3 Public procurement and state aid

Face - Contents - Top/Bottom - Previous/Next

"Annual Report 2002"

3 Public procurement and state aid

3.1 Public procurement

The purpose of the EU rules on public procurement is to create cross-border competition in public procurement within the EU. The aim is to ensure that suppliers from all EU Member States have equal access to bidding for public procurement contracts. This promotes cross-border competition and thus ensures public procurement on the best possible terms.

The work of the Competition Authority within public procurement was dominated by international activities in 2002.

During the Danish EU Presidency, the Competition Authority was responsible for the Council of Ministers' task force managing the negotiations on new Public Procurement Directives. Likewise, the Competition Authority also reported the results of the pilot project on public procurement to the European Commission. Finally, the Competition Authority launched a new networking initiative between European public procurement authorities.

Average duration of case handling 2000-2002, Procurement (months)

Negotiations on new Public Procurement Directives
The negotiations on new Public Procurement Directives have been going on since the European Commission presented its proposal in the summer of 2000. The proposal involves an in-dept reform of the Public Procurement Directives in order to ensure that the rules can match future requirements. The reform is crucial because it will help the public sector to get maximum value for its money when purchases are made.

In 2002, the negotiations on an update of the rules progressed considerably. During the Spanish EU Presidency, the Council of Ministers reached political agreement on the Directive for the Public Sector. The aim for the Danish Presidency was to conclude the negotiations on the Utilities Directive. Also in this area, political agreement was reached already at the Council meeting in September.

Informal conflict resolution and a permanent public procurement network
In the summer of 2002, a pilot project on informal conflict resolution carried out during the past four years by several EU Member States, EEA countries and Switzerland was completed.

The project was initiated by Denmark in 1998 and originally comprised only six EU countries. At the completion in 2002, a total of 15 countries had joined the project.

The main purpose of the project was to develop methods for smooth and eficient resolution of problems that occur when a company submits a tender in another country. For this purpose, a network was established between the participating countries. The network ensures that cross-border tenders can be handled in an eficient and informal way. The pilot project attended to approx. 50 cases during the pilot stage.

The participating countries also beneited from the discussions on the implementation of the public procurement rules in the individual countries and the mutual exchange of experience that took place.

In September, the Competition Council submitted the results of the pilot project to Mr Bolkestein, Commissioner. The project was reported in four reports found at the web site of the Competition Authority (http://www.ks.dk/).

At the conclusion of the project, the participating countries recommended that a permanent network between the European public procurement authorities should be established. The European Commission supports this idea.

The Competition Authority organised the irst meeting of the new public procurement network early 2003. The new network will include up to 32 countries.

New rules on tender procedures for public works contracts
In 2001, new rules on tender procedures for public works contracts that do not exceed the EU tender threshold entered into force. The new Danish regulatory framework (Act on Tender Procedures for Public Works Contracts and Executive Order on Tender Procedures for Public Works Contracts) basically helps to ensure competition in connection with public and publicly supported works contracts and to ensure that this competition takes place on fair and equal terms. As the bill was read by the Parliament, the building and construction industry maintained that the Executive Order on Tender Procedures for Public Works Contracts was too detailed and complicated to work with.

In January 2002, the Danish government launched a series of initiatives aimed at improving the competitiveness of Danish industry. In this connection, it was noted that the administrative burden of the building and construction industry could be eased. Therefore, efforts to make the rules of the Executive Order on Tender Procedures for Public Works Contracts simpler and more flexible were initiated. This resulted in a new Executive Order on Tender Procedures for Public Works Contracts that entered into force on 1 September 2002.

The simpliication initiative consisted of three elements targeted towards the clients, the small contractors and the large contractors, respectively. The changes form a whole that improves the terms of the building industry. At the same time, the Competition Authority published a user's guide to both the Act and the Executive Order.

Case processing
An undertaking can complain to the Danish Competition Authority of a tender if it has reason to believe that the public procurement rules have been violated. It is most expedient to complain before the tender procedure is completed, i.e. prior to the award and signing of the contract. The Competition Authority is given the opportunity to contact the caller for tenders, examine the case and propose a solution to the problem. This may mean that any defects can be remedied and the tender made to comply with the rules prior to the award of the contract. In a competitive market, it is of pivotal importance that all tenderers participate in a tender procedure on equal terms.

Under Danish law, once a contract has been signed, it is binding. For this reason, it is important for the undertakings to ile a complaint with the Competition Authority stating the nature of the issue as early in the tender procedure as possible.

If the tender procedure is so advanced that the contract has already been signed, it is generally too late to reverse the outcome.

In 2002, the Danish Competition Authority received a total of 37 complaints concerning tenders. In about one third of the cases, the Competition Authority did not ind any reason to intervene against the caller for tenders. In the rest of the cases, one or more irregularities were found.

Production igures, procurement and state aid 1999-2002

3.2 State aid

State aid policy has many things in common with competition policy. Both state aid and restrictions on competition distort competition between companies and can result in considerable losses for society. State aid policy is covered by the competition rules of the EC Treaty and serves the same purpose as competition policy, namely to ensure an eficient use of society's resources.

For this reason, it is natural to place the state aid area under the auspices of the Danish Competition Authority.

In matters relating to state aid, participating in the EU co-operation is one of the Authority's responsibilities. The Authority thus takes part in negotiations within the EU on new measures in respect of state aid. An important part of the Authority's work in this context is to ensure that Danish interests are safeguarded in the best possible way. When state aid is on the agenda, the Authority also helps to prepare for EU Councils (particularly the Industry Council).

In addition to international work, the Authority plays a national advisory role. The State Aid Ofice offers advice to the Danish authorities on state aid issues and may provide recommendations; however, it cannot make decisions. It is up to the European Commission and the European Court of Justice to make the inal decision as to whether a given scheme constitutes state aid, and whether such an arrangement may be approved.

An economic approach towards less and better state aid
On 26 November 2002, the EU Competitiveness Council adopted the conclusions on an economic approach towards less and better state aid put forward by the Danish Presidency.

The conclusions point out preconditions for reducing and reorienting state aid. For example, it is necessary to carry out better economic analysis before granting aid and to require documentation for the long-term effects of aid.

Such analyses should point at possible detrimental effects of a given state aid scheme as well as an assessment of the scheme's suitability for solving the problem in question. This should lead to better aid schemes and force policy makers and planners to consider alternative regulatory steps other than state aid. In short, “less aid, but better aid”.

The conclusions also put emphasis on the continuing efforts to increase transparency. Furthermore, the European Commission and the Member States are invited to exchange experience, starting in 2003. This is to take place through meetings and seminars on the efforts to reduce state aid, including the following indicative list of themes and subjects:

• development of statistical measures and indicators;
• national targets and results of efforts to reduce aid; and
• experience in using “ex-ante” and “ex-post” evaluations of aid.

Face - Contents - Top/Bottom - Previous/Next

Version 1.0 April 2003 • © Danish Competition Authority. Published by the Danish Competition Authority, http://www.ks.dk/
Publication produced according to the standard for electronic publication set by the Government