Bid to ensure fair play in concession contracts

Date: 09/03/2000

By Peter Chapman

The European Commission will warn EU member states later this month that they must remove barriers to foreign firms bidding for key 'concession' contracts to build and manage public services worth billions of euro.

Concessions - contracts under which firms agree to take the financial risk of building and managing a service such as a motorway, a bridge or a waterworks in return for the right to charge for their use - are now a huge part of the Union's gross domestic product. EU figures show they are running neck and neck with traditional public contracts, which account for nearly 11% of the Union's annual income.

But the Commission is concerned that member states are applying a raft of national rules and regulations when they award concessions which could fall foul of the EU's tough single-market laws designed to guarantee fair treatment for all Union firms. This, say critics, means that foreign companies face a tough time when they cross borders to bid for often lucrative concession contracts.

A spokesman for Single Market Commissioner Frits Bolkestein said he would publish a paper later this month setting out how governments should avoid these pitfalls and warning of tough EU court action if they ignore the Commission's advice. "The intention is to make absolutely clear to member states that Community law is applicable," he said, adding: "That was not the case before."

In a draft of the paper, the Commissioner says that "certain member states" are unaware that concessions are governed by the Union treaty rules because they involved the delegation of a service to the public - and that this was possible only on the basis of "mutual trust."

But he warns that concessions must be awarded in the same way as other public contracts. Bolkestein says member states must wipe out favouritism towards domestic firms by applying strict criteria to ensure foreigners are treated as equals to domestic bidders, and that successful candidates are chosen on "objective grounds".

He adds contracts must be advertised widely in specialised and daily press or "by posting appropriate notices" providing all the information needed for any firm to bid. He also insists that all technical specifications or 'performance criteria' for contracts must be 'proportional' to the task and fair to all bidders.

Moreover, he says, governments must not reject the qualifications, technical specifications and levels of services offered by a foreign bidder if they meet the criteria for similar work in their own member state.

The European Commission is to warn EU Member States that they must remove barriers to foreign firms bidding for key 'concession' contracts to build and manage public services worth billions of euro.