Results / Cross-border public procurement (4th milestone)

The study prepared in the frames of this subproject can be downloaded by clicking on the picture below (in Hungarian).

Results of the subproject were summarized in the following points. Click on the text for details.

In the course of project 2018, one of the recurring topics during consultations with EGTCs was the complex implementation of public procurement procedure connected to cross-border projects. First, it was problematic that a Hungarian based EGTC could publish a call according to the public procurement law of the neighbouring country. Second, it was emerged that how each item should have purchased in case of integrated projects. It mainly caused problems in developments, which needed investments on both sides of the border.

Concerning the complexity of this topic, first, general legal framework was analysed on a basic level in the course of the current project, to settle raising questions. A proposal was formulated to eliminate the lack of harmonisation of law, and a guide was made to help the public procurement procedure of cross-border projects.

No special conciliations and conferences were held in the topic of the subproject yet. It was only processed by a legal expert on the mentioned basic level, who rated the available legislations of member countries that could come into question and of third countries, as well. The expert prepared a formulation of amendments and a guide, too.

During the work, in favour of transparency, we analysed the related provisions of all countries that could come into question, even if large leeways could be noticed in the regulation system of certain countries (see third countries), mainly because they were lacking of the EU membership.

We divided the professional work into the following subtasks:

  1. Review the EU and certain national public procurement regimes:
    • Review the public procurement regime of the European Union;
    • Review the public procurement regime of Hungary;
    • Main differences in the neighbouring member states’ and third countries’ public procurement regime from the Hungarian one (if interpretable).
  2. Public procurement regulations related to the implementation of cross-border projects (integrated projects);
    • In the relation of member state-member state;
    • In the relation of member state-third country (if interpretable).
  3. Proposals on harmonisation of law and legislation in favour of clarifying, simplifying and improving cross-border (public) procurement of EGTC.
  4. Guide on cross-border public procurements for EGTCs (including the whole procedure from the preparation to the closing of delivery).

Exploration of differences in harmonisation of law

During the harmonisation of law, one starting point of the policy of the European Union was to establish real internal market on public markets to provide equal opportunity, equal and non-discrimination treatment, fair competition and transparency for economic operators. Although, at the latest modernisation review of directives in 2014, the better usage of public procurements to support common economic and social (strategic, sustainability, innovative) aims, the increase of the efficiency of public expenditure, as well as to promote small and medium-sized enterprises to take part in public procurements were already an important aspect.

However, the development of the new directives’ contents were affected by the previously effective Directive 2004/18/EK that implicitly allowed common cross-border public procurement, there is still a significant legal and practical problem for contracting authorities to buy from central purchasing bodies of other member states or award public procurement contracts together. Because of this, new regulations on common cross-border public procurement were established, which facilitated cooperation between contracting authorities, the conditions of cross-border requisition of central purchasing bodies was named and a public procurement law applicable in cases of common cross-border procedures was made including regulation applicable in cases of legal remedy for the contracting authorities of different member states, furthermore, it was made possible to establish common organisations based on national or EU law.

In relation to the analytical methodology of the study, it should be noted, that the regulation of Directive (Classic Directive) 2014/24/EU and Directive (Public Service Directive) 2014/25/EU on public procurement are basically the same, therefore, they both can be applied to all public procurement contracting authorities, thus in the followings, only the provisions of classic directive were examined. Finally, public procurement regulations were not included in Concession Directive 2014/23/EU, which doesn’t mean that – in light of the evolution of directive – there is no place for such procurements and for their directive regulation below in the case of concession procurement objects.

Requirements formulated by directives were adapted into public procurement norms through member state laws and implementing legislations. It is worth mentioning that not all member states meet the deadline of 18 April 2016, thus in December 2017 the European Commission initiated an infringement procedure against four member states. Among them, Austria fulfilled its obligation in 2018 and Slovenia in 2019.

The transposition of directive regulations can cause different solutions in each member state in some cases, with the feeling of overregulation (e.g. the Hungarian public procurement regulation is a considerably complex, multilevel and detailed standard with a stronger approach to centralisation and control.) However, new directives from 2014 can be considered as gap fillers and they generally promoted the cases of cross-border cooperation and joint developments of member countries from the perspective of procurement.

In this final report we don’t discuss the public procurement rights of third countries more thoroughly. It is enough to mention, that these regulations are understandably did not or just partly harmonised with the EU law in respect of their guiding principles towards joint procurements with other countries are not discuss cross-border aspects.

The defining source of domestic public procurement law is statutory, which currently effective and repeatedly modified code is Legislation CXLIII/2015 (henceforward: PPA), which is the fourth PPA since the regime change. The implementing regulations (and other joint legislations) of PPA regulate details and specific rules of public procurements.

The Second Part of PPA is valid for public procurements and public procurement procedures that reach the EU limit, while the Third Part includes public procurement regulations that are below the EU limit but reach or exceed national limits.

National limits are determined annually in PPA.

Transposition of the directive rules into the procurement rules of the EU member states, neighbouring with Hungary, shows that these member states generally followed the normative text of the directive, i.e. they typically did not create new rules. Particular provision of the Slovak law deserves a highlight which allows “contracting authorities” to take advantage of these cross-border procurements if the applicable legislation is in accordance with the legally binding acts of the EU. In our view, a similar approach could be followed by the relevant third countries in their “approximating legislation”, i.e. harmonising their public procurement rules with the members state rules, hence the relevant EU law could be designated as the applicable law.

Proposals for legislative amendments in order to correct the revealed differences

  • The foundation of the common organisation (see EGTC), should not necessarily be tended to the implementation of public procurements, especially not for the implementation of “defined” public procurement(s). According to our opinion, this exposure in the current regulation is unduly restrictive, especially that even in the case of the European Grouping for Territorial Cooperation (EGTC) mentioned in the directive, the main activity is usually not tended to the implementation of joint public procurement.
  • It probably came as a result of the previously mentioned approach that paragraph 30 (6) of Public Procurement Act refers the regulation – that related to temporality and in some cases, connected to the implementation of sporadic joint public procurement – to the establishment of joint organisation and not to the contractor agreement although, the directive contains the latter.
  • It is also worth underlining that the directive provides the inclusion of the Public Procurement Law’s applicable agreement into the constitutional document of joint organisation only if the agreement is for an undetermined period of time and does not require it otherwise. Valid Hungarian provisions contradict this, which eventuates an unnecessary, restrictive interpretation, which also excludes the sporadic right of disposal of the EGTC’s main body to decide in such cases.
  • Furthermore, it is also a difference that the applicable law, designated by agreement according to directives, can not only be applied to the negotiation of the Public Procurement Procedure, but more widely than that, to the given national public procurement regulation, as well (based on the preambulum of directive it includes e.g. legal remedy and according to our observations the mandatory public procurement legislations, which are applicable to the conclusion of contracts based on the procedure).
  • The determination of applicable law is a fundamental question in cases of public procurement nevertheless, the directive entrusts the joint organisation that “has jurisdiction” with this decision, while the public procurement law only names the main body. Since it is possible to have manouverability inside the organisation to divide competencies based on regulation, which refers to the organisations (e.g. in the case of the EGTC, as well), it is questionable, whether domestic regulation should interfere with this question, because the expected agreement among “underlying” contracting authorities is also a guarantee itself (it’s undeniable that in most cases, the main body becomes the competent one). Furthermore, the relationship between the agreement of the contracting authorities and the content of the decision of the Assembly should also be specified, since the agreement should not happen according to the decision of the Assembly, but the agreement should be “integrated” within the act of the appropriate body of the organisation.

In light of the above, we suggest a quick revision of the substantive differences that are unnecessary and interfere with or complicate the appropriate emergence of directive regulation.

Due to the complexity and codification nature of the proposed amendments, the study – because of the nature of its basic principle – is limited to indicate the regulatory anomalies. We recommend the implementation of a separate project for drafting textual legislative proposals.

Preparation of a practical guide for EGTCs

The aim of this guide is twofold: on one hand, it provides a comprehensible, practical assistance to public procurement procedures; on the other hand, it maps the most important topics and cross-border cases that does not create an obvious situation, which makes cross-border cooperation harder and where current regulatory situations are incomplete. Whithin this, the guide gives an overview on the related provisions of the Hungarian Public Procurement Law to the investigative steps of procurement needs, by taking into consideration the most important questions of preparing and conducting public procurement procedure, as well as the phase of contracting and fulfilment of the agreement.

The key principles identified by the study, which need to be taken into particular account during the public procurement procedure in the case of the EGTCs established by Hungarian participants, are the following ones:

  • in the case of a joint procurement, an agreement on the law that are applicable to public procurement is mandatory, or its incorporation in the articles, or by the decision of the competent body of the EGTC (decision of the general assembly);
  • it is a conceptual question, whether the agreement on the applicable law should be permanent or rather on ad hoc basis, or a delimitation in space or time on the basis of the subject of public procurement and according to the type of contract to be concluded;
  • contracting authorities cannot circumvent their own mandatory public rules by choosing the applicable national law;
  • when a third country entity is a member of the EGTC and the activity is implemented in the third country, the public procurement rules of the third country need to be aligned with the relevant EU law;
  • in case of choosing a law, there is a need to clarify the scope of the applicable law; then it arises, whether a contract resulting from the public procurement procedure is necessarily regulated by the law of the member state under whose the public procurement law was conducted;
  • it is worth to examine the applicable public procurement rules (not only procedural type) and for example “alignment” of public procurement law in another country, where the investment is made;
  • market analysis to identify acquisition needs is indispensable on both sides of the border;
  • “competition” of public procurement rules, i.e. selecting of the law can be interpreted in a way that the more competitive regulation is more preferable by the contracting authorities, as well as by the tenderers; nevertheless, this requires further analysis.
Name of the indicatorRequiredFulfilment
Legal analysis
Legal proposal of public procurement procedures related to the EGTCs
Guide

A “problem map” was formulated during the investigation of the legal environment of public procurement procedures related to cross-border projects of the EGTCs, which have raised the need for

  • further analysis, in case of conflictions and rules that relate to public procurement “public agreement” and legal remedy,
  • on the other hand, case study/studies on the basis of already implemented cross-border public procurements, which can be used to develop further regulatory proposals (both on the EU and national level) and to set precedents to be promoted as good practices (including the level of the EGTC agreement and if applicable, the level of international underlying agreements, as well).