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EU Commission Green Paper on PPP/PFI Contracts

The European Commission has recently launched a consultation process on the legal framework available for PPP projects in Europe.

Following publication of two new Directives on public procurement (Directive no. 2004/18/EC dated 31 March 2004 coordinating the award procedures for public services, supplies and work contracts and Directive no. 2004/17/EC dated 31 March 2004 - utilities), the Commission is now looking at PPP projects and current practice in the EU. The Commission is seeking to ensure that public authorities and the private sector can freely access the different types of PPP contracts in an environment of fair competition.

The choice of a partner from the private sector in PPP schemes in Europe must be made in accordance with the general rules of public procurement. As there is no specific procedure or legal framework for PPPs, the Commission wishes to ascertain whether a special or harmonised legal framework is desirable. The aim is to ensure that the current public procurement Regulations are sufficiently clear and homogeneous for all types of PPPs: "The EU needs a suitable regulatory framework for developing these partnerships in order to apply transparency and fair competition for the benefit of the taxpayer." (Commission Green Paper).

It is unlikely, however, that this consultation will result in the Commission drafting a special (and more advantageous) regime for PPPs. The Green Paper provides that if changes to the current procurement framework are required, these changes will take place within the scope of the existing new Directives - including, for example, the Competitive Dialogue process or bids on technical specifications. The Competitive Dialogue will apply to PPP contracts used in relation to "particularly complex projects" only (Article 29 of the Directive on public works, services and supplies contracts dated 30 March 2004), and not all PPPs. Once the threemonth consultation period has concluded, the Commission will decide whether changes to the current public procurement Directives are desirable.

OGC Consultation on EU Directives relating to Public Procurement Regulations

The UK Office of Government Commerce ("OGC") is asking for views and comments on the transposition of the EU Directives on public procurement to the UK. As mentioned in our Spring 2004 newsletter, two new Directives on public procurement have been adopted by the European Parliament (these were published in the Official Journal of the European Union on 30 March 2004). The UK is obliged to transpose the new rules into English law by 31 January 2006. For this purpose, the OGC has launched a two-stage consultation on its proposed transposition.

During the first stage commencing on 18 May and ending on 9 August 2004, the OGC is consulting the construction and PFI industries on its proposed approach to transposition before any regulations are drafted. In a second stage and before the regulations are debated in Parliament, the OGC will circulate draft regulations for comment.

The OGC has said that its preferred approach to transposition of the Directives, in particular in relation to the Competitive Dialogue process, is to remain as close to the EU text as possible, because "any substantive departure would undoubtedly raise questions that the UK was trying to interpret the provision to suit our own circumstances" (OGC Consultation Paper on Directive for public works, services and supplies, paragraph 9.2).

It is still unclear whether PFI contracts that are not "particularly complex" can be awarded under a negotiated procedure. The question, raised by the EU Commission in relation to a school PFI project on the ground that it was not a sufficiently complex deal to allow for the use of a negotiated procedure, was never referred to the ECJ. The OGC may want to clarify the issue in the transposition of the Directives into English law.

Clifford Chance will be sending comments to the OGC, expressing particular concerns in relation to the new Competitive Dialogue stage, such as:

• increased bidding costs for unsuccessful tenderers;
• protection of know-how following the dialogue phase; and
• scope of negotiations after appointment of preferred bidder.