Trade: Council agrees its negotiating mandate on the International Procurement Instrument

EU ambassadors today agreed on a mandate for negotiations with the European Parliament on a regulation to create an International Procurement Instrument (IPI), which will help to address the lack of a level playing field in world procurement markets.

IPI is a trade offensive tool aiming to provide the EU the necessary negotiating leverage to open up third countries’ procurement markets and ensure access and a level playing field to EU businesses in those markets.

The EU will be now better equipped to defend European businesses against discriminatory and restrictive practices applied by some of its major partners. If the procurement market of a third country is closed to EU companies, the EU could close segments of its own procurement market in response. An open procurement market will boost competition and transparency, reduce the cost of public goods and services for taxpayers and minimise the risk of corruption.

Augusto Santos Silva, Minister of State and Foreign Affairs of Portugal

The IPI would enable the EU to limit or exclude, on a case-by-case basis, access to its public procurement markets by economic operators originating in countries that apply restrictive or discriminatory measures to EU businesses.

However, the existing EU commitments with third countries – including the WTO Government Procurement Agreement (GPA) and bilateral trade agreements – would remain unaffected by the IPI. In addition, the IPI is also structured to minimise the administrative and budgetary burden upon the contracting authorities from member states resulting from its application, and to  take into account the specificities of  the least developed countries and European SMEs.

Some key amendments introduced by the Portuguese Presidency in the legislative texts agreed by the Council include the following:

• Shorter and more flexible deadlines for investigations and consultations, taking into account the instrument’s objectives and the Commission’s resources;
• The procedure for determination of origin has been simplified (targeting bidders rather than bids);
• Two types of IPI measures can be implemented (adjustment measures and, in more extreme and therefore exceptional situations, the exclusion of a bidder);
• Adjustment measures can include quality criteria in addition to price and can be applied within a certain percentage range;
• IPI measures will only be applicable to new procurement procedures launched after the entry into force of the regulation, and will be subject to revision after being in force for a certain period;
• Differentiated thresholds for goods/services and works/concessions have been introduced. These have been set at a proportional level ensuring the effectiveness of the instrument;
• Additional contractual obligations (“Add-on provision”) are set to avoid the risk of circumvention of IPI measures and only apply for as long as the associated IPI measure is in force;
• There is a possibility of applying exceptions under very strict conditions (including due to certain public policy needs and to a disproportionate increase of price or costs);
• The specificities of LDCs and EU’s autonomous SMEs are taken into consideration;
• The IPI Regulation should be reviewed by the Commission in a regular long term basis to assess the need to improve its effectiveness or to minimize the burden to member states’ contracting authorities and entities.

Background

On 21 March 2012 the European Commission presented a first proposal for a regulation on the International Procurement Instrument. This proposal failed to obtain the support necessary in the Council. On 29 January 2016, the European Commission adopted an amended proposal for a regulation on the International Procurement Instrument on the basis of which the Council is agreeing its negotiating mandate.

The amendments introduced by the Commission in 2016 were intended to eliminate certain aspects of the instrument that were perceived as negative and to simplify the procedures, shorten investigations and reduce the number of actors involved in implementation. However, the standstill remained as member states were divided at the Council.

In March 2019, the European Council called for action and in October 2020 asked to foster discussions. The Portuguese Presidency pursued a new approach, presenting in early January a draft text, building on the Commission’s 2016 proposal, the work of successive Presidencies and inputs from member tates and accelerated technical discussions. This intense work allowed the Presidency to present a compromise proposal in mid-April that reflects the different views of member states in the Council, and strikes the right balance between an instrument with sufficient leverage for the Commission in negotiations with third countries to open up their procurement markets for European businesses and limits the administrative burden on the member states’ contracting authorities and entities.

The Presidency managed to find a compromise on the Council position at technical level in May and forwarded it to Coreper, which now has given its green light.

Next steps

After the endorsement by EU ambassadors of the Council mandate, the European Parliament will now have to adopt its position. The trilogues with the Parliament will start after the summer.

A link to the approved text will be made available as soon as possible.