When must buyers put out tenders?*
By Dr Oliver Esch, lawyer and specialist in procurement law at Cologne-based Osborne Clarke Associates
Initially, it must be emphasised that companies are only committed by current public procurement law where this is required by law.
The legal basis can be either the national ‘domestic public procurement’ law or the standardised EU public procurement law as per §§97 ff. GWB (law against restraints of competition). There are differences between national public procurement law and the EU public procurement law regime.
Objectives and possibilities
The objective is different: The national public procurement law serves only to ensure as economical a purchase of services as possible by the (public) payer; the EU public procurement law aims to ensure standardised access for companies in all EU member states to procurement markets within the EU. The legal basis is outlined in the EU Procurement guidelines and the fundamental freedoms outlined in the EU Contract.
However, the requirements of the EU procurement law, compared to the national procurement law, are more formal. Nevertheless, the EU procurement law – different from the national procurement law – offers the bidders effective legal protection and therefore an instrument that allows for an official legal review of the correctness of the procurement process and decision and, if necessary, to have another check carried out by the courts. The purely national procurement law does not offer this facility. An essential criterion of demarcation is the exceedance of a standard value. In the area of delivery and services, which have to be put out to tender according to standard official contracting terms, this amount is ?206,000. Only when the net total order value over the entire duration exceeds this value does the EU procurement law apply.
A prerequisite for the intervention by the EU public procurement law regime is: A public employer issues a public tender with a net order value above the threshold where no obvious exceptions apply. The obligation to tender according to the EU public procurement law is therefore aimed at public hospital operators such as communal hospitals, university hospitals, other public hospitals, such as those partly funded by trade associations, and the respective pooling agreements, for instance in the form of purchasing associations.
Creditableness of purchasing associations
The objective of purchasing associations is in particular the rationalisation of purchasing processes and the attainment of more favourable purchasing conditions based on larger procurement volume/larger buying power.
However, the bundling of buying power in itself may, in certain circumstances, constitute a restraint of competition, which in turn may constitute a contravention against the basic norm § of the competition law relating to the ban on cartels. The creditableness of purchasing associations must therefore always be carefully checked on an individual basis. Exemption rules may apply that may justify usually inadmissible constrictions. This generally applies when the demand behaviour has no significant impact on competition in the relevant market. One criterion here can be improved competitive ability of small and medium-size consumers. The relation to other, particularly larger competitors on the side of the consumers will, in the end, be decisive here.
Legal principles governing public contract awards – specific problems relating to purchasing associations
The principle of transparency must be strictly adhered to when contracts and tenders are issued according to official procurement law. The contracting parties and the liabilities during the tendering process have to be clearly visible. The same applies to the invitation to tender. The basic principles of the correct specification of services and their relevance to the tender must also be held. Refund regulations or incentives may, in certain cases, cause problems here, as the extent of the services to be calculated has to be clearly identifiable for the bidders, which, in the case of not sufficiently defined services by consulting firms etc. acting on behalf of the contracting entity, may not be the case. Public awarding authorities cannot dispose of their liabilities relating to procurement law by joining purchasing associations consisting predominantly of non-public purchasers.
*Based on the lecture: Are companies and hospitals well positioned for competition? MedInform – Informative meeting Hospital-Management, Berlin, 26/09/2008.
19.11.2008
