The Instrument for International Public Procurement: a new trade policy tool promoting reciprocity in access to international public procurement and concession markets
Access for Union economic operators, goods or services to public procurement and concession markets in third countries and the elimination of restrictive public procurement practices in third countries remain an important policy objective of the European Union (the Union).
On 23 June 2022, the Union therefore adopted the International Procurement Instrument (IPI). The general objective of the IPI is to achieve reciprocity by opening up public procurement and concession markets in third countries and by improving market access possibilities for economic operators, goods or services of the Union.
The adoption of this instrument has long been considered a priority by the Commission given that many third countries are reluctant to open their public or concession markets to international competition or to improve access to these markets. According to the Global Trade Analysis Project, quoted by the Commissionin 2012, €352 billion of the €420 billion (about 85%) of the EU’s public procurement budget was open to countries that are members of the WTO agreement on public procurement, in contrast with the corresponding figures for the United States (approximately 178 billion euros out of 556.25 billion euros or only 32%) and Japan (approximately 27 billion euros out of 96.4 billion euros or only 28 %).
This newsflash presents a summary of all the IPI rules which will soon come into force.
- Purpose and scope
The purpose of the IPI is to establish measures concerning purchases not coveredthese are procedures for the award of public contracts for goods, services or concessions for which the Union has not made market access commitments in an international agreement in the field of public contracts or concessions (for example bilateral or multilateral trade agreements).
The scope of the IPI is linked to the Union directives on public procurement 2014/23/EU, 2014/24/EU and 2014/25/EU: the regulation applies to contracting authorities and entities contracting authorities (hereinafter collectively referred to as contracting authorities) and economic operators as defined in the Union directives on public procurement.
The public procurement procedures to which the IPI applies are also those covered by the Union directives on public procurement. The public procurement procedures applicable to public contracts awarded by the Union institutions on their own account do not, however, fall within the scope of the IPI. These procedures are defined in the Financial Regulationwhich is based on the EU directives on public procurement.
2. COMMISSION INVESTIGATIONS
The IPI sets out the procedures for the Commission to open investigations into alleged third-country measures or practices against EU economic operators, goods and services. A third country measure or practice is defined as “any legislative, regulatory or administrative measure, procedure or practice, or a combination thereof, adopted or maintained by public authorities or individual contracting authorities or contracting entities in a third country, at any level whatsoever, which results in a serious and recurring obstacle to the access of economic operators, goods or services of the Union to public contracts or concession contracts of this third country”.
A significant exemption is that the Commission will not open investigations against the least developed countriesunless there is evidence of circumvention of an IPI measure attributable to that third country or its economic operators.
The procedure allowing the Commission to open investigations into alleged third-country measures or practices against Union economic operators, goods and services is as follows:
- The Commission may initiate, on its own initiative or on reasoned complaint a Union or Member State interested party (for which an online tool will be made available on the Commission’s website), an investigation;
- A notice will be published in the Official newspaper of the European Union (OJ of the EU), indicating the Commission’s preliminary assessment of the third country’s measure or practice and inviting interested parties and Member States to provide relevant information within a given deadline;
- Upon publication of the notice, the Commission invite the third country concerned to present their point of view, provide relevant information and go into consultation with the Commission to remove or remedy the alleged measure or practice of a third country;
- A third country under investigation may to suspend the investigation when it takes satisfactory corrective measures or undertakes towards the Union to put an end to or phase out the third country measure or practice within a reasonable period of time and at the latest 6 months after having made these commitments. Nevertheless, the Commission can resume the investigation at any time if it concludes that the reasons for the suspension are no longer valid;
- If the alleged measure or practice of the third country is not maintained or if it does not result in a serious and recurring obstacle to the access of economic operators, goods or services of the Union to public contracts or to markets third country concessions, the Commission end the investigation and post a notice of termination in the OJ from the EU;
- The Commission has a period of 9 months after the date of its initiation to conclude the investigation and consultations. In justified cases, this period can be extended for 5 months. Following the investigation and consultations, the Commission (i) makes available to the public a report setting out the main findings of the investigation and a proposed course of action and (ii) presents this report to the European Parliament and the Council .
3. IPI MEASURES
Following an investigation during which the Commission finds the existence of a measure or practice of a third country and if it considers that this is in the interest of the Union, the Commission shall adopt an IPI measurement: a measure limiting the access of economic operators, goods or services originating in third countries to public contracts in the Union or to concession contracts in the field of public contracts not covered.
An IPI measure may require contracting authorities or contracting entities to:
- impose a score adjustment on offers submitted by economic operators from the third country concerned; Where
- exclude tenders submitted by economic operators from the third country concerned.
An IPI measure only applies to procurement procedures that are covered by the IPI measure and that were initiated between the entry into force of that IPI measure and its expiry, withdrawal or suspension. However, an IPI measure must Not Applicable to public procurement procedures for the award contracts based on a framework agreement or for contracts for individual lots.
It is important to point out that an IPI measure only applies to public procurement procedures estimated value greater than a threshold to be determined by the Commission. In any case, this estimated value should be:
- for works and concessions: equal to or greater than 15 million euros (excluding VAT);
- for goods and services: equal or higher 5 million euros (excluding VAT).
If an IPI measure is applicable, contracting authorities shall include in the public procurement documents for procedures falling within the scope of an IPI measure, a reference to both the application of the IPI and the applicable IPI measure.
As a rule, an IPI measure expires 5 years upon its entry into force. The Commission may nevertheless initiate a review of the ICI measure no later than 9 months before the expiry date and decide, within 6 months, (i) extend the duration of the IPI measure for another 5 years, (ii) adjust it appropriately or (iii) replace it with a different IPI measurement.
4. OBLIGATIONS OF SUCCESSFUL BIDDERS UNDER AN IPI MEASURE
The successful bidder in the context of a public procurement procedure subject to an IPI measure must comply with the following obligations (these obligations must also be included by the contracting authorities in the public procurement documents):
- a bidder is not allowed to outsource more than 50% the total value of the contract to economic operators originating from a third country which is subject to an IPI measure;
- for contracts the subject of which relates to the supply of goods: during the term of the contract, the goods or services supplied or supplied in performance of the contract and originating in a third country subject to the IPI measure cannot represent more than 50% the total value of the contract, whether these goods or services are provided or provided directly by the successful tenderer or by a subcontractor;
- the contractor must provide the contracting authority at its request sufficient evidence corresponding to the two aforementioned points, at the latest at the end of the performance of the contract;
- in the event of non-compliance with the obligations referred to in the first two points mentioned, a charge of between 10% and 30% of the total value of the contract may be imposed.
Even where an IPI measure is applicable, contracting authorities may exceptionally decide not to apply this IPI measure in the context of a public procurement procedure.
This exception is however limited to (i) a situation in which only offers from economic operators originating from a third country subject to an IPI measure satisfy the requirements of the call for tenders, or (ii) when the decision not to applying the ICI measure is justified by overriding reasons related to the public interest, such as public health or environmental protection.
When a contracting authority decides to invoke one of these exceptions and therefore decides not to apply an IPI measure, it provides specific information to the Commission.
6. ENTRY INTO FORCE
The IPI was signed on June 23, 2022 and published at OJ of the EU on 30 June 2022. The new trade policy tool will enter into force on 60e day following that of its publication, that’s to say on August 29, 2022.