International public procurement instrument: New tool to support EU firms

This article is brought to you in association with the European Parliament.

The EU will have more leverage to push for the opening up of global procurement markets following an informal deal on the shape of the new tool on Monday evening.

Parliament and Council negotiators agreed on setting up the international procurement instrument (IPI), which will introduce measures limiting the access to open EU public procurement tenders to companies from non-EU countries that do not offer similar access to EU companies. Its goal is to encourage protected markets to be opened up to EU economic operators, goods and services.

The IPI tool will empower the Commission to determine whether and to what extent companies from a third country must be subject to an IPI measure, depending on the extent of the trade barriers. Parliament’s negotiating team amended the design and the scope of the instrument as well as member states’ discretionary powers in its application.

Widening the scope of IPI

Negotiators agreed that the IPI measures will apply to tenders worth at least €15 million for works and concessions, for example road or bridge construction, and €5 million for goods and services, such as the purchasing of computers. Parliament negotiators, led by Trade Committee Chair Bernd Lange (S&D, DE) and rapporteur Daniel Caspary (EPP, DE), say this would ensure that the administrative burden is low while the reach of the instrument remains wide.

It will be mandatory to take social, environmental and labour requirements into consideration when judging bids, according to the agreed text following insistence by EP negotiators.

Parliament’s team also succeeded in reducing to two the number of exceptions whereby an authority seeking tenderers in member states (for example, town halls, public institutions or governments) can opt out of IPI measures, therefore widening the scope of the tool.

Exceptions based on a “disproportionate increase in price”, a concept hard to define, were deleted. Similarly, EP negotiators successfully argued that big contracting authorities, for example city halls of large towns or the central government, will always have to apply the new rules. To this end, local contracting authorities will only be exempted from the IPI if they represent fewer than 50,000 people, and the percentage of annual overall tender value, for which contracting authorities must apply IPI, is set at 80%.

Stricter IPI measures when barriers are found

The Parliament team ensured that if the Commission finds that barriers exist in the public procurement market of a third country from which a bid originates, IPI measures can take the form of a price penalty of this bid or a reduced score for it, depending on certain criteria. The adjustment can reach 50% for score adjustment measures and 100% when only price is taken into account.

Poorest countries exempt

Finally, Parliament negotiators ensured that bidders from least developed countries are not subject to IPI measures.

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Rapporteur Daniel Caspary said: “After almost exactly ten years of debates, blockades and setbacks, the agreement is a breakthrough. It will help to achieve a level playing field in public procurement and modernise the EU’s trade toolbox. This puts an end to the long list of prominent examples in which third-country bidders win illustrious public contracts across the EU while their home markets are de facto off limits for EU bidders. The agreement is effective while limiting the administrative burden to a minimum.”

Bernd Lange, Chair of the Committee on International Trade, said: “Our agreement enables the EU to take more decisive action against discrimination of European companies abroad. The message is clear: fair market access is not a one-way street, it must be reciprocal. We do not want to close off the European market, we want to ensure equal treatment of our companies abroad. The agreement is a success for Parliament, and the EU: we have created an instrument which will bring third countries to the negotiating table and open up their procurement markets.”

Next steps

The agreement reached between the Parliament and the Council negotiators now has to be approved by both institutions.