Contracting with European Institutions: legal issues and practical tips

In 2019, the European Commission alone spent more than €3 billion on public procurement. The contracts of the European institutions are therefore opportunities to be seized. Only few companies are familiar though with the specific legal regime that applies to the conclusion and execution of public contracts of the European institutions. In this article, we highlight certain differences from (Belgian) national public procurement law and provide practical advice to help you engage in tendering for European institutions with confidence.

A specific regulatory framework

The public contracts of the European institutions are not subject to the Belgian law on public procurement, nor even to the European directive that this law implements. Reference should in fact be made to the lesser known Financial Regulation 20181, which also includes the budgetary rules of the European Union.

The rules of the Financial Regulation are inspired by the European directives on public procurement, but as we will see below, they are not identical.

Tip: challenge the reflexes that you may have acquired through your experience of Belgian public procurement. If you start from a tender template previously used for a domestic public contract, make sure to remove any reference to Belgian law.

Finding European contract notices

Depending on their value, contracts from the European institutions can be concluded without advertising or by publishing a contract notice on the European portal (TED)2. However, the notices of the European institutions are not published on the Belgian "e-Notification" site3.

Tip: register on the TED portal (it is easy to identify yourself via the "itsme" app) and subscribe to the contract notices you are interested in, depending on the subject of the contract ("CPV" code) and the type of buyer (for example, by specifically mentioning the contracts of the European institutions and agencies)4.

Exclusion criteria: Honesty is the best policy

As under Belgian law, the Financial Regulation sets out various hypotheses in which a tenderer is not considered reliable or honest enough to take part in the procedure (bankruptcy, failure to pay taxes, serious professional misconduct, agreement contrary to competition law, etc.).

Several important differences should nevertheless be noted:

  • there is no distinction between optional or mandatory grounds for exclusion: all are mandatory, subject to compliance with the principle of proportionality;
  • certain grounds for exclusion do not require, as in Belgian law, a final judgment or a final administrative decision: it is possible to exclude a company on the basis of a “preliminary classification in law”, after the opinion of a centralised body called the “panel”;
  • the grounds for exclusion apply to a very wide range of persons linked to the company, and not only to the company itself or to the members of its management or overseeing bodies;
  • a financial penalty may be imposed instead of, or in addition to, exclusion;
  • an "Early Detection and Exclusion System" (EDES) has been put in place to enable the European institutions to share information relating to the risks posed by certain persons or entities.

Tip: the company exposes itself to major risks if it is aware of a cause for exclusion and does not report it to the authority. Be transparent and, if necessary, invoke corrective measures that will enable you to avoid the sanction of exclusion. Though the system is far from perfect, EDES makes it quite a bit harder for companies to hide infractions, which may come back to bite a company through the imposition of considerable fines.

Evaluation of tenders

Tenders will in principle be evaluated by an evaluation committee composed of three people.

The administrative specifications frequently provide for a two-tier evaluation: in the first tier, the tenders are compared with regard to the "quality" criterion and only those tenders that reach a certain quality threshold are taken into consideration for the second tier which comprises financial comparison.

An award decision is adopted, but it is rarely communicated in full to the bidders. On request, unsuccessful tenderers will only be informed of the name of the successful tenderer and the characteristics and relative advantages of the successful tender, the price paid or contract value.

Tip: the European institutions sometimes communicate the reasons for their decisions in a piecemeal fashion; be persistent in obtaining the necessary information.

Appeal procedures

For contracts exceeding the European advertising thresholds, the authority will have to respect a standstill period of 10 days (if electronic means of communication are used) before signing the contract.

During this period, the unsuccessful tenderer may apply to the General Court of the European Union for suspension or other interim measures. Contrary to what is provided for in Belgian law, the applicant will have to demonstrate the urgency, i.e. the need for an interlocutory order in order to avoid serious and irreparable damage. In practice, access to the European interim relief judge proves much more cumbersome than under national law.

Other remedies are available, such as an action for annulment and damages or a complaint to the European Ombudsman, but are usually less effective for companies seeking to come out on top of the tender.

Tip: given the short time limits for taking action and the specific formalism of litigation before the European courts, be very responsive as soon as you receive a decision that is unfavourable to you.

Performance of the contract

The Financial Regulation includes only a few rules relating to the performance of the contract. There is no equivalent to the "General Rules for the Performance of Public Contracts" established in Belgium by Royal Decree.

Therefore, a draft contract based on a model contract is always attached to the contract notice and covers important issues such as invoices, the residual application of national law, price revision, etc.

This contract also addresses the issue of liquidated damages, i.e. the lump-sum compensation in case of non-compliance with (particular obligations under) the contract. Liquidated damages clauses, especially when they are accompanied by a service level agreement (SLA) which imposes output-based (result) commitments, can become a thorn in the side of companies who do not adequately ascertain their scope and evaluate their effects in advance.

Tip: the European institutions monitor the implementation of contracts rigorously. You too should therefore pay close attention to the contract management aspects: no execution of the contract before it is signed; no services outside the budget or scope without prior agreement; etc.

Now it’s up to you!

They are few good reasons for companies to stay away from European public contracts. If they think twice before starting, companies will not only be able to gain experience and prestige from European contracts, but will also be able to establish themselves as one of the limited number of companies that dare to compete for these contracts.

by Jens Mosselmans, Local Partner, Maxime Vanderstraeten, Counsel, and Stef Feyen, Senior Associate at NautaDutilh


 

[1] Regulation 2018/1046 of 18 July 2018 on the financial rules applicable to the general budget of the Union.

[2] https://ted.europa.eu.

[3] https://enot.publicprocurement.be.

[4] Use the advanced search mode (https://ted.europa.eu/TED/search/search.do) and in the "Type of buyer" field, tick "EU institutions and agencies

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