Public Procurement CBG quarterly newsletter

1. EU insights and updates

The DG Grow of the European Commission has initiated a public consultation to evaluate the three legislative acts that regulate public procurement in the EU. It is open until March 7, 2025, to any interested person/company.

This consultation may not necessarily result in a new text proposal or reform. The aim for the Commission is to assess the performance of the current directives (dating from 2014) and their impact across the EU, to determine if they are still fit for purpose and suitable for current challenges. The evaluation will cover an eight-year period (2016-2024) and all EU Member States as well as EEA countries.

Professional’s point of view:

This is a unique opportunity to provide feedback on specific issues encountered with the implementation of these directives: promoting innovation, underused innovation partnerships, insufficient implementation of multi-award; need to recognise a greater place to negotiations, etc.

There are already several contributions in multiple languages, published on the aforementioned hyperlink.

2. EU and national Case-Law

Modification of concession contracts during their term

By a judgment of 7 November 2024 issued upon a referral from an Italian court (Regional Administrative Court, Lazio, Italy), the Court of Justice of the European Union held that, 43 of Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts, read in conjunction with the general principle of sound administration, does not preclude “national legislation under which a contracting authority may modify a concession during its term with regard to the entities concerned and the substance thereof, without organising a new concession award procedure, provided that that modification does not fall under Article 43(5) of that directive and that the contracting authority has set out the reasons why it considered that it was not required to organise such a procedure”.

Pursuant to the same article of the Concessions directive, the Court also held that EU law does not preclude “national legislation under which the contracting authority is entitled to modify a concession during its term without having assessed the reliability of the concessionaire”. Indeed, according to the Court, “it is for each Member State to determine the rules allowing the contracting authority to react when the concessionaire has committed a serious failure to fulfil its obligations or is suspected to have done so, which calls into question its reliability, during the term of the concession”.

It is worth noting that this case was about the collapse of the Morandi Bridge in Italy, which killed 43 people in August 2018. In a nutshell, the Court thus adopted a liberal – put also pragmatic and necessary – view of the rules on modifications of concession contracts, where those modifications affect the person of the concessionaire (incl. its share capital).

Negotiated procedures without prior publication

On 9 January 20025, the CJEU handed down a landmark ruling providing crucial guidance on the application of negotiated procedures without prior publication of a contract notice under Directive 2004/18/EC (but the same rules apply under the current Directive 2014/24/EU). This case, stemming from a request by the Czech Supreme Administrative Court, centered on the General Finance Directorate's (GFD) award of a maintenance contract for a tax authority information system to IBM Česká republika, without a prior contract notice.

The CJEU clarified that for a contracting authority to justify the use of a negotiated procedure without prior publication based on the protection of exclusive rights, it must demonstrate that the need for such protection is not attributable to the authority itself. This includes a thorough examination of both the factual and legal circumstances surrounding the initial contract and the period leading up to the decision to award a subsequent contract.

This decision emphasizes the importance of transparency and competition in public procurement processes, underscoring that exceptions to these principles must be strictly justified. The ruling is a reminder for contracting authorities to diligently assess their procurement strategies to ensure compliance with EU law.

Debt recovery – Payment of invoices in procurement contracts

We note that our clients are encountering more and more difficulties in recovering their invoices issued in the context of their public contracts. A recent decision from the CJEU shed important light on the rights of economic operators.

In the context of an action for infringement initiated by the European Commission against Slovakia, on 19 September 2024, the CJEU condemned Slovakia for failure to comply with its obligations under Article 4, §4, sub b), of Directive 2011/7/EU of 16 February 2011, on combating late payment in commercial transactions (transactions between businesses and public authorities).

According to this Directive, “Member States shall ensure that in commercial transactions where the debtor is a public authority":

a) the period for payment does not exceed any of the following time limits:

(i) 30 calendar days following the date of receipt by the debtor of the invoice or an equivalent request for payment;
(ii) where the date of receipt of the invoice or the equivalent request for payment is uncertain, 30 calendar days after the date of the receipt of the goods or services;
(iii) where the debtor receives the invoice or the equivalent request for payment earlier than the goods or the services, 30 calendar days after the date of the receipt of the goods or services;
(iv) where a procedure of acceptance or verification, by which the conformity of the goods or services with the contract is to be ascertained, is provided for by statute or in the contract and if the debtor receives the invoice or the equivalent request for payment earlier or on the date on which such acceptance or verification takes place, 30 calendar days after that date.”

The Directive allows Member States to provide for longer deadlines for public hospitals providing healthcare, "up to a maximum of sixty calendar days". For the CJEU, Slovakia has indeed failed to ensure that its public entities providing healthcare comply "effectively" with the 60-day payment deadline provided for in this provision.

Although such a judgment of failure to fulfil obligations is declaratory of the said failure, an economic operator could subsequently use it to attempt to hold Slovakia liable for non-compliance with this CJEU decision. In addition, the Commission could refer the matter to the CJEU again to have the State ordered to pay financial penalties if the failure is not remedied.

Professional’s point of view:

Although EU law and this judgment from the CJEU offers a strong protection for economic operator, it is important to also take account of other factors, such as contractual provisions which may impose certain formalism for invoices to be paid. For instance in France, it is worth noting that, at the same time as the CJEU’s reported ruling, the Versailles Administrative Court of Appeal was approached by a company requesting late payment interest and a fixed indemnity for recovery costs regarding invoices paid late under a public procurement framework agreement.

The court emphasized the importance of complying with the contract's terms, noting the company's failure to prove invoice receipt dates for interest claims. This decision highlights the critical nature of meticulous invoice preparation and documentation in public procurement, underscoring the strategic necessity of compliance and the importance of document retention for dispute resolution.

3. Updates from the different jurisdictions

France - clean energy

On 23 December 2024, the French General Directorate for Energy and Climate has initiated the first competitive process to support the production of renewable or low-carbon hydrogen as defined in Article L. 811-1 of the Energy Code through water electrolysis. Specifically, the process involves the allocation of public support under Articles L. 812-1 and following of the Energy Code, for up to 15 years, for the construction and operation of renewable or low-carbon hydrogen production units on French territory.

Eligibility criteria:

• The facilities must have a capacity greater than 5 MW and up to 100 MW.
• The hydrogen production must be primarily intended for direct industrial uses.

Selection process:

The competitive process will unfold in several phases:

1. The Application Selection Phase aimed at selecting candidates to participate in the Dialogue Phase based on their technical and financial capabilities;

2. The Dialogue Phase intended for conducting discussions according to the procedures indicated in the consultation regulations sent to the candidates. This phase will allow selected candidates to refine their proposals and ensure they align with the procedure's objectives; and

3. The Winner Designation Phase aimed at the final selection of projects that will receive support, based on the submission of final aid requests and compliance with the specifications provided to candidates after the Dialogue Phase.

Nature of the aid:

In accordance with Article L. 812-2 of the Energy Code, winners may receive either operational assistance or a combination of financial investment aid and operational assistance.

Deadline not to be missed:

Interested candidates must submit their applications before March 14, 2025, at 12:00 PM. This is a unique opportunity to participate in accelerating the energy transition in France and to benefit from state support in developing clean hydrogen solutions.

We strongly encourage industry stakeholders and innovators in the hydrogen field to seize this opportunity to contribute to building a sustainable energy future. For more details on the application process and consultation requirements, please visit the notice published on the PLACE platform and contact us for any further information.

Belgium - new payment rules

As of 1 January 2025 new payment rules for public procurement contracts are applicable in Belgium.

The old payment rules under the Royal Decree Execution 14 January 2013 (“RD Execution”) provided for a 30 days verification period followed by a 30 days payment period (60 days for contracting authorities providing healthcare). Thus resulting in a period of in total 60 days (90 days for contracting authorities providing healthcare) for the contracting authority to pay an invoice (as of date of receiving said invoice).

By judgement of 20 October 2022 the European Court of Justice (case C-585/20, BFF Finance Iberia SAU) ruled that article 4 (3) to (6) of Directive 2011/7 precludes national legislation which lays down, in general terms, for all commercial transactions between undertakings and public authorities, a maximum payment period of 60 calendar days, including where that period consists of an initial period of 30 days for a procedure of acceptance or verification of the conformity of the goods or services supplied with the contract, followed by an additional period of 30 days for payment of the agreed price.

The old Belgian payment rules under the RD Execution however provided for such a general verification period of 30 days followed by a payment period of 30 days. Hence the Belgian legislator needed to intervene to align the Belgian payment rules with the aforementioned European case law. This was done by the Royal Decree of 12 August 2024 modifying the payment rules in the RD Execution.

The new payment rules abolish the verification period and payment period, replacing them with a single “processing period” that may not exceed 30 days. Within this processing period, the verification and payment of the invoice must be made by the contracting authority, provided it has received the invoice. This 30-day processing period is the default rule.

A deviation to this 30-day processing period is possible, provided that each of the following conditions are met:

1. the tender documents expressly provide for a longer processing period;

2. this deviation is objectively justified by the special nature or characteristics of the contract

3. the processing period shall in no event exceed 60 days;

4. this extension does not entail manifest unfairness towards the contractor.

For contracting authorities that provide healthcare and are specifically recognised for that purpose (but only for contracts related to that specific activity), a double exception applies:

• the processing period is 60 days by default (and not 30 days);

• a separate verification period of max. 30 days + a separate payment period of max. 60 days is still possible if the following (strict) cumulative conditions are met:

  1) the contracting authority must indicate in the tender documents that it wishes to deviate from the default 60-day processing period;
  2) the tender documents must explicitly provide for a procedure for verification;
  3) the duration of the verification period must be specified in the tender documents (and may not exceed 30 days);
  4) this deviation must not serve to obtain a longer overall payment period, which the contracting authority must be able to demonstrate (this does not have to be explicitly justified in the tender documents, but the contracting authority must be able to demonstrate that longer periods are needed for a reason other than merely obtaining an overall longer payment period – which is not so straightforward).

Although the new payment rules now establish a 30-day (60-day) processing period as the default rule, deviations up to 60 days (90 days) are still possible, albeit under rather strict cumulative conditions.

The new payment rules are applicable on public procurement contracts that are launched as of 1 January 2025 only. Hence, the old payment rules of the RD Execution will continue to be of relevance for (and apply on) ongoing public procurement contracts that were launched before 2025.

Italy - Changes to the public procurement code

Two years after its entry into force, the Legislative Decree No. 36/2023 (the “Public Procurement Code”) has been recently amended by the Italian Government with the goal of improving specific provisions, without altering its main structure.

The new rules were approved by the Council of Ministers on 23 December 2024 and came into force on 31 December 2024 with the publication in the Italian Official Gazette of Decree no. 209/2024.

The main innovations of the new decree are as follows:

Employment Protections

Article 2 of Decree no. 209/2024 modifies Article 11 of the Public Procurement Code, focusing on employment protections, particularly the enforcement of the National Collective Labour Agreements (CCNL). This issue has been a central topic of intense debates among professionals and has led to numerous legal disputes before the Italian administrative courts. The amendments aim to harmonize procurement procedures initiated by contracting authorities and simplify both the regulatory framework and the process for determining the applicable CCNL for specific procurement procedures.

Specifically, Decree no. 209/2024 introduces a new Annex I.01, which provides guidelines for contracting authorities on selecting the appropriate CCNL to be indicated in the tender documents, based on the tender's subject. Automatic criteria have been established to evaluate the equivalence between CCNLs signed by the main trade unions, considering the key normative and economic indicators set out in the decree.

BIM and Digitalization

Starting January 1, 2025, the implementation of BIM (Building Information Modeling) will be required for public contracts exceeding 2 million euros. Decree no. 209/2024 also introduces new provisions for digital platform certification and simplifies the management of virtual files for contracting authorities.

Protection of small and medium enterprises (SMEs)

To boost SME participation in public procurement, Decree no. 209/2024:

• Enhances lot division, clarifying that lots need not be functionally autonomous (amendment to Article 3 and Annex I.1);
• Modifies subcontracting rules to reserve 20% of services for SMEs (amendment to Article 119);
• Introduces reserved contracts for SMEs, below European thresholds (addition of paragraph 2-bis to Article 61).

Contract variants

The Decree no. 209/2024 amends Article 120 of Legislative Decree 36/2023, which concerns the modification of contracts during their term. It provides an exhaustive list of circumstances that allow for contract variations, as well as a list of changes that are always authorized because they are not considered substantial.

Contracts may be amended without a new award procedure in the case of variations occurring during the performance of the contract due to the following unforeseeable circumstances:

1. Needs arising from new legislative or regulatory provisions or subsequent decisions of public authorities or bodies responsible for relevant interests;

2. Extraordinary and unforeseeable natural events and cases of force majeure affecting the goods subject to the intervention;

3. Discoveries unforeseen or not predictable with due diligence during the design phase;

4. Execution difficulties arising from geological, water-related, and similar causes, not predictable by the parties based on the consolidated technical-scientific knowledge at the time of design.

Additionally, the following non-substantial changes are always allowed regardless of their value:

1. Changes that ensure savings compared to initial forecasts, to be used to compensate for increased costs of the works;

2. Changes achieving equivalent or improved solutions in economic or technical terms, or in completion times of the work, including the use of materials, components, or technologies not existing at the time of design that lead to significant improvements in the quality of the work or part of it, or a reduction in completion times, without increasing costs;

3. Interventions imposed by the works manager to solve technical issues that arise during the performance of the works, which can be financed with the resources allocated in the economic framework of the work.

Public-private partnership (PPP)

The Italian Public Contracts Code allows private operators to propose public works or services projects. If deemed of public interest by contracting authorities, these operators gain a pre-emption right for the PPP contract award. The decree now mandates more transparency during the public interest declaration stage and enforces principles of competition, impartiality, non-discrimination, publicity, transparency, and proportionality.

UK - Procurement Act 2023

Summary: The UK’s Procurement Act 2023 will come into force in late February, overhauling the existing regime and introducing a host of changes including new monitoring and reporting requirements, updated award procedures and a new suppliers’ debarment list.

Background

The Procurement Act 2023 (the Act), which received Royal Assent in October 2023, will enter into force on 24 February 2025. The Act will introduce a single, consolidated set of rules on public procurement in the UK, replacing a number of different regulations derived from EU law, which together make up the current regime.

The UK Government has stated that the Act, which will apply in England, Wales and Northern Ireland (Scotland will continue to have its own separate, but aligned, regime), will transform public procurement, creating a simpler and more transparent system that will better deliver value for money.

While the Act was due to come into effect in October 2024, the Government delayed the “go live” date to allow time for a new National Procurement Policy Statement to be drafted, which will set out the Government's strategic priorities for public procurement in the UK.

Key reforms in the Act

The changes brought about by the Act are wide ranging and impact every aspect of the procurement process. Some of the key reforms to be aware of include:

Transparency by default: A key ambition of the Government has been to introduce “transparency by default” in the procurement process. To give effect to this, the Act introduces a new “noticing” regime requiring the publication of notices throughout the lifecycle of a procurement, from planning through to contract expiry.

The procurement objectives: The Act replaces fundamental EU law principles with its own statutory procurement objectives. Notably, these overarching procurement objectives include maximising public benefit and delivering value for money as well transparency and acting with integrity.

Award procedures: The Act introduces greater flexibility in the design of competitive award procedures. The Act provides for only two awards procedures: open procedure (a single stage procedure with no restriction on who can submit tenders) and a new competitive flexible procedure (any other procedure which the contracting authority considers appropriate).

Exclusion and debarment: The new regime will include a series of new or expanded grounds for exclusion, including in respect of poor performance. Most significantly, it introduces a new, public debarment list for excluded suppliers to be controlled by central government.

Contract performance: The requirement for key performance indicators (KPIs) tied to awarded contracts is another change introduced by the Act. Contracting authorities will be required to publish at least three KPIs in respect of any contract with an estimated value of more than £5 million. Suppliers will then be assessed annually against those KPIs and information relating to performance will be published to improve transparency.

Interested in learning more?

If you would like to know more about the Act and how you can prepare for the new regime, see our prior webinar and podcast series or contact a member of the Procurement group at Simmons.