Brussels, 5 May 2010
Public procurement: Commission acts to ensure fair access to waste disposal contract in Nordsachsen, Germany
The European Commission has acted to ensure that EU rules on public procurement – the spending of public money by public authorities – are respected in Germany. The Commission is concerned that Germany has failed to fulfil its obligations by not reopening to competition a waste disposal contract in the former district of Delitzsch, now district of Nordsachsen, despite substantial modifications. Common public procurement rules are designed to ensure fair competition for public contracts on a European scale, thereby creating opportunities for European businesses and ensuring the best value for public money. If they are not properly implemented, there is a risk of a closed market and waste of public money. The Commission's request to Germany takes the form of a reasoned opinion. If Germany does not reply satisfactorily within two months, the Commission may refer this matter to the Court of Justice.
What is the aim of the EU rule in question?
Public procurement is about how public authorities spend public money. It covers purchases of everything from coffee to computer systems, waste water plants, ship building or consulting services. Total public procurement in the EU is estimated at about 17% of the Union’s GDP. The open and transparent tendering procedures required under EU public procurement rules mean more competition, stronger safeguards against corruption, and better service and value for money for taxpayers.
How is Germany not respecting these rules and why are citizens and business suffering as a result?
According to the case-law of the Court of Justice of the European Union, public contracts have to be (re)opened to competition if amended in a way which is materially different in character from the original contract.
In the present case, the former district of Delitzsch, now district of Nordsachsen, had concluded in 1992 a waste disposal contract with a mixed undertaking, composed of the district itself (55%) and one private partner (45%). In 2005 the parties amended the contract, waiving the right to terminate the contract until 2025. In 2006, the original private partner of the mixed entity was replaced by another private firm. A public procurement procedure has not taken place at any time.
The original contract did not need to be tendered, as it was concluded before entry into force of the European public procurement Directive 92/50/EEC. However, the waiver of the right to terminate the contract, as well as the selection of a new private partner, constitutes essential modifications of the contract. These modifications have to be considered as a new award which had to respect the procedures foreseen by the applicable EU public procurement directives.
Modifying essential terms and conditions of a public contract without giving other bidders the opportunity to compete for the contract entails a serious risk of distorting competition, deterring potential new bidding companies and wasting taxpayers' money.
Therefore, the Commission, informed about the facts in a complaint, asked Germany to comment on the situation by letters of formal notice sent in February and November 2009. As no satisfactory reply was provided, the Commission has now decided to initiate the second stage of the formal infringement procedure by issuing a reasoned opinion.
About infringement procedures
The European Commission has powers under Article 258 of the Treaty on the Functioning of the European Union (TFEU) to take legal action – known as infringement procedures – against a Member State that is not respecting its obligations under EU rules. These procedures consist of three steps. The first is that the Member State receives a letter of formal notice seeking information if the Commission has concerns that there may be a breach of EU law and has two months to respond. If the Commission's concerns about a breach of EU legislation are confirmed, the Commission sends a reasoned opinion requiring the Member State to comply with EU law within two months. If there is no satisfactory reply, the Commission can refer the matter to the Court of Justice in Luxembourg. If the Court rules against a Member State and the Member State does not comply with the Court's ruling, the Commission can also request that the Court impose a fine on the country concerned.
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