Regulation 42 – Technical specifications

Commentary

Regulation 42 establishes the rules on how contracting authorities are to (or may) define the technical specifications for a public procurement procedure. In essence, it transposes Article 42 of Directive 2014/24/EU and codifies some technical specifications case law from the last few years, particularly the Dutch Coffee case (C-368/10 Commission vs Netherlands). Moreover, these provisions recast and recombine the rules previously scattered between specific regulations/articles and annexes and try to concentrate in a single provision all requirements applicable to the setting of technical specifications.

The Regulation is divided into three main parts: scope, formulation and application of technical specifications. As with many other articles, the content is more or less the same that we can find in Article 42 of Directive 2014/24/EU, but presented in a different way.

Technical specifications scope

Paragraphs 2 to 7 establish the scope of what should be included in technical specifications and determine that they need to lay down the characteristics required of works, services or supplies and be set out in the procurement documents, and they describe the content the technical specifications may have (also that of Annex VII of Directive 2014/24/EU). In addition to the traditional characteristics of what is being acquired, the Regulation establishes in a very detailed way that various performance indicators may be included as part of the specifications, thus constituting more of a list of examples than an actual mandatory rule.

The main innovation in these rules is that, according to Regulation 42(6) PCR2015, technical specifications may also refer to the specific process or method of production or provision of the requested works, supplies or services or to a specific process for another stage of its life cycle even where such factors do not form part of their material substance provided that they are linked to the subject-matter of the contract and proportionate to its value and its objectives. However, this is not exactly new and is the natural evolution of various cases such as the Concordia Bus, Weinstrom and to a certain extent the Dutch Coffee one.

Finally, the technical specifications may also specify if intellectual property is being transferred. This is an important point to take into consideration as Regulation 31 on the innovation partnership states that the parties need to deal with intellectual property but the competitive dialogue and competitive procedure with negotiation rules (Regulations 29 and 30) have no similar indication, although they can also be used for the procurement of innovative solutions. However, we are not entirely sure of the actual benefit of stating that IP may be mentioned in the technical specifications: even without such caveat it was always possible to do so and, honestly, we would prefer a more prescriptive obligation instead.

Technical specifications formulation

Paragraphs 8 to 13 define how contracting authorities are to formulate the technical specifications: ie in terms of performance or functional requirements, by reference to technical specifications, or as a hybrid option mixing up performance and technical elements. Remarkably, the prohibition of making references to a specific make or source, or a particular process which characterises the products or services provided by a specific economic operator, or to trade marks, patents, types or a specific origin or production with the effect of favouring or eliminating certain undertakings or certain products is retained, and only exempted on an exceptional basis, where a sufficiently precise and intelligible description of the subject-matter of the contract is not possible without such reference, in which case it shall be accompanied by the words “or equivalent”. These paragraphs include accessibility rules as well as strong indications of the need to draft technical specifications in a way that does not distort competition (or in the parlance “shall not have the effect of creating unjustified obstacles to the opening up of public procurement to competition”). This is stressed in Regulation 42(10) PCR2015, according to which “[t]echnical specifications shall afford equal access of economic operators to the procurement procedure and shall not have the effect of creating unjustified obstacles to the opening up of public procurement to competition.” The usual tortuous contortionisms related with referring to brands, trademarks and “or equivalent” are still present and their use is now clearly established as exceptional. How will it be measured and controlled is anyone’s guess.

The more interesting points of these paragraphs are the rules related to national technical rules and the nudge in favour of functional specifications. Regarding the first, they are now permitted (if legal under EU law, yet another tautology…) but there is a clear preference for extra-national standards to be used in case detailed technical specifications are being drafted, creating a number of hoops to be overcome before contracting authorities can rely on national standards. This is where we think there is a clear nudge for performance or functional specifications, with which we agree. The problem, as usual, will be to convince contracting authorities to lose control of the specifications and to draft them in a way that still allows for a meaningful “apples to apples” comparison. As Recital (74) of Directive 2014/24/EU clearly stresses, ‘the technical specifications drawn up by public purchasers need to allow public procurement to be open to competition as well as to achieve objectives of sustainability … Consequently, technical specifications should be drafted in such a way as to avoid artificially narrowing down competition through requirements that favour a specific economic operator by mirroring key characteristics of the supplies, services or works habitually offered by that economic operator. Drawing up the technical specifications in terms of functional and performance requirements generally allows that objective to be achieved in the best way possible. Functional and performance-related requirements are also appropriate means to favour innovation in public procurement and should be used as widely as possible‘ (emphasis added).

Technical specifications application

Regulation 42 doubles down on the preference for performance or functional specifications in the final three paragraphs. Paragraph 14 states that even if the technical specifications are detailed enough, a non-confirming bid cannot be excluded in case the tenderer can prove by any appropriate means (including those of Regulation 44 PCR2015 [CROSSREF]) that its solution solves the issue for the contracting authority in an equivalent way. 

Paragraphs 15 and 16 apply a similar logic in scenarios where functional specifications are used: if the tender refers to standards (except purely national standards are these are discriminatory) which are functionally equivalent, then the tender is compliant and shall not be excluded. Thus, as a consequence of this pro-competitive and technically neutral approach, the initial exercise of setting up technical specifications by the contracting authority should only be seen as an attempt to define its needs, which the marketplace can then propose to satisfy in a wide array of alternatives (including, where applicable, variant tenders under Regulation 45 PCR2015 [CROSSREF]). 

Critical remarks

For this open approach to be effective, contracting authorities need to ensure strict adherence to two issues:

(A) Guaranteeing Neutrality and Flexibility in the Determination of Technical and/or Functional Equivalence of Solutions and, particularly, as regards the Acceptable Means of Proof.

According to the rules of Regulations 42(14) & (15) and 44 PCR2015 [CROSSREF], the burden of proving equivalence of the submitted proposal with the technical and performance requirements of the tender lies with the tenderer, who has to discharge it to the satisfaction of the procuring entity, but can in principle choose at its own discretion any adequate means to fulfill this requirement—which mainly includes technical dossiers of the manufacturer and test reports from a recognised body. Therefore, while the discretion of the procuring entity as regards the admissible means of proof seems to be significantly constrained and all (objectively) adequate means should be available to the tenderer to prove that all technical and performance requirements are met, the contracting authority seems to retain a larger degree of discretion in deciding whether, in the light of the available evidence, the proposed solution is actually equivalent to the requirements of the technical specifications. To be sure, the decision regarding these two aspects of technical equivalence—ie, the admissibility or objective suitability of a given means to prove it, and the evaluation of the evidence put forward by those means—are hardly divisible, since the one will significantly affect the other.

In this regard, and in order to prevent the adoption of administrative practices that could jeopardise the objectives of the anti-formalist and functional approach adopted by the directives, an obligation to be neutral and flexible as regards the means of proof and the assessment of the functional and performance equivalence of the bids should be imposed on contracting authorities. This is not intended to mean that they need to be lax in their assessments or waive any of the technical specifications governing the tender, but that they should undertake the equivalence evaluation with a ‘possibilistic approach’ and abandon excessively rigid or formal positions. In this sense, nothing prevents contracting authorities from indicating what means of proof and what kinds of evidence will be of particular importance in conducting this assessment, but they must accept any alternative equivalent means of proof and be prepared to rely on different types of evidence put forward by the tenderers, without restriction and without attaching higher value to the former over the latter. In any case, if contracting authorities decide to set particular means by which functional equivalence or performance suitability can be proven, they must ensure that they are not restrictive and do not discriminate amongst tenderers; and, in any case, they must be prepared to accept alternative means and to attach them with the same evidentiary value.

Regardless of the general approach adopted by contracting authorities in assessing technical and functional equivalence, there are additional restraints on the exercise of such discretion that derive from more general rules and, particularly, from the general principles of non-discrimination and transparency, and from the duty to give reasons [it is noteworthy to stress that the CJEU emphasised that this duty to give reasons must be discharged in a timely manner; see Case C-250/07 Commission v Greece [2009] ECR I-4369 67–72. See also Case T-465/04 Evropaïki Dinamiki (DG FISH) [2008] ECR II-154; and Case C-456/08 Commission v Ireland [2010] ECR I-859]. As regards the requirements of transparency and non-discrimination, it should be stressed that

in order to be effective, these principles must therefore cover not only the initial definition of technical specifications and award criteria by contracting authorities, but also the way in which those specifications and criteria are interpreted and applied during an award procedure (Opinion of AG Sharpston in case C-6/05 Medipac-Kazantzidis 77).

As regards the obligation to provide reasons, it is expressly established in Regulation 55(2)(b) PCR2015 [CROSSREF] that this specific obligation includes the reasons for a decision of non-equivalence or a decision finding that the works, supplies or services do not meet the performance or functional requirements set by the technical specifications. Therefore, contracting authorities will need to provide specific reasons as regards their assessment of the evidence presented by tenderers and, more importantly, decisions on the equivalence of these solutions shall be based on objective and non-discriminatory criteria, and fully disclosed to the tenderer—in accordance with the transparency obligations.

(B) Stressing the Prohibition on Discriminating against ‘Equivalent’ Solutions in the Evaluation of Tenders and Award of Public Contracts.

Finally, as yet another requirement of the principles of equality and competition, it should be stressed that the criteria established for the evaluation of bids and the award of the contract cannot directly or indirectly discriminate against solutions that do not comply strictly with the technical specifications (‘original solutions’) but that meet their requirements by way of performance or functional equivalence (‘equivalent solutions’). Therefore, all solutions able to satisfy the performance requirements established or derived from the technical specifications, regardless of the specific solutions adopted by the tenderer to reach these output requirements, must be evaluated in the same way.

Evaluation criteria can only treat more favourably solutions that provide additional or enhanced functional and performance characteristics—as long as they are set as such from the outset and duly publicised by the contracting authority—or solutions that refer to derived costs or technical implications of the proposed solutions, such as maintenance costs or expected reliability of the technology, and therefore two solutions that satisfy the same function under equivalent performance terms can be graded differently if they impose different costs or guarantee different levels of availability or produce different levels of errors or failures—but not otherwise. Therefore, award criteria that discriminate between technical solutions as such—ie, that do not rely on additional factors duly set, communicated and applied by the contracting authority—are banned by the consistent application, and the need to guarantee the effectiveness of the rules of the directives on technical specifications not only at the phase of their setting, but throughout the tender.

 

Proposed citation: Albert Sanchez-Graells & Pedro Telles, (2016) Commentary to the Public Contracts Regulation 2015, available at: www.pcr2015.uk.

Last modified: September 5, 2016 by Pedro Telles

42.—(1) The technical specifications shall be set out in the procurement documents.

Scope of the technical specifications

(2) The technical specifications shall lay down the characteristics required of works, services or supplies.

(3) In the case of a public works contract, the technical specifications shall define any characteristics required of a material, product or supply so that it fulfils the use for which it is intended by the contracting authority.

(4) The characteristics referred to in paragraph (3) may include—

(a) levels of environmental and climate performance, design for all requirements (including accessibility for disabled persons) and conformity assessment, performance, safety or dimensions, including the procedures concerning quality assurance, terminology, symbols, testing and test methods, packaging, marking and labelling, user instructions and production processes and methods at any stage of the life cycle of the works;

(b) rules relating to design and costing, the test, inspection and acceptance conditions for works and methods or techniques of construction and all other technical conditions which the contracting authority is in a position to prescribe, under general or specific regulations, in relation to the finished works and to the materials or parts which they involve.

(5) In the case of public supply or service contracts, the required characteristics may include quality levels, environmental and climate performance levels, design for all requirements (including accessibility for disabled persons) and conformity assessment, performance, use of the product, safety or dimensions, including requirements relevant to the product as regards the name under which the product is sold, terminology, symbols, testing and test methods, packaging, marking and labelling, user instructions, production processes and methods at any stage of the life cycle of the supply or service and conformity assessment procedures.

(6) In the case of any public contract, the required characteristics may also refer to—

(a) the specific process or method of production or provision of the requested works, supplies or services, or

(b) a specific process for another stage of its life cycle,

even where such factors do not form part of the characteristics’ material substance provided that they are linked to the subject-matter of the contract and proportionate to its value and its objectives.

(7) The technical specifications may also specify whether the transfer of intellectual property rights will be required.

Formulating the technical specifications

(8) For all procurement which is intended for use by natural persons, whether the general public or staff of the contracting authority, the technical specifications shall, except in duly justified cases, be drawn up so as to take into account accessibility criteria for disabled persons or design for all users.

(9) Where mandatory accessibility requirements are adopted by a legal act of the EU, technical specifications shall, as far as accessibility criteria for disabled persons or design for all users are concerned, be defined by reference thereto.

(10) Technical specifications shall afford equal access of economic operators to the procurement procedure and shall not have the effect of creating unjustified obstacles to the opening up of public procurement to competition.

(11) Without prejudice to mandatory national technical rules, to the extent that they are compatible with EU law, the technical specifications shall be formulated in one of the following ways:—

(a) in terms of performance or functional requirements, including environmental characteristics, provided that the parameters are sufficiently precise to allow tenderers to determine the subject-matter of the contract and to allow contracting authorities to award the contract;

(b) by reference to technical specifications and, in order of preference, to—

(i) national standards transposing European standards,

(ii) European Technical Assessments,

(iii) common technical specifications,

(iv) international standards,

(v) other technical reference systems established by the European standardisation bodies, or

(vi) when none of the above exist, national standards, national technical approvals or national technical specifications relating to the design, calculation and execution of the works and use of the supplies,

but each reference shall be accompanied by the words ‘or equivalent’;

(c) in terms of performance or functional requirements as referred to in sub-paragraph (a), with reference to the technical specifications referred to in sub-paragraph (b) as a means of presuming conformity with such performance or functional requirements;

(d) by reference to the technical specifications referred to in sub-paragraph (b) for certain characteristics, and by reference to the performance or functional requirements referred to in sub-paragraph (a) for other characteristics.

(12) Unless justified by the subject-matter of the contract, technical specifications shall not refer to a specific make or source, or a particular process which characterises the products or services provided by a specific economic operator, or to trade marks, patents, types or a specific origin or production with the effect of favouring or eliminating certain undertakings or certain products.

(13) But such reference is permitted on an exceptional basis, where a sufficiently precise and intelligible description of the subject-matter of the contract in accordance with paragraph (11) is not possible, in which case the reference shall be accompanied by the words “or equivalent”.

Applying the technical specifications

(14) Where a contracting authority uses the option of referring to the technical specifications referred to in paragraph (11)(b), it shall not reject a tender on the grounds that the works, supplies or services tendered for do not comply with the technical specifications to which it has referred, once the tenderer proves in its tender by any appropriate means, including the means of proof referred to in regulation 44, that the solutions proposed satisfy in an equivalent manner the requirements defined by the technical specifications.

(15) Where a contracting authority uses the option laid down in paragraph (11)(a) to formulate technical specifications in terms of performance or functional requirements, it shall not reject a tender for works, supplies or services which comply with a national standard transposing a European standard, a European technical approval, a common technical specification, an international standard or a technical reference system established by a European standardisation body, where those address the performance or functional requirements which it has laid down.

(16) In its tender, the tenderer shall prove by any appropriate means, including those referred to in regulation 44, that the work, supply or service in compliance with the standard meets the performance or functional requirements of the contracting authority.