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Commission requests Portugal to ensure fair access to public contracts over €25 million

Wednesday November 24th, 2010

The European Commission has requested Portugal to amend its rules on public contracts worth more than €25 million so as to ensure full compliance EU rules on fair and transparent public procurement.

The Commission considers that Portuguese law, because of a standing requirement that access to public contracts worth more than €25 million be subject to the performance of a research and development (R&D) project, is discriminatory and in breach of EU public procurement rules. Public procurement rules are designed to ensure fair and transparent competition for public contracts in Europe, thereby creating opportunities for European companies while ensuring the best value for public money. If the rules are not respected there is a risk of a closed market and wasted public money. The Commission’s request to Portugal takes the form of a reasoned opinion. If Portugal does not reply satisfactorily within two months the Commission may refer this matter to the Court of Justice.

What is the aim of the EU rule in question?

Public procurement is about how public authorities spend public money. It covers purchases of everything from coffee to computer systems, waste water plants, ship building, and consulting services. Total public procurement in the EU is estimated at about 17% of the Union’s GDP. The open and transparent tendering procedures required under EU public procurement rules mean more competition, stronger safeguards against corruption, and better service and value for money for taxpayers.

How is Portugal not respecting these rules?

Portuguese law requires all public contracts valued at € 25 million or above to be accompanied by an R&D project amounting to at least 1% of the contract’s value. The law also stipulates that the project be carried out on Portuguese territory. The Commission considers this requirement illegal under EU rules for two reasons.

First, it is discriminatory because it gives Portuguese companies, and those already established in Portugal, a clear advantage over those located in other Member States. This advantage is due to the fact that local operators can rely either on their own R&D facilities in Portugal or on agreements they have established with national partners, which may enable them to submit a more competitive bid.

Second, the law requires each and every public contract valued at or above € 25 million to be accompanied by a R&D project regardless of its utility in the execution of the contract. This disadvantages companies who are not willing to accept the additional burden.

Why are citizens and businesses suffering as a result?

Citizens are at risk of not getting the best value for money on large public contracts for two reasons. First, the cost of the R&D project is included in the overall contract, which raises the price to be paid by the public authorities, whilst the necessity to conduct R&D activity in the context of each contrat is not justified . Second, due to the requirement that the R&D projects be carried out on Portuguese territory, companies already established in Portugal are at a distinct advantage. Consequently, there is less competition for the award of the contract.

The latest information on infringement proceedings concerning all Member States can be found at:

http://ec.europa.eu/community_law/index_en.htm

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