Regulation 90 – Duty owed to economic operators from certain states

Commentary

Regulation 90 PCR2015 extends the duty created in Regulation 89 to economic operators based in other countries. This extension is provided for economic operators from countries signatory to the Government Procurement Agreement (GPA) and other countries where a bilateral agreement on procurement exists. The number of signatory parties to the GPA is small but growing.

Under Regulation 90(1) PCR2015, this duty is owed to an economic operator from a GPA state, but only where the GPA applies to the procurement concerned; and to an economic operator which is not from an EEA state or a GPA state, but only if a relevant bilateral agreement applies. This comes to specify the duty of equal treatment and non-discrimination that the GPA and bilateral international trade agreements can create.

For the purposes of duties owed to economic operators from GPA state (ie any country, other than an EEA state, which at the relevant time is a signatory to the GPA), the GPA applies to a procurement if the procurement may result in the award of a contract of any description; and at the relevant time a GPA State has agreed with the EU that the GPA shall apply to a contract of that description, and the economic operator is from that GPA state (Regulation 90(2)). This could have been expressed simply and more directly by reference to the schedules of coverage of the GPA (available here) as amended from time to time.

Ultimately, the GPA extension is applicable only to contracts covered by it. Defining what is covered is not easy and depends upon looking into the specific commitments both the EU and other parties have made. As such, paragraph 2 establishes a “minimum common denominator” approach to the duty, making it depending on the reciprocity of the GPA state.

Let’s use an example with a works contracts. The EU’s GPA commitment is identical to the thresholds so in absence of a “minimum common denominator” rule, all contracts over €5,186,000 would be open to economic operators from all other GPA parties. However, the minimum common denominator rule only extends the obligations from Regulation 89 if there is reciprocity in the commitment of the other GPA member.

In our example the contract is valued at €5,500,00 and both American and Israeli economic operators want to take part on it. Only the first are entitled to the duty from Regulation 89. Why? Because their GPA threshold for works contracts is SDR 5,000,000 (identical to the EU’s) whereas Israel has adopted a higher threshold of SDR 8,500,000, well above to the EU threshold. However, Israel will bring down this threshold to SDR 5,000,000 in 2020.

Bilateral agreement extensions apply in case the EU has entered into an agreement whereby it granted to a third country remedies that are “no less favourable” than the ones given to EU based economic operators (paragraph 3). It is surprising that the Regulation refers specifically to “EU economic operators” instead of EEA ones as this Regulation is extending the rights of Regulation 89 to economic operators from other countries.

Regulation 90(3) PCR2015 could have been expanded to bilateral agreements that may bind the UK without necessarily binding the EU (either currently or in the future, which is at least theoretically are possible, depending on how the EU exercises its trade competences in the future; for discussion, see Y Devuyst “European Union trade policy after the Lisbon Treaty: the Community method at work” in N Witzleb, A Martinez Arranz & P Winand (eds), The European Union and Global Engagement: Institutions, Policies and Challenges (Cheltenham, Edward Elgar, 2015) 138-158—and certainly a possibility central to Brexit strategies not relying on EEA membership].

More generally, the normative question of whether all candidates and tenderers should be afforded the same protection regardless of their nationality remains open and is a complex issue in trade regulation. At the EU level, the proposal of the European Commission to potentially limit access to procurement markets (and hence, the available remedies) can also generate reform in this area (see here).

Opting for universal protection of tenderers could incentivise participation by economic operators from jurisdictions without strong (legal) trade links with the UK and the EU and, more generally, it is hard to understand why contracting authorities would be allowed to disregard the legitimate expectations of economic operators genuinely interested in a public tender–which could strengthen competition and challenge incumbents in cosy relationships with the public sector. However, this is clearly a normative point and, as mentioned regarding Regulation 89 PCR2015, it is clearly not the UK (English) tradition to give extensive rights of claim against the public sector. Hence, the scope of protection devised in Regulation 90 PCR2105 needs to be interpreted in strict terms.

Last modified: December 6, 2016 by Pedro Telles

90.—(1) The duty owed in accordance with regulation 89 is a duty owed also to—

(a)an economic operator from a GPA state, but only where the GPA applies to the procurement concerned; and

(b)an economic operator which is not from an EEA state or a GPA state, but only if a relevant bilateral agreement applies.

(2) For the purposes of paragraph (1)(a), the GPA applies to a procurement if—

(a)the procurement may result in the award of a contract of any description; and

(b)at the relevant time—

(i)a GPA State has agreed with the EU that the GPA shall apply to a contract of that description, and

(ii)the economic operator is from that GPA state.

(3) For the purposes of paragraph (1)(b), a relevant bilateral agreement applies if—

(a)there is an international agreement, other than the GPA, by which the EU is bound; and

(b)in accordance with that agreement, the economic operator is, in respect of the procurement concerned, to be accorded remedies no less favourable than those accorded to economic operators from the EU in respect of matters falling within the scope of the duty owed in accordance with regulation 89.

(4) In this regulation—

“GPA state” means any country, other than an EEA state, which at the relevant time is a signatory to the GPA; and

“relevant time” means the date on which the contracting authority sent a call for competition in respect of the contract to the EU Publications Office or would have done so if it had been required by Part 2 to do so.