.

• A new system of European preference is introduced, which may give Union suppliers advantages.

• Security, resilience and supply security are given a clearer role alongside European preference.

• Procurement is to be digitalised through a common EU-wide system.

Background

The proposal is based on the Commission's evaluation of the 2014 procurement directives. The evaluation showed, among other things, reduced competition for public contracts, low participation by small and medium-sized enterprises, few suppliers from other Member States, and an increasing number of procurements receiving only a single tender.

Several high-profile reports on how the EU can strengthen its competitiveness have also highlighted public procurement as a tool for strengthening European industry, innovation and the green transition. The proposal should therefore be seen against two backgrounds: how competition for public contracts can be increased, and how public demand can at the same time be used more strategically.

A regulation instead of three directives

The proposal merges the directives on public procurement, the utilities sectors and concessions (2014/24/EU, 2014/25/EU and 2014/23/EU) into a single regulation. A directive sets out a goal that each Member State implements itself in its national legislation. A regulation functions differently: it applies directly and verbatim in all Member States from the day it becomes applicable, without first needing to be transposed nationally.

For procurements covered by the regulation, the scope for Swedish legislation is thus reduced, since the rules will then follow directly from the EU regulation instead of from the Swedish Public Procurement Act (LOU), the Utilities Procurement Act (LUF) and the Concessions Act (LUK). A regulation may not be transposed into national legislation, but existing national legislation may need to be adapted so that it does not overlap with or conflict with the regulation. In addition, there will continue to be a need for certain national rules, including for procurement below the EU thresholds and for remedies such as review procedures and damages. How Swedish legislation in these remaining areas will ultimately be designed remains to be seen.

Sector-specific procurement provisions are consolidated

The proposal does not only replace the three procurement directives. The Commission notes that procurement rules are currently spread across more than fifty different sector-specific EU legal acts. The proposal therefore incorporates provisions from these frameworks into the new regulation.

For both contracting authorities and suppliers, this means that provisions currently found in several different legal frameworks can instead be found in a single regulation.

New procurement procedures and greater scope for negotiation

The number of procedures is reduced. The current procedures are essentially replaced by two procedures: (i) the open procedure and (ii) the dynamic procedure. Perhaps the biggest change is that negotiation becomes available as an optional feature in both of these procedures. The procedures are supplemented by a special innovation procedure for developing and purchasing innovative solutions, and a special procedure for direct award to one or more suppliers in certain expressly specified exceptional situations.

Quality over lowest price

Today, contracts must be awarded to the most economically advantageous tender, but the contracting authority itself chooses whether this is to be assessed on the basis of the best price-quality ratio, cost, or price alone. The proposal makes the best price-quality ratio the general rule, with a minimum weighting for quality criteria of 30 percent, and 50 percent for labour-intensive contracts. Awarding contracts on price alone is not prohibited, but the authority must then be able to explain how quality is nevertheless ensured.

Grounds for exclusion consolidated and expanded

As today, the grounds for exclusion are divided into mandatory and voluntary (discretionary) grounds, but grounds currently spread across several legal acts are consolidated in the regulation, and a number of new mandatory grounds are added. The possibility of so-called self-cleaning is removed for these particular grounds, while it remains available for the voluntary grounds largely as it is today.

New maximum terms for framework agreements

A maximum term for framework agreements already applies today under the LOU and the LUF. The proposal changes how the maximum term is determined: instead of a general time limit regardless of the number of suppliers, the maximum term is differentiated according to how many suppliers the framework agreement covers.

For framework agreements with a single supplier, a maximum term of three years is proposed, and for framework agreements with multiple suppliers, five years.

A longer term may be used in exceptional cases, where justified by the complexity or special nature of the procurement and provided the term is not longer than necessary.

A further change is that contracts based on a framework agreement may not run longer than the framework agreement's own term plus an additional 50 percent of that term, and that each individual call-off must be published through a summary of results.

European preference

A system of European preference is introduced. Under certain conditions, it will become possible to restrict participation, require Union origin, or favour tenders in the evaluation. In certain cases, the Commission may make such restrictions mandatory, for example to reduce harmful dependencies or strengthen supply security.

Security and supply security given a greater role

Security, resilience and supply security are given a prominent place in the regulation. Contracting authorities may, under certain conditions, need to take into account risks linked to, for example, critical infrastructure, cybersecurity, supply disruptions and dependencies on third countries. This is the same underlying rationale that justifies European preference, and the two parts of the proposal are closely linked. However, defence and security procurement, which is currently governed by special legislation, is not covered by the regulation.

A common digital ecosystem

The proposal establishes a digital ecosystem for procurement: a common technical structure, electronic eligibility verification based on reusable company data, the so-called once-only principle, and national data spaces that will feed information into a common EU data space held by the Commission.

When will the new regulation start to apply?

The provisions of the proposed regulation are intended to become applicable two years after the regulation enters into force. If the proposal becomes reality and is published in the EU's Official Journal during 2027, the regulation would be applicable from some date during 2029. However, it is not unlikely that the legislative process will be prolonged, in which case the new regulatory framework could be delayed.