Public Services International Research Unit
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Resource 1a
EU procurement directives


The European Union (EU) has introduced four directives relating to public sector contracts: the Works Directive (71/304), the Supplies Directive (77/62); the Services Directive (92/50); and the Utilities Directive (93/38).

The main purpose behind the directives is to ensure that public sector contracts are open to fair competition for all contractors, whichever country they are based in. They are not meant to protect workers' rights, but they do affect contracting-out behaviour in the UK.

The directives do not require any service to be put out to tender or market tested, unlike the former UK government's approach, so if a service is done inhouse the directives have no relevance. But if it is being contracted-out, then the directives require open advertisement, following prescribed tendering procedures, and reporting of contract awards.

The utilities directive specifically excludes water supply and sewerage concessions from the reuirement for competitive tendering.

The directive lays down procedures for the whole tendering process. It requires contracts to be advertised (article 15) and open to all or at least a selected list of tenderers (Articles 11,18,19). This means:

  • Contractors can no longer "buy" an extension of their contract in exchange for it not being re-tendered.
  • Private contractors can no longer get contracts without competition. However, the directives do allow for a "negotiated procedure" to be used, in supposedly very limited circumstances, which can enable a company to be selected as a 'preferred bidder'.
  • Management buyouts are also caught by the directive. They count as contractors, and so cannot be awarded contracts, or sold inhouse operations, without competitive tender in accordance with the directives.
  • contractors can be excluded from consideration on grounds of financial and economic standing (article 31) or technical capability, which includes "skills, efficiency, experience and reliability" (article 32). Authorities can decide for themselves what financial and technical standards are required (following a decision of the European Court of Justice (Bellini [1987] ECR 3347)).
  • The directive bans discrimination in terms that may mean that other public sector tenderers cannot be arbitrarily excluded by the authority awarding the contract.
  • The directive also allows authorities to choose whether to evaluate tenders by "lowest price only" or the "economically most advantageous tender" (Article 36)

Further Resources for this Module

EPSU: Electricity and Gas Directives

Papers on Public Services in EU - Amsterdam Treaty etc