The new EU Public Procurement Directive – a step towards better working conditions?

The EU’s Procurement Directive only applies to contracts above certain financial threshold values. These thresholds are set out in the Directive and fixed for two-year periods.

If a public authority wants to procure goods or services with a value above the given thresholds, it is required by EU law to procure them Europe-wide. This aims at strengthening the internal market of the European Union, increasing transparency and enhancing governments’ ability to spend public money more effectively.

To protect our social welfare system from too much market liberalisation, certain services are excluded from this directive such as the so-called non-economic services of general interest (SGI) – which are defined by Member States and include for example compulsory social security services, trade union services, etc.

The new Public Procurement Directive from 2014 is binding as to its objectives, but not in the means to achieve the set objectives. This is in order to allow for the better adaptation of EU law to national contexts. National legislators are therefore free in how they apply the principles of the Directive and make best use of them.

The 2014 Public Procurement Directive has been adopted by EU institutions and came into force on the 17th of April, 2014. EU Member States now have two years to implement the directive in national legislation – by April 2016 new rules need to be in place in all 28 Member States to avoid legal disputes with the European Commission and to ensure EU-wide standards regarding public procurement.

What are the main changes compared to the previous directive and how do they influence working conditions?

Social considerations

The new Public Procurement Directive lays down clear objectives regarding social considerations, such as fair working conditions, the inclusion of disadvantage persons, etc. Nevertheless, many details are left open and might hinder efficient implementation at the national level. Therefore, national legislators in all 28 EU Member States need to give thorough thought to the definition and promotion of social considerations.

NGOs and civil society representatives in Brussels were very active during the development phase of the new directive to ensure that careful attention is paid to social and environmental concerns. After its adoption, they generally welcomed the new directive as it foresees several opportunities for public authorities to spend public money in a more socially and environmentally responsible way. The most appreciated points in the directive are the application of working conditions at the place of work and the sustainability criterion of public procurement.

Social considerations can be found in different places in the new Public Procurement Directive. Public authorities can take into account a service’s or a product’s social and environmental impacts by specifying certain criteria in the section on process and production methods, which refers to the way a product is made and which might not be visible in the end product. For example, buying coffee or tea in large amounts for a city’s administration can now involve the demand of fair trade labels or the proof that no child labour was used during production.

The requirement of fair working conditions can be introduced at many different stages of the procurement process: as an award criterion, as a technical specification or in the contract performance clauses .Thus, it offers concrete possibilities for the contracting authority for socially responsible awarding.

Furthermore, social considerations can be included at any point in a product’s or a service’s life-cycle, including its production, delivery, maintenance etc. Unfortunately, the directive does not foresee a monitarisation of these social considerations as public authorities are not allowed to include them in the calculation of the costs.

Compliance with environmental, social and labour law

One of the most significant improvements in the new directive is Article 18 paragraph 2 which constitutes a major change compared to the old regime, and which should lead to significant changes in national procurement legislation as it is mandatory for transposition.

It states that “[…] Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions […].” Companies tendering for a public procurement award need to comply – at any stage of the procurement procedure – with the highest standard of obligations deriving from environmental, social and labour legislation as well as collective bargaining at the place where the service or the goods are delivered.

The obligation to control compliance has been placed on Member States to avoid the placing the burden on local and regional authorities. While the explicit mentioning of compliance with social and labour law is a very good improvement, there are doubts about the practicability of the enforcement of these controls when it comes to certain products (e.g. electronics) as Member States do not have sufficient information and enforcement power about production processes occurring outside of the European Union.

If a tenderer does not comply with social or labour law, he can be excluded - at any stage - from the procurement procedure even if he has the economically most advantageous offer. Tenderers have to deliver a self-declaration as preliminary evidence.

At the same time, public authorities cannot require tenderers to have a certain corporate social or environmental responsibility policy in place, this is only applicable to the product or service. Nevertheless, the contracting authority is free to define the substance of the contract in any way that meets the public’s needs, including through criteria promoting horizontal policies.

Technical specifications – a more concrete description of the service/product to be delivered – now include for the first time sustainability aspects. If tenderers don’t meet these criteria, they will be excluded from the procurement procedure.

Qualitative criteria

Thus far, public authorities were usually required by national procurement law to award the most economically advantageous tender (the so-called MEAT criterion).

With the new directive, Member States are permitted to prohibit or restrict the use of ‘price only’ or ‘cost only’ criteria to assess the most economically advantageous tender where they deem it appropriate. This would allow public authorities to include quality criteria into their decision when awarding a public tender. Unfortunately, this provision is not binding and therefore it is up to the Member States to use this opportunity of more quality-orientation in their procurement processes. NGOs are advocating at the national level to transpose this obligation into their respective national legislation.

Furthermore, contracting authorities have the possibility to include additional social considerations – such as qualification of staff, social integration of disadvantaged persons or members of vulnerable groups, promotion of equality of women and men at work, increased participation of women in the labour market, reconciliation of work and private life – related to the performance of the contract. This might be the case when social considerations were not included in technical specifications or in awarding criteria.

Public Procurement vs Posting of Workers

According to EU rules, when awarding public procurement contracts to a company or service provider based in another Member State, the question of posted workers becomes noteworthy. A worker is "a posted worker" when s/he is employed in one EU Member State but sent by her/his employer on a temporary basis to carry out work in another Member State. This category does not include migrant workers who go to another Member State to seek work and are employed there.

Although the new Public Procurement Directive establishes the principle of equal treatment at the workplace for domestic workers, it is not clear what happens in the case of posted workers. For example, a service provider may win a contract in another country and send her/his employees there to carry out the contract. Jurisprudence of the European Court of Justice (ECJ) is ambiguous in these cases. The famous Rüffert judgement made it more difficult for public authorities to force contractors to respect local collective agreements for their workers.

According to the ECJ, imposing the local minimum wage on posted workers requires that generally applicable collective agreements apply both for private and public contracts, which is a condition almost impossible to be met by local collective agreements. The Court argued with the “market entry doctrine” whereby minimum rates of pay render cross-border service provision less attractive.

As the ECJ did not take social considerations in public procurement into account at all, the risk of conflict with the new directive is increasing. Public authorities might become reluctant to introduce social considerations in their procurement procedures to avoid these legal disputes.

Summary

The new Public Procurement Directive offers many possibilities for public authorities to make their procurement policies more sustainable as well as more socially and environmentally responsible. It is now up to the Member States to translate the relevant provisions into national law. NGOs shall keep a close eye on the transposition process at national level and advocate for the attention to social considerations.

This article is published as part of the “Testing EU Citizenship as Labour Citizenship: From Cases of Labour Rights Violations to a Strengthened Labour-Rights Regime” project.The project is co-financed by the European Commission grant in the Europe for Citizens programme. The European Commission support for the production of this publication does not constitute an endorsement of the contents which reflects the views only of the authors, and the Commission cannot be held responsi­ble for any use which may be made of the information contained therein.