About EPSU 15

EPSU has closely analysed the measures proposed by the Commission in the Communication on Public Procurement. The objectives of the European Union concerning social policy, employment, equality, public services and environmental protection also have to be considered in the Public Procurement directives.

EPSU has identified several issues that ought to be discussed more thoroughly. Legislative instruments are needed on certain issues such as social and environmental standards.

The areas EPSU finds most important are:

• democratic influence of citizens on the provision of public services;
• a high quality of public services;
• social and environmental aspects of Public Procurement;
• preventing corruption, fraud and excessive influence of transnational companies on public services.

EPSU wishes to draw the attention of the Members of the European Parliament and the Commission to the following points in particular (paragraph numbers refer to the background document):

• The Commission Communication neither reflects on the role public services play in the European integration process, nor on how public procurement can be used to promote social and territorial cohesion. The Communication states that the objective is to align the public procurement regime with other Community policies. EPSU believes that the Commission missed an opportunity to take account of the recent change in the Treaty (Article 16), the Commission Communication on Services of General Interest in Europe and the report of the European Parliament on Public Services written by MEP Mrs. Billingham. EPSU expects the Commission to cover the relationship between public procurement and the public services in an interpretative document (paragraph 3).

• EPSU strongly believes that the current procurement rules are not suitable to cover procurement of essential public services, public – private partnership and concessions (the exclusive right to provide public services). EPSU believes that the Commission should publish an overview of problems and trends involved in public - private partnerships before attempting to regulate. One of the main problem areas is the conflict between the interests of the public and the interests of the private sector providers of public services. At present, the views of the Commission lack empirical support and ignore a number of serious problems such as market dominance, regulating quality standards in what can be very long-term contracts, providing for accountability to users (paragraphs 4 and 5).

• EPSU reiterates that the powers of local communities and their representatives to select the best way of providing public services should not be eroded. Inter-municipal arrangements to provide services to citizens are an important and effective means of doing this (paragraph 6).

• The Communication does not refer to the quality of public services. Quality of the public service, its contribution to social and territorial cohesion and employment are difficult criteria. To make them more precise the authorities can draw up lists of requirements. A choice amongst the tenderers is then made. At present the directives solely refer to the decisive criteria of lowest price or most economically efficient proposal. EPSU wishes that the Commission clarifies how the criteria of social and territorial cohesion can be made more specific (paragraph 7).

• A transparent system for public procurement is of great importance to public authorities, contractors, and users of services and workers. The Commission should therefore address the following:
• the power of weaker parties in the procurement regime needs to be strengthened. These weaker parties include local authorities, citizens, consumer, and environmental groups and trade unions. They should be allowed and enabled to follow the system critically. This needs to happen not only at a national but also at a European level as the companies involved in concessions operate on a European scale (paragraph 8).

• According to EPSU, consideration needs to be given to the regulatory mechanism to check the private (and public) providers of essential public services. This system should include:
• a right to know for consumer groups, environmental organisations, trade unions and other citizens’ interest groups. This will limit the possibilities for corruption, excess profits, market dominance and laying the costs of producing shareholder value on users, workers and the environment;
• a right to use the information to participate in the regulation of concessions and private-public partnerships (paragraph 9).

• EPSU stresses that if the Commission wishes to bring concessions and public-private partnerships under the public procurement regime it should prescribe that a public sector option must always be included and assessed in areas dealing with the exclusive right to provide public services. A complete assessment should be made of:
• relative costs of financing;
• full economic costs for consumers, workers and public finances;
• environmental consequences (paragraphs 10 and 11).

• This system will prevent abuse, high prices and low quality. It will also ensure that large corporate interests pursuing their essentially private aims do not do so at the expense of the public interest.

• EPSU is a member of ETUC. ETUC has argued for many years for the need to provide a legal basis in Community legislation for the use of social and environmental standards in public contracts. The Treaty confers the responsibility of giving social and environmental objectives an equally high ranking as economic performance to the Commission. The Commission’s objective to propose an interpretative document is therefore not enough. It will also not remove a large factor of insecurity and confusion from the public procurement regime. Arguments, based on local and national practices, are made in the academic community and the political world to amend the directives to ensure that social and environmental standards can be used. Public authorities should have the possibility to exclude and sanction violators of national, European and international legislation, which are undermining the European social model and obstructing its sustainable development.
• Confusion arises about the role of ILO Convention 94 in the European Public Procurement regime. This ILO Convention has been signed by a majority of EU Member States.
• Contract compliance. This is especially important in the context of the Treaty objective to strive towards equality between women and men.
• Chain of responsibility in case of contractors and sub-contractors.
• Transfer of workers in the case of concessions and loss of concessions (Is the new operator going to take the workers on?).
• Minimum standards and collective agreements in Member States and whether authorities can demand that contractors respect this.
• Sanctioning of companies that violate European social standards such as in the Vilvoorde case (paragraph 12 and 13).

A first report by EPSU on the Green Paper on Public Procurement, the Way forward, was made in March 1997.

Attached is further evidence to highlight some of the points made above.

The Commission Green paper on Public Procurement in the European Union, exploring the way forward of November 1997 was welcomed by EPSU in its contribution of March 1997. It was a first step towards the evaluation of the effectiveness of the public procurement regime.

EPSU raised concerns about:

• bias in the procurement regime against public service considerations;
• lack of clarity with regard to social and environmental standards and public procurement;
• limited possibilities to use qualitative criteria;
• lack of vision to use the public procurement regime to promote employment;
• concessions and regulation.

EPSU argued for a legislative initiative on social and environmental standards and public procurement. EPSU also argued to exclude concessions (the exclusive right to provide public services). The present Directives are not able to deal with the complexities of the provision of basic and essential public services.

EPSU welcomes the 2nd Communication on Public Procurement as an opportunity to assess whether the Commission has taken these comments into account.

EPSU wishes to draw the attention of the Members of the European Parliament and the Commission to the points raised in this contribution.

EPSU notes that the 2^nd Communication addresses many points but does not provide much detail. The detail, it is argued, will be provided in the interpretative and other documents. This makes the status of these documents unclear.

The Commission has addressed several of the points raised by EPSU such as:

• environmental standards in public procurement;
• social policy and public procurement;
• privatisation, public private partnerships and concessions.

EPSU feels however that the direction given and solutions offered by the Commission are far from comprehensive and will not solve the uncertainty and unclarity for the users of the public procurement regime. The bias against public service considerations continues.

The Commission Communication neither considers the role public services play in the European integration process, nor how public procurement can be used to promote social and territorial cohesion. The Communication states that the objective is to align the public procurement regime with other Community policies. EPSU believes that the Commission missed an opportunity to take account of the recent change in the Treaty (Article 16), the Commission Communication on Services of General Interest in Europe and the report of the European Parliament on Public Services written by MEP Mrs. Angela Billingham. EPSU expects the Commission to cover the relationship between public procurement and the public services in an interpretative document.

EPSU requests the Commission to clarify how the criteria of social and territorial cohesion can be made more specific. At present the directives solely refer to the decisive criteria of lowest price or most economically efficient proposal. Can a local authority demand that a company hire locally unemployed persons, set a quota for women or disabled? If a local authority is involved in urban renewal can it favour small enterprises set up by citizens in the neighbourhood (maybe long-term unemployed) for certain contracts?

EPSU strongly believes that the current procurement rules are not adequate to cover procurement of essential public services, public – private partnerships and concessions (the exclusive right to provide public services). EPSU believes that the Commission should publish an overview of problems and trends involved in public - private partnerships before attempting to regulate. One of the main problem areas is the conflict between the interests of the public and the interests of the private sector providers of public services. At present, the views of the Commission lack empirical support and ignore a number of serious problems such as market dominance, regulating quality standards in what can be very long-term contracts, providing for accountability to users.

The Commission now intends to regulate the exclusive right to provide public services and other forms of public-private partnerships in the same way as works, supplies and services.

This affects the delivery of essential public services used by many hundreds of millions of Europe’s citizens on a daily basis. There is a difference between the provision of clean and safe drinking water and accountancy services, or between the collection, transport and disposal of refuse, including clinical waste and the purchase of ball-points, or between providing care to the elderly and constructing a public building.

The Commission Communication provides very little detail on many points related to the exclusive rights to provide public services. The Commission argues in favour of public - private partnerships and concessions, but ignores existing empirical evidence that details problem areas.

According to EPSU the interests of the private sector providers of public services through concessions or public-private partnerships do not necessarily meet the interests of the public.

EPSU proposes that the Commission look into the areas listed below when preparing its overview. It should set out how public procurement (and especially concessions and public-private partnerships) can ensure high quality public services. The Commission should also indicate how the conflict between the public interest and the interests of the private sector could be reconciled.

The Commission should distinguish:

• service provision (who delivers, public or private);
• investment provision (who raises capital);
• method of payment for the service;
• regulation (quality, influence of citizens…).

A further breakdown relates to:

• ownership;
• management control;
• financial and legal structure;
• source of investment funds;
• source and form of finance;
• safeguards for service quality (regulation);
• safeguards for citizens’ influence (regulation);
• workers representation;
• employment guarantees;
• accountability.

EPSU reiterates that the powers of local communities and their representatives to select the best way of providing public services should not be eroded. Inter-municipal arrangements to provide services to citizens are an important and effective means of doing so.

In its earlier contribution EPSU insisted that the Commission should not interfere in how local and other public authorities decide to deliver a particular service, for example through inter-municipal companies. We have noted that the Commission agrees in principle, but at the same time still wants to regulate this area.

The Commission does not take the role of local authorities into account. It addresses itself solely to the Member States and the private sector, i.e. the Advisory Committee on Public Procurement has very few representatives of societal interests. It does not operate in a transparent and representative manner. It seems to serve the Commission as a way to justify certain policy directions.

The example on Polhelmsgården illustrates possible consequences of an approach based on lowest price.

• There is a difficulty for the private sector to cure itself given that it obtains contracts based on lowest price and not on the best way to provide care or fulfil the needs of users of the service.
• Quality standards need to be defined before procurement starts and the quality standards must be part of the final contract. A measure of harmonisation at European level is necessary;
• Workers know about the quality of their work. When quality criteria are set out, the authority should be obliged to consult with the representatives of the work force before procurement.
• Public service contracts should contain standards on the way in which the evaluation takes place, including consultation with the workers providing the service. Ad-hoc evaluation is definitely not enough as proven by the Polhemsgården case.
• Quality is related to the number of employees, their skills, training and decent conditions of service.
• The right of workers to criticise their employer is important to the evaluation of the quality of the service ultimately delivered to the citizens.

A transparent system for public procurement is of great importance to public authorities, contractors, users of services and workers. The Commission should therefore consider the following:

• the power of weaker parties in the procurement regime needs to be strengthened. These weaker parties include local authorities, citizens, consumer, and environmental groups and trade unions. They should be enabled to follow the system critically. This needs to happen not only at a national but also at European level as the companies involved in concessions operate on a European scale.

• In water and sewage French transnational companies dominate. Other companies active on this market do not manage to win substantial contracts.
• In waste, the waste subsidiaries of the same water companies dominate. Other companies such as a US multinational are active but are having difficulty in establishing themselves.
• In urban bus transport, it is only UK companies and one French company that operate on the European market.

According to EPSU consideration needs to be given to the regulatory mechanism to check the private (and public) providers of essential public services. This system should include:

• a right to know for consumer groups, environmental organisations, trade unions and other citizens’ interest groups. This will limit the possibilities for corruption, excess profits, market dominance and laying the costs of producing shareholder value on users, workers and the environment;
• a right to use the information to participate in the regulation of concessions and private-public partnerships;

EPSU notes that many concession contracts remain secret and give citizens little access to information on what exactly has been agreed. Trade unions find it difficult to have access to the contracts that spell out investment decisions and employment issues, and it therefore becomes difficult to defend employment and workers’ rights. The argument used against citizens, environmental organisations and trade unions is that the contracts deal with sensitive and commercial information. The scope for commercial secrets should be very limited. The free flow of commercial information is in the best interest of society as it ensures the proper functioning of the market economy!

EPSU stresses that if the Commission wishes to bring concessions and public-private partnerships under the public procurement regime it should prescribe that a public sector option must always be included and assessed in areas dealing with the exclusive right to provide public services. A complete assessment should be made of:

• relative costs of financing;
• full economic costs for consumers, workers and public finances;
• environmental consequences.

This system will prevent abuse, too high prices and low quality. It will also ensure that large corporate interests pursuing their essentially private aims not do so at the expense of the public interest.

Corruption is difficult to prevent and detect. Even when detected it often still pays to engage in it. EPSU therefore proposes the following measures:

• the Commission should publish a "black list" on the Internet naming companies that have been convicted for corruption, or violations of environmental and social legislation in EU, CEEC and other countries. This would help public authorities, municipalities and others in valuing the bids. From discussions with local authorities it has become clear to EPSU that such a list would be appreciated in particular since transnational companies operate in so many countries. A European economy demands a European approach. The Commission could make this available on the internet in the same way as it uses the SIMAP system;
• the Commission should spell out in the directives that any evidence of corrupt practices by the company before or after the contract award invalidates the contract;
• likewise, violating social and environmental standards should invalidate a contract;
• to be fully effective, the Commission should lay down a so-called "whistle-blowing" right which ensures that employees of companies or authorities reporting corrupt practices, violations of social and environmental standards are protected. The Polhemsgården case described earlier shows how important such a right is to protect users and workers.

As mentioned earlier, the best defence against corrupt practices is transparency of operations and possibilities for public scrutiny.

EPSU notes with satisfaction the change of tone in the Commission Communication concerning social and environmental issues and public procurement. We welcome that the Commission intends to publish Indicative papers laying down how social and environmental standards can be used. EPSU believes, however, that a legislative approach is indispensable in this area.

The European Parliament’s Social Affairs Committee also considered the necessity for legislation during a public hearing on Labour clauses in public contracts on 16 April 1998 in Brussels. Specialist academic literature, EC institutional consensus and practice at international, EC and Member State levels indicate that a European policy on labour clauses is possible. MEP Van Lancker has drafted an opinion along the lines as advocated here for the Social Affairs Committee.

EPSU is a member of ETUC. ETUC has argued for many years for the need to provide a legal basis in Community legislation for the use of social and environmental standards in public contracts. The Treaty confers the responsibility of giving social and environmental objectives an equally high ranking as economic performance to the Commission. Public authorities should have the possibility to exclude and sanction violators of national, European and international legislation, which are undermining the European social model and obstruct the sustainable development.

• Confusion arises on the validity of ILO Convention 94 in the European Public Procurement regime. This ILO Convention has been signed by a majority of EU Member States.
• Contract compliance is particularly important in the context of the Treaty objective to strive towards equality between women and men.
• Chain of responsibility in case of contractors and sub-contractors needs to be maintained.
• Transfer of workers in the case of concessions and loss of concessions needs to be regulated on the Acquired Rights Structure (Is the new operator to take the workers on?).
• Minimum standards and collective agreements in Member States and whether authorities can demand that contractors respect this.
• Sanctioning companies that violate European social standards such as in the Vilvoorde case.

The following question is related:

• Can public authorities exclude bids from contractors that can not deliver proof that the products and services the companies and their suppliers and sub-contractors offer make no use of child labour and forced labour, and do not suppress freedom of association and collective bargaining ?

Another important question is that of the possibilities for municipalities, states and other public authorities to exclude companies doing business with regimes that have a proven record of violation of human and trade union rights. EPSU believes that this should be possible. It can not agree with the Commission position on the so-called Burma laws in the US.

EPSU notes that employers and trade unions in the textile and clothing and in the footwear sectors have adopted codes of conduct. These prohibit the use of child labour, forced labour and call for recognition of the freedom of association, the right to negotiate and non-discrimination of employment.

The European Commission promotes these codes as examples for the sectoral social dialogue.

EPSU believes that public authorities can demand respect for and adherence to these norms as laid down by European employers and trade union organisations for European and non-European companies trying to win contracts.

EPSU welcomes the attention that the Commission Communication gives to the role of public procurement in environmental protection. Since the Earth Summit nobody denies that public authorities also have a responsibility for protecting the environment. The Amsterdam Treaty also reflects this requirement.

The European Environmental Bureau has produced a paper in April 1995 that defines the need for a legal framework for an environmentally responsible procurement procedure.

As with social standards there are differences between countries. This creates confusion for companies and public authorities. It also leads to economic distortions. The European Environmental Bureau is highly critical in its contribution to the Communication. "In general the Communication does not properly address the need to integrate the environmental protection requirements into the internal market policy". This is however set in the Treaty article 130r(2)

The EPSU Task Force on Public Procurement has developed this position

The European Federation of Public Service Unions of the ETUC represents more than 10 million public service workers providing services to Europe’s citizens and businesses in areas such as health and social care, fire-fighting, police, electricity, gas, water, sewage, waste collection, local, regional and central government. These public service workers are organised in more than 180 EPSU member unions, in all European countries

EPSU

Rue Royale 45, box 1

1000 Brussels

Belgium

Tel: (+32) 2 2501080

fax: (+32) 2 2501099

email: c.fischbach@ping.be