The Commission's procurement mechanism for large infrastructure projects, soft law with a new twist, or catch 22?


On 3 October 2017, the European Commission launched a strategy aimed at "Making Public Procurement work in and for Europe". As the accompanying press release indicates, the strategy has four main strands: (i) the definition of priority areas for improvement at Member State level; (ii) voluntary ex-ante assessment of large infrastructure projects; (iii) a Recommendation on professionalisation of public buyers; and (iv) a consultation on stimulating innovation through public procurement.

The first initiative consists in a policy push to prompt Member States to concentrate efforts on six priorities: "greater uptake of innovative, green and social criteria in awarding public contracts; professionalisation of public buyers; improving access by SMEs to procurement markets in the EU and by EU companies in third countries; increasing transparency, integrity and quality of procurement data; digitisation of procurement processes; and more cooperation among public buyers across the EU". None of the priority areas concern issues that I would consider of immediate practical relevance, in particular in terms of legal clarification of the 2014 Public Procurement Package (see here), but rather reflect issues that have been at the top of procurement policy-making agendas at least for the last 10 years, and where all efforts (and gains) are at best incremental. I find the push for further 'strategic' use of procurement particularly interesting, as well as the push for more procurement collaboration, including centralised and cross-border procurement. These are issues that will deserve further discussion some time soon.

The third initiative on professionalisation will also be the object of a future post, while I will aim to submit my views on the use of procurement to foster innovation in the context of the official consultation. Here, I am particularly interested in the second initiative, the voluntary ex-ante assessment of large infrastructure projects (already announced in the 2015 Strategy on Upgrading the Single Market), which is described in more detail in the accompanying Communication "Helping investment through a voluntary ex-ante assessment of the procurement aspects for large infrastructure projects".

The initiative is structured around three main elements: (i) a helpdesk where the Commission can provide clarifications on issues of interpretation of the EU procurement rules or their application to a specific case within one month, and which answers (once anonymised) will be published for more general use; (ii) a notification system aimed to apply to broader procurement plans, where Member States can ask the "Commission services [to] express their views on whether the procurement plan complies with EU procurement rules, without prejudice to any future legal interpretation or assessment"; and (iii) an information exchange mechanism meant to be a knowledge management tool for use by national authorities and contracting authorities/entities, ultimately geared towards building up reference classes of similar projects as a means of sharing experience, and to serve as a platform for exchanges on different aspects related to projects.

There are significant practical issues, in particular concerning the third strand, and especially concerning the utility of a collection of past projects where there is no indication that the information will be checked from a legal compliance perspective by the Commission (!), and where "[d]ocuments can be provided in any of the official languages of the EU [and] [t]he database will include a machine translation facility". That can significantly reduce the practical relevance of this part of the initiative, in particular given the significant difficulties in obtaining accurate machine translation of eg technical specifications or complex contract clauses.

More importantly, however, I think that this mechanism, and in particular the notification system, raise issues as to the legal nature of the assessments and clarifications obtained from the Commission, as well as some more practical issues concerning the resourcing of the helpdesk on which the mechanism relies. I will solely concentrate on the first issue for now, as the challenge of ensuring sufficient human capital to field all questions and notifications potentially coming from the Member States is ultimately a managerial issue dependent on budget availability.

Non-bindingness of specific legal assessments?

In simple terms, the Commission describes the mechanism as follows:

Complex projects can go wrong right from the beginning if the project managers do not fully grasp the complex rules that apply to large-scale procurement. The Commission will set up a helpdesk that can answer specific questions at an early stage related to projects with an estimated value over €250 million. For projects of high importance for the Member State concerned or with a total estimated value above €500 million, relevant authorities can ask the Commission to check the complete procurement plan for compatibility with the EU procurement legislation, significantly reducing uncertainties and the risk of delays and legal challenges. The mechanism is voluntary, the Commission's advice is non-binding, and information will be handled subject to strict confidentiality requirements (emphasis added).

This is also highlighted at the start of the fuller description of the mechanism, where the Commission indicates that "[n]ational authorities and contracting authorities/entities have the option to use the mechanism on a voluntary basis to raise questions with the Commission and receive an assessment of a project’s compatibility with the EU regulatory framework before taking important steps", but that the "views expressed by the Commission services in their assessment are not legally binding on those using the mechanism or on the Commission, and are without prejudice to the interpretation of the relevant rules by the Court of Justice of the European Union" (COM(2017) 573, at 4, some footnotes omitted, except footnote 10).

Already at this level of design of the mechanism for ex-ante assessment of the procurement, EU lawyers will probably raise their eyebrows in surprise, wondering how is it possible that a specific review by the Commission, where it issues a specific opinion on the compliance or not with EU law, can be considered non-binding. In my view, and particularly if there are EU funds involved in a project which risk being withdrawn, this will certainly end up being litigated on the basis of the principle of legitimate expectations (or administrative estoppel). On that note, it is worth recalling that, in its latest formulation, the Court of Justice has reiterated that, in accordance with its settled case-law,

the right to rely on the principle of the protection of legitimate expectations extends to any person whom an institution of the European Union has caused, by giving him precise assurances, to entertain justified hopes. Information which is precise, unconditional and consistent, in whatever form it is given, constitutes such assurances (Judgment of 13 September 2017, Pappalardo and Others v CommissionEU:C:2017:672, para 39; see also references cited therein).

I would have thought that a contracting authority (and winning tenderer) that had obtained a document from the Commission indicating that the project complied with EU law could, at the very least, wave it against the Commission in case of a subsequent infringement procedure. Conversely, where the Commission issued a negative opinion and the contracting authority decided to carry on regardless, that document could end up being used against the contracting authority in domestic litigation and prove rather persuasive to review boards or domestic courts. Additionally, it is hard to see how the pre-existence of the negative opinion would not be used against the Member State in a potential infringement procedure, and how this would not raise due process claims on the Member State's side. All in all, then, this seems like another instance of soft law bound to harden, but this time with a twist, because it would be the result of a specific procedure created by the Commission to that effect--rather than as a byproduct or unintended consequence of regular administrative procedures subject to EU administrative law.

The Commission could, of course, argue that they will couch their views in such terms as to avoid a level of detail specific enough to create legitimate expectations (which would however empty this mechanism of any effectiveness or appeal), and that they will resist public disclosure of these assessments to avoid these effects (which I do not really think possible, given the duty to grant access to documents under Regulation 1049/2001, discussed here). That would not be very convincing, though. Each of these issues requires some further assessment, because none of them seem to hold much water.

Precision and legal effects

In trying to make the mechanism attractive to the Member States which it sets out to support, in the Communication, the Commission indicates that, the helpdesk can deal with rather particular and potentially complicated issues, such as

  • the applicable EU legal framework governing the project: classic procurement or utilities directives; concessions directive, etc.
  • conditions for exclusions from the directives;
  • procurement procedures to be used and their specific features;
  • selection and award criteria;
  • inclusion of green, social and innovative considerations;
  • how to implement joint procurement under Article 39 of Directive 2014/24/EU.

Regardless of the nature of the question, an within one month from the time when the Commission has all the information it considers necessary to answer it, the Commission will aim to provide a specific reply. That reply will later be anonymised and published on the website of the ex-ante mechanism. However, at this point and probably in awareness (and worry) of the potential legal effects of such answers to specific and potentially rather complex and tricky questions, the Communication contains a cross-referential footnote that indicates again that "[t]he views expressed by the Commission services in their assessment are not legally binding on those using the mechanism or on the Commission, and are without prejudice to the interpretation of the relevant rules by the Court of Justice of the European Union".

Similarly, concerning the notification of a procurement plan by the relevant authority, or issues specific contract amendments, and within a period of three months, "[t]he Commission services will then provide an assessment, in which the Commission services express their views on whether the procurement plan complies with EU procurement rules, without prejudice to any future legal interpretation or assessment." Interestingly, once more, at this point the Communication contains another cross-reference to the by now famous footnote 10, which indicates that "[t]he views expressed by the Commission services in their assessment are not legally binding on those using the mechanism or on the Commission, and are without prejudice to the interpretation of the relevant rules by the Court of Justice of the European Union".

At this point, one will be forgiven for wondering whether contracting authorities will have any incentive to raise issues with the Commission knowing that they will have to wait for a month (helpdesk) or three months (full-fledged notifications of procurement plans) and that all they will obtain is a view from the Commission that the Commission itself is not willing to be bound by, and at the risk of being faced with specific recommendations or warnings on how to carry out the procurement. There seems to be an opposing incentive for contracting authorities to ignore these mechanisms and the delay they imply altogether, except where they cannot afford independent legal advice (which seems rare where there is a project budget of €250 mn or €500 mn) and may see the Commission as the only source of available (free) expertise.

How confidential is confidential?

The second important issue concerns potential difficulties in preserving the confidentiality of the documents exchanged with the Commission. Indeed, as the Commission itself reminds (in another footnote!, n 23), "Regulation (EC) No 1049/2001 of the European Parliament and of the Council of 30 May 2001 regarding public access to European Parliament, Council and Commission documents applies to all documents drawn up or received by the Commission and in its possession".

This means that, even where the Commission and the contracting authority share a view on whether a piece of information is confidential or not, the fact that the Commission holds the documentation triggers a risk of disclosure (or, at least, of disclosure-related litigation) under the EU rules. This may be particularly challenging for contracting authorities in Member States imposing lower levels of transparency than the European standard. It also means that, where the Commission and the contracting authority do not share a view on the confidentiality of some information, there is additional potential for litigation. Even if the Commission was willing to defer to Member States and reassure them that the second type of problem will not arise, the first one is unavoidable.

Even if there are good reasons to think that Reg 1049/2001 (Art 4) contains sufficient exceptions to disclosure of information of the type that can worry a contracting authority, the simple fact that the Commission has felt the need to introduce specific references to those rules in relation to every document that could include confidential or sensitive information indicates that the Institution, itself, is in no position to ensure watertight confidentiality.

The devil is in the footnotes, or catch 22?

All in all, then, the mechanisms included by the Commission in its initiative on the voluntary ex-ante assessment of large infrastructure projects, including its related helpdesk and information exchange mechanism, seem to be affected by two main issues: first, an unavoidable tension between, on the one hand, the need to provide detailed assessments that make consulting the Commission worth the contracting authorities' while (in particular, in terms of time) and, on the other, the belt and braces approach to disclaiming any legal effectiveness of those assessments. Second, a risk of public exposure of all or parts of a project that can have highly sensitive implications (in political and commercial terms).

The Commission seems to have relied on the existence of a large amount of (good) willingness from contracting authorities, and the hope that the mechanism will be perceived and understood as soft (also by economic and political agents with other agendas). However, as PhD supervisors and peer-reviewers will know well, the devil is in the footnotes, where we all tend to hide those arguments that we know will be more controversial or those issues that we want to avoid having to deal with more openly. In my view, footnotes 10 (no legal effects) and 23 (confidentiality warning) and the multiple cross-references, are good indicators that this mechanism will be problematic. And this is simply because, even if it is clear that contracting authorities will always benefit from additional expertise and (good) free legal advice (in particular, but not only, when they deal with complex projects), the simple fact is that the Commission is not in a position to provide it. First, structurally, because of the legal framework within which it operates--which questions its ability to engage in this type of advocacy plus initiative at all. Second, because of important resourcing constraints, which may well become obvious rather soon if the mechanism is used.

On the whole, I think that this voluntary ex ante mechanism is the paradigm of a catch 22 for the Commission. What is noticeable is that this is one that the Commission has created for itself (ignoring the lessons of the now long-abandoned notification mechanism in the context of Article 101(3) TFEU). And what saddens me personally is that I know for a fact that the Commission heard all of these arguments long before publishing the Communication--as evidenced by the minutes of the meeting of the Stakeholder Expert Group on Public Procurement of 17 February 2016 (note the last two bullet point of para 2).