Brussels, 14 March 2022
The EU public procurement market is one of the largest and most accessible in the world. However, many of the EU’s major trading partners apply restrictive practices in their markets that discriminate against EU businesses. These restrictions affect competitive EU sectors such as construction, public transport, medical devices, power generation and pharmaceuticals. The IPI will help address this problem by empowering the EU to initiate investigations in cases of alleged restrictions for EU companies in third country procurement markets, engage in consultations with the country concerned on the opening of its procurement market and, in the end, restrict access to the EU procurement market for foreign companies if they come from a country which continues to apply restrictions to EU companies.
Executive Vice-President and Commissioner for Trade Valdis Dombrovskis said:
“A level playing field is vital for the competitiveness of our companies. While the EU has kept its public procurement market open, the same cannot be said for many third countries, where our companies still face unfair barriers. We continue to favour dialogue to resolve such issues. But in the final instance, this new instrument will give us extra leverage to remove these barriers and promote fair competition for the benefit of all.”
With the IPI, the Commission would, ultimately, be able to apply restrictions to the EU’s own procurement markets in the form of adjustments in the way tenders from the country concerned are assessed, or by excluding certain tenders from the country concerned. In practice, these adjustments mean that bids from that country would, compared to other bids, be considered to offer a higher price than the actual price put forward. This would give EU and non-targeted countries’ bidders a competitive advantage on EU public procurement markets.
This would be a measure of last resort. Before that step is taken, the Commission would initiate investigations in cases of alleged restrictions for EU companies in third country procurement markets. In parallel to the investigation into restrictions vis-à-vis EU goods, services and/or suppliers, the Commission would invite the country concerned for consultations on the opening of its procurement market. Such consultations could also take place in the form of negotiations of an international agreement.
In any case, to avoid the application of such measures, third countries would only need to stop their restrictive practices. The existing EU commitments – including in the WTO Government Procurement Agreement (GPA) and bilateral trade agreements – remain unaffected by this instrument.
Public procurement is about how public authorities spend public money to buy goods and services. This can range from buying computers, to building a road or managing a transport network. Public procurement represents a significant part of national economies. Public procurement spending accounts for on average between 10% and 20% of each country’s GDP and represents over EUR 8 trillion in business opportunities worldwide.
The EU advocates for open international public procurement markets and has opened its own public procurement market for many goods and services from third countries. Closed procurement markets undermine competition and transparency, increase the costs of public goods and services for taxpayers and also increase the risk of corruption.
The IPI was first proposed by the Commission in 2012 and amended in 2016. The Council adopted its position on the proposal on the International Procurement Instrument in June 2021.
Further to this political agreement, the European Parliament and the Council will formally adopt the amended regulation with a view to its entry into force as soon as possible.
EP on International public procurement instrument: New tool to support EU firms
Goal is to encourage the opening of protected markets to EU economic operators
MEPs managed to widen the scope of application of the new instrument
MEPs secured provision that bidders from least developed countries are not subject to measures
The EU will have more leverage to push for the opening up of global procurement markets following an informal deal on the shape of the new tool on Monday evening.
Parliament and Council negotiators agreed on setting up the international procurement instrument (IPI), which will introduce measures limiting the access to open EU public procurement tenders to companies from non-EU countries that do not offer similar access to EU companies. Its goal is to encourage protected markets to be opened up to EU economic operators, goods and services.
The IPI tool will empower the Commission to determine whether and to what extent companies from a third country must be subject to an IPI measure, depending on the extent of the trade barriers. Parliament’s negotiating team amended the design and the scope of the instrument as well as member states’ discretionary powers in its application.
Widening the scope of IPI
Negotiators agreed that the IPI measures will apply to tenders worth at least €15 million for works and concessions, for example road or bridge construction, and €5 million for goods and services, such as the purchasing of computers. Parliament negotiators, led by Trade Committee Chair Bernd Lange (S&D, DE) and rapporteur Daniel Caspary (EPP, DE), say this would ensure that the administrative burden is low while the reach of the instrument remains wide.
It will be mandatory to take social, environmental and labour requirements into consideration when judging bids, according to the agreed text following insistence by EP negotiators.
Parliament’s team also succeeded in reducing to two the number of exceptions whereby an authority seeking tenderers in member states (for example, town halls, public institutions or governments) can opt out of IPI measures, therefore widening the scope of the tool.
Exceptions based on a “disproportionate increase in price”, a concept hard to define, were deleted. Similarly, EP negotiators successfully argued that big contracting authorities, for example city halls of large towns or the central government, will always have to apply the new rules. To this end, local contracting authorities will only be exempted from the IPI if they represent fewer than 50,000 people, and the percentage of annual overall tender value, for which contracting authorities must apply IPI, is set at 80%.
Stricter IPI measures when barriers are found
The Parliament team ensured that if the Commission finds that barriers exist in the public procurement market of a third country from which a bid originates, IPI measures can take the form of a price penalty of this bid or a reduced score for it, depending on certain criteria. The adjustment can reach 50% for score adjustment measures and 100% when only price is taken into account.
Poorest countries exempt
Finally, Parliament negotiators ensured that bidders from least developed countries are not subject to IPI measures.
Rapporteur Daniel Caspary said: “After almost exactly ten years of debates, blockades and setbacks, the agreement is a breakthrough. It will help to achieve a level playing field in public procurement and modernise the EU’s trade toolbox. This puts an end to the long list of prominent examples in which third-country bidders win illustrious public contracts across the EU while their home markets are de facto off limits for EU bidders. The agreement is effective while limiting the administrative burden to a minimum.”
Bernd Lange, Chair of the Committee on International Trade, said: “Our agreement enables the EU to take more decisive action against discrimination of European companies abroad. The message is clear: fair market access is not a one-way street, it must be reciprocal. We do not want to close off the European market, we want to ensure equal treatment of our companies abroad. The agreement is a success for Parliament, and the EU: we have created an instrument which will bring third countries to the negotiating table and open up their procurement markets.”
The agreement reached between the Parliament and the Council negotiators now has to be approved by both institutions.
Statement Caspary (CDU) zur Trilog-Einigung über das International Procurement Instrument (IPI)
Zur Trilog-Einigung zum Instrument für das internationale Beschaffungswesen (International Procurement Instrument (IPI)) erklärt Daniel Caspary (CDU), Vorsitzender der CDU/CSU-Gruppe und Berichterstatter des Europäischen Parlaments:
“Die heutige Trilogeinigung ist ein Durchbruch und korrigiert einen viel zu lange bestehenden Missstand. Bei öffentlichen Vergabeverfahren in der EU kommen regelmäßig Anbieter aus Drittstaaten, z.B. China, zum Zug, die mit künstlich verbilligten Angeboten prestigeträchtige Aufträge in der EU gewinnen konnten. Die U-Bahn-Tunnel in Stockholm und die Pelješac-Brücke in Kroatien sprechen als Beispiele für sich. Gleichzeitig blieb europäischen Anbietern der Zugang zu öffentlichen Vergabeverfahren in Drittstaaten verwehrt. Dieser wettbewerbsverzerrenden Praxis schiebt das IPI als neues Handelsinstrument einen Riegel vor.
Zukünftig können Angebote aus Drittstaaten bei öffentlichen Vergabeverfahren in der EU entweder mit einem Preisaufschlag versehen oder gänzlich von einem Vergabeverfahren ausgeschlossen werden, sofern sich der betroffenen Drittstaat in Verhandlungen mit der Europäischen Kommission weigert seinen öffentlichen Beschaffungsmarkt für EU-Anbieter ebenso weit zu öffnen, wie die EU es für Drittstaatanbieter tut. In diesem Sinne ist das IPI ein wichtiger Türöffner für europäische Unternehmen in Drittstaaten.
In den Trilogverhandlungen hat das Europäische Parlament sichergestellt, dass das IPI ein effektives und effizientes Instrument ohne Schlupflöcher ist. So konnte die umstrittene Anwendungsausnahme, wonach das Instrument im Falle eines “unverhältnismäßigen Preisanstiegs” nicht angewendet werden müsse, ersatzlos getilgt werden. Ebenso wurde die Höhe des prozentualen Preisaufschlags deutlich erhöht.
Die Schaffung des IPI leistet einen wichtigen Beitrag zur Modernisierung der Handelsinstrumente der EU. In Verbindung mit dem geplanten Instrument zur Bekämpfung von Zwangsmaßnahmen und der geplanten Verordnung über verzerrenden drittstaatliche Subventionen stärkt die EU ihren Handlungs- und Gestaltungsspielraum in einem rauen internationalen Handelsumfeld.”
Source – EVP/CDU (via e-Mail)