Government Procurement Law and Policy: European Union
I. Introduction
Public procurement is subject to the general, basic freedoms enshrined in the Treaty on the Functioning of the European Union, as amended by the Lisbon Treaty; that is, free movement of goods, freedom to provide services, and freedom of establishment within the territories of the twenty-seven EU Member States. In practice, EU Member States within the single market may not discriminate in awarding public contracts against firms from other EU Members; they are obliged to treat contracts based on the principles of equal treatment, nondiscrimination, mutual recognition, proportionality, and transparency. Public procurement has been regulated by a number of Directives, which require further implementation by the Member States. In 2004, following a lengthy debate, the European Union (EU) reformed the rules on public procurement in light of case law of the Court of the European Union and adopted two Directives, the so-called Public Procurement Directives, which replaced prior directives.
Within the EU framework, cross-border procurement occurs in two ways; Direct cross-border procurement and indirect cross-border procurement. Direct cross-border procurement occurs when firms that operate from their home market bid and win contracts for invitations to tender initiated in another EU Member; while indirect cross-border procurement takes places when firms bid for contracts through subsidiaries.[1]
The EU legal regime on public procurement also applies to signatories to the WTO Agreement on Government Procurement.[2] For the purposes of the award of contracts, Member States are required to apply “in their relations conditions as favorable as those which they grant to economic operators (the term includes contractors, suppliers and service providers) of third countries in implementation of the Agreement on Government Procurement (AGP).”[3] Pursuant to the AGP, EU Members are also required to ensure that their entities do not treat a locally established supplier less favorably than another locally established supplier based on the degree of foreign affiliation or ownership; moreover, EU Members must also ensure that their entities do not discriminate against locally established suppliers on the grounds of the country of production of the good and services being supplied, if the country of production is a party to the AGP.[4]
In 2002, pursuant to the European Commission’s estimates, the total public procurement in the EU-that is, the purchase of goods, services and public works by governments and public utilities-was close to 16% of the Union’s GDP or
