The rules governing public procurement have their roots in a series of European directives.
Directive 2014/24/EU establishes rules on the procedures for procurement by contracting authorities of services, supplies or works of a general economic interest. Directive 2014/25/EU does the same for procurement by entities operating in the water, energy, transport and postal services sectors. Directive 2014/23/EU, lastly, focuses on the award of concession contracts. For the Netherlands, these directives have been transposed into the Public Procurement Act 2012 [Aanbestedingswet 2012, or PPA’ for short].
Some key themes within procurement law are discussed below.
Mandatory public procurement
The one question that must be asked first and foremost is: what are the entities that are obliged to put contracts out to tender? In a nutshell, public authorities (local, regional, national) and bodies governed by public law such as the Netherlands Central Bank and the Education Executive Agency are obliged to put out contracts to tender. Bodies governed by public law are defined as bodies that:
- have been established for the purpose of meeting needs in the general interest, not having an industrial or commercial character;
- have legal personality, and
- are financed or are subject to management supervision by the State or local or regional authorities.
If a body meets these cumulative criteria, it is to be considered a contracting authority.
Public contracts
The European public procurement rules apply if:
- the entity awarding the contract is to be considered a contracting authority and this entity enters into an agreement with one or more entrepreneurs;
- the contract is awarded in writing and for valuable consideration, and
- the estimated value of the contract exceeds the relevant threshold.
Procurement law distinguishes between contracts for works, for supplies and for services. There are also mixed contracts, which have as their subject different types of procurement, such as supplies and services.
Thresholds
The estimated value of each public contract must be calculated to determine whether national or EU rules apply. In principle, contracts with a value in excess of a European threshold amount must be put out to tender under the European public procurement rules. These threshold amounts, applicable from 1 January 2024 until 31 December 2025, vary according to the type of contract (works, supplies or services):
- Works contracts and concessions: EUR 5,388,000
- Supplies and services sub-central government authorities: EUR 221,000
- Supplies and services central government authorities: EUR 143,000
- Social and other specific services: EUR 750,000
- Concessions: EUR 5,538,000
These thresholds are all VAT excluded.
Where the estimated value is below the European threshold amount, the Proportionality Guide provides which procedure in principle must be followed, such as the multiple private tender.
Grounds for exclusion and suitability requirements
Grounds for exclusion concern the circumstances relating to the person of the tenderer. If, for example, a tenderer has been convicted for participation in a criminal organisation or fraud involving public funds, this constitutes ground for exclusion from taking part in the procurement procedure (also known as 'mandatory grounds for exclusion'). A contracting authority can exclude a tenderer if, for example, the latter has made a serious error in the performance of their profession (such grounds are also known as 'optional grounds for exclusion').
Importantly, the procurement rules must provide for the possibility of self-cleansing. This means that a tenderer to whom a ground for exclusion applies must be given the opportunity to prove that it has taken sufficient measures to demonstrate its reliability.
Contracting authorities can set suitability requirements relating to the financial and economic strength of the tenderer and/or the tenderer's technical and professional skills.
Material amendment
It follows from EU case law that any material amendment to a public contract requires a new tendering procedure. After all, the public contract so amended is to be considered a new public contract, which the competition must be given a fair chance to bid for.
Framework agreements
If a contracting authority puts out to tender contracts with a certain regularity and subject to the same or similar terms and conditions, a framework agreement may be just the thing. Contracting authorities are free to enter into framework agreements with a single bidder or with multiple bidders. The framework agreement records the terms and conditions subject to which individual public contracts are awarded.
Concessions
Concession contracts are similar to public contracts. Concessions are contracts by means of which a contracting authority entrust the execution of works or the provision of services to one or more economic operators, the consideration of which consists solely in the right to exploit the works or services that are the subject of the contract. The award of a concession involves the transfer to the concessionaire of the operating risk, however negligible it may be.
Quasi in-house contract awards
As a rule, public contracts must be put out to tender. However, the public procurement rules do not apply if a contracting authority awards a contract to a legal entity over which it exercises control. Two conditions must be fulfilled for the exemption to apply: (1) the control condition, and (2) the majority condition.
The control condition means that the contracting authority exercises over the legal entity concerned a control which is similar to that which it exercises over its own departments. The majority condition means that the controlled legal entity carries out the majority of its activities in the performance of tasks entrusted to it by the contracting authority (or controlling legal entity) awarding the contract.
Procedures
Specific procedural regulations apply to public contracts and concession contracts. Consequently, it is crucial to determine which procurement procedure is to be used for a specific public contract.
A range of procurement procedures is available, including the open procedure, the restricted procedure, the competitive dialogue, the competitive procedure with negotiation, the dynamic purchasing system and the negotiated procedure without prior publication (also known as the 'direct award'). Contracting authorities may apply the last procedure if competition for the provision of the works, supplies or services is absent, or for reasons of extreme urgency.
Legal protection
A contracting authority must state the reasons for its intention to award the public contract to the selected tenderer. The contracting authority is not allowed to make the contract award decision final or actually sign the contract until tendering parties have had the opportunity to bring a legal challenge. This is also known as the 'standstill period'.
Do you oppose the decision of a contracting authority to award a public contract, because the authority misapplied the criteria for the award or infringed another procurement rule? You can bring court action demanding that the award be set aside and follow this up with an action on the merits to claim compensation on the ground of not being awarded the contract.
It should be noted that case law makes clear that tenderers cannot sit on their hands and must alert the contracting authority of any legal challenge to the procurement procedure as soon as possible.
Financial rules
The public procurement rules do not apply to contracting authorities in the Netherlands alone. They must also be followed by the institutions and agencies of the European Union, when the European Parliament puts a contract for the purchase of occupational clothing out to tender, for example. Regulation (EU) 2018/1046 establishes rules to be followed by EU institutions and agencies when acquiring works, supplies or services by means of procurement procedures. These rules are largely identical to the rules laid down in the EU Directives on procurement.
International Procurement Instrument
On 29 August 2022, Regulation (EU) 2022/1031 entered into effect. This Regulation authorises the European Commission to investigate allegedly restrictive measures or practices adopted by third countries against EU economic operators tendering in their markets. In that case, the European Commission has the power to impose measures on economic operators from third countries, such as exclusion from tenders or a score adjustment, which must be taken into account by contracting authorities.
Regulation on foreign subsidies
On 12 January 2023, Regulation (EU) 2022/2560 on foreign subsidies distorting the internal market entered into effect. Under circumstances, an economic operator taking part in a procurement procedure is required to report the receipt of foreign subsidies. More information about this Regulation can be found in this blog.