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Public procurement of IT-related products and/or services

How to identify unlawful procurement practices and what to do about them

A. The problem

Notices in the EU's Official Journal sometimes solicit bids for IT-related products and/or
services where the contracting authorities refer to a specific make or source, or to trademarks
or patents, such as, for example, Microsoft's or Intel's products, to set out the technical,
functional and other performance requirements of the products or services they require (the
"Technical Specifications"). Such practices are legally questionable, and this note is intended
to help you identify potentially illegal behaviour and what to do about it.

One egregious example of such practices occurred in Hungary in the beginning of 2008, when
a contracting authority announced a public procurement procedure for inter alia the extension
and upgrade of software licences procured earlier by public administration and education
institutions, and for the purchase of new ones. In the Technical Specifications the contracting
authority referred numerous times to traders of "Microsoft or equivalent" software. The
procedure is now the subject of an action in the Hungarian courts based on a complaint that it
breached the rules prohibiting references to a specific trademark or make, and the principle of
equal treatment of tenderers.

Moreover, the Commission recently took action against France, Finland, the Netherlands,
Sweden and Spain asking them to correct breaches of EU public procurement law related to
microprocessor-related procurement. The Commission observed that contracting authorities of
these Member States infringed European law on public procurement by using the following
three variants in order to set out the Technical Specifications in the calls for tender: Intel
microprocessors, "Intel or equivalent" microprocessors, or microprocessors using a specific
clock rate. The Commission considered that there was reason to believe that the contracting
authorities set out the required technical characteristics discriminatorily and that the
performance of microprocessors could be evaluated using appropriate benchmarks developed
by industry consortia or third-party independent benchmarking firms to assess the performance
of microprocessors. The Commission concluded that under EU law a brand may be specified
only if it is otherwise impossible to describe the product sufficiently precisely and intelligibly.
Following the first formal Commission letter, the Member States ceased using these ways of
setting out Technical Specifications.

Recent surveys such as the OpenForum Europe Monitoring Report on "Discrimination in Public
Procurement Procedures for Computer Software in the EU"1 show that the practices above are
not unique. There appear to be many other cases of discriminatory treatment of similar IT
products or services that are not compliant with the Technical Specifications as set out by the

1
More information on the OFE Monitoring Report are available at:
http://www.openforumeurope.org/press-room/latest-news/ofe-calls-on-eu-to-crack-down-on-public-
procurement-practice-for-it-software-studies/?searchterm=procurement
contracting authorities, yet are able to interoperate with open standards that meet the same
functional and performance needs sought by the contracting authorities.

Below you will find a brief analysis of certain potentially unlawful practices regarding the
definition of Technical Specifications and a briefing on ways an aggrieved party can inform
national and European authorities about such practices. Finally, we include a number of
questions that will help you assess whether public procurement practices you encounter are
lawful and how you can contest such practices.

B. The legal background

Usually, contracting authorities must apply EC public procurement rules to IT products or


services, whether hardware or software. They must indicate in the tender notice to be
published in the EU's Official Journal, as well as in the contract documentation, the Technical
Specifications to be complied with by the product(s) and/or service(s). This must be done
either (1) by making reference to Technical Specifications (i.e., standards developed in formal
national, European or international standards organisations, or common technical
specifications officially published in the Official Journal) or (2) by describing the relevant
functional or performance requirements.

What must contracting authorities ensure in setting their Technical Specifications?

Contracting authorities must treat economic operators equally and non-discriminatorily


and must act transparently. A contracting authority must refrain from adopting Technical
Specifications that operate to discriminate either directly or indirectly among economic
operators.

Under EU rules on Technical Specifications, authorities are prohibited from formulating


technical specifications in such a way that they exclude products, services or service providers
that meet the procuring entity's functional requirements. Moreover, if Technical Specifications
are formulated in a restrictive way and the contracting authority therefore rejects a submitted
tender that is compliant with the procuring entity's functional requirements, but not with the
specifications, such a practice will be prohibited as violating the principle of equal treatment in
both the EC Treaty and the EC public procurement rules.

EC public procurement rules seek to achieve objectivity by giving preference to the use of
approved and recognised standards. All products complying with the relevant standard must
be accepted by the contracting authorities.

Contracting authorities must not draw up Technical Specifications in such a way as to


exclude products that meet their requirements. Technical Specifications should be set out
in such a way as to afford equal access for bidders and not have the effect of creating
unjustified obstacles to the opening up of public procurement to competition. Contracting
authorities must formulate Technical Specifications in terms of a product's or service's function
or performance. Hence, contracting authorities must not refer to standards that are not
themselves based wholly on performance or functional requirements.

A contracting authority may not reject a tender on the grounds that the products or services
tendered do not comply with the Technical Specification if they meet in an equivalent manner

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the functional or performance requirements referred to by the Technical Specifications. The
above rule applies even in cases where a contracting authority in the Technical Specifications
refers to specific national, European or international standards, as long as the bidder proves,
by whatever means, that the solutions he proposes satisfy the same functional or performance
needs the contracting authority aims to cover by reference to those standards.

A contracting authority normally must not refer to a specific make, source or process.
Technical Specifications must not refer to a specific make or source, or a particular process, or
to trademarks, patents, types or a specific origin with the effect of favouring or eliminating
certain undertakings or products in a public procurement process.

Such a reference is permitted only if it is accompanied by the term 'or equivalent' in cases:

 where a sufficiently precise and intelligible description of the subject matter of the
contract is not possible without any reference to a specific make or source, to a
trademark, etc.; or
 where it is justified by the subject matter of the contract. For example, in cases where
the functional needs of the contracting authority could not be met by another product or
the purchase of another product would impose extra costs or difficulties in its use.

A contracting authority must provide the reasons either in the contract documents for each
contract or else in an equivalent document justifying the reference to specific makes and
explain why there is a lack of equivalent technical, functional and other performance
requirements to describe the products or services they require. In addition, the contracting
authority when it makes use of these exceptional circumstances must permit bidders to
demonstrate equivalence by using any form of evidence and it must provide a reason for any
decision that equivalence does not exist in a given case.

Additionally, in the field of information technology a contracting authority must also


consider the application of the Council Decision 97/95/EEC of 22 December 1986 on
standardization in the field of information technology and telecommunications (the "IT
Standards Decision"). The IT Standards Decision applies to Technical Specifications in
public procurement orders concluded for the supply of equipment relating to information
technology, which must be formulated in a way to ensure the exchange of information and data
for systems interoperability. In the case of Technical Specifications falling within the scope of
the IT Standards Decision, a contracting authority may choose not to use European or
international standards only if doing so is objectively justified by any of the following
circumstances and the contracting authority records the reasons for doing so:

 The need for operational continuity in existing systems (technical compatibility);


 The genuinely innovative nature of the product in question;
 The standard is technically inadequate for its purposes on the grounds that:
o It does not provide the appropriate means of achieving information and data
exchange or interoperability; or
o The means (including testing) do not exist to establish to a satisfactory extent
that the product conforms to the standard; or
o In the case of European pre-standards, these pre-standards lack the
necessary stability for applications, or finally;

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 After careful consultation of the market, it is found that for important reasons of cost-
effectiveness the use of a specific standard is inappropriate.

What actions may a potential complainant take in case of an infringement of EC Public


Procurement rules?

Below is a general framework of what an aggrieved party may do at a national or a European


level.

An aggrieved party should immediately raise concerns with the contracting authority
and the national Procurement Agency (if any) as a first step. At this stage the aggrieved
party has the right to ask the contracting authority to clarify whether it claims exceptional
circumstances under the EC public procurement rules.

Following an unsatisfactory response, the aggrieved party may consider filing an injunction
against the contracting authority in the national courts seeking an order to suspend the process
and remedy the breach. Any action, however, in this respect needs to take into account any
statutory time limits under national law.

Additionally, an aggrieved party may consider submitting a complaint with the European
Commission. In particular, the aggrieved party may file a complaint with the Commission
according to Article 226 of the EC Treaty. The purpose is to make the Commission aware of
one's concern that the public procurement practices of a Member State are in breach of the EC
public procurement rules. In his complaint, the aggrieved party may challenge the practices of
the contracting authority or the government on the grounds both of EC public procurement
rules and of the general Community law principles these rules reflect.

The attached appendix sets for the basic analysis one must take to address the lawfulness of a
particular procurement practice and to consider what to do about it.

C. Call for action

It is vital that all of us work together in order to eliminate public procurement practices which
infringe EC public procurement rules, especially by referring to a specific make, source, patent
and/or trademark in order to set out Technical Specifications. Anyone becoming aware of
questionable procurement practices should inform other interested parties, so joint analysis and
potential joint actions can be considered.

The success of a campaign to root out illegal public procurement practices in Europe will
demand substantial resources and cooperation. For example, the success of complaints
depends on providing sufficient evidence and technical expertise to prove that a contracting
authority is engaged in unlawful procurement practices. And it will be necessary for many of us
together to educate procurement agencies about their obligations, and in particular how those
obligations apply in the context of IT procurement. In addition, success will depend on raising
the awareness of the press and national and European politicians about these issues and
emphasizing to them the public interest in appropriate IT procurement practices.

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Awareness can be raised, for example, by sending letters to European Commissioners and
Members of the European Parliament. Appendix 2 contains a list of European Commissioners
to whom letters could be sent.

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APPENDIX 1

First, an aggrieved party or an interested entity should examine the following:

• Do the Technical Specifications refer to a specific make or source, or a particular


process, or to trademarks, patents, types or a specific origin or production? Does such
a reference have as an effect to favour or eliminate certain providers or certain
products?

A positive answer to the aforementioned questions means that the contracting authority
has infringed the rules on Technical Specifications -- subject to the exemptions
provided below.

• If a reference to a specific make or source, or a particular process, or to trademarks,


patents, types or a specific origin or production is made, is such a reference essential
in order to describe sufficiently precisely and intelligibly the subject matter of the
contract?

Otherwise, is such a reference justified by the subject matter of the contract? For
example, is it the case that the functional needs of the contracting authority could not
be met by another product or that the purchase of another product would impose extra
costs?

If any of the aforementioned exemptions apply, then the contracting authority may be
allowed to refer to a specific make or source, or a particular process, or to trademarks,
patents, types or a specific origin or production in the Technical Specifications. But the
burden of proving the applicability of an exemption falls on the contracting authority,
and interested parties should seek to ensure that the burden is high.

• If a reference is made to a specific make or source, or a particular process, or to


trademarks, patents, types or a specific origin or production, falling within the scope of
the exceptions provided above, is such a reference accompanied by the words "or
equivalent"?

If not, then the contracting authority will be infringing the rules on Technical
Specifications.

• In general, do the Technical Specifications afford equal access for tenderers? In


addition, do they have the effect of creating unjustified obstacles to the opening up of
public procurement to competition?

If the above apply and sufficient evidence can be provided to that effect, then the
Technical Specifications may infringe the EU public procurement rules, even if
technically the rules have been complied with.

If the Technical Specifications in public procurement orders concluded for the supply of
equipment relating to information technology must be formulated in a way to ensure the
exchange of information and data for systems interoperability, then the IT Standards Decision
applies. In that case:

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• Has the contracting authority used European or international standards, which ensure
the precision required by users for exchange of information and data and systems
interoperability, in order to set out the Technical Specifications?

• If the contracting authority opts out from the requirement to use European or
international standards, do any of the following apply?
o Is doing so required for operational continuity in existing systems (technical
compatibility)?
o Are the products to be supplied genuinely innovative in nature?
o Is the standard is technically inadequate for its purposes on the grounds that:
 It does not provide the appropriate means of achieving information and
data exchange or interoperability; or
 The means (including testing) do not exist to establish to a satisfactory
extent that the product conforms to the standard; or
 In the case of European pre-standards, these pre-standards lack the
necessary stability for applications?
o After careful consultation of the market, has the use of a specific standard
been found inappropriate for important reasons of cost-effectiveness?

• If any of the above applies, has the contracting authority objectively justified invoking
any of the aforementioned circumstances and have they recorded the reasons for
doing so?

If the practice does not fall within the exceptions provided above and does not meet the
requirement to objectively justify and record the reasons for invoking any of the
exceptions, then the practice of the contracting authority will be unlawful under the IT
Standards Decision.

If by examining the above, an aggrieved party concludes that the Technical Specifications are
not compliant with the EC public procurement rules, how can he contest the practices?

• As a first step an aggrieved party should raise concerns with the contracting authority
and the national Procurement Agency (if any) asking the contracting authority to clarify
whether any of the exceptional circumstances under the EC public procurement rules
or the general Community law apply.

• If the contracting authority does not satisfy the aggrieved party's inquiry, then the latter
may consider filing an injunction against the contracting authority in the national courts
seeking an order to suspend the process and remedy the breach within the statutory
time limits provided under national law.

• In addition, an aggrieved party or any interested party may consider submitting a


complaint with the European Commission according to Article 226 of the EC Treaty.
The complaint should be addressed to:

Commission of the European Communities


(Attn: Mrs. Catherine Day, Secretary-General)
Rue de la Loi 200,

7
B-1049 Brussels
Belgium

A copy of the complaint could be sent to:


Mr. Jörgen Holmquist, Director General of DG Internal Market and Services
European Commission
B - 1049 Brussels
Belgium

Optionally a copy of the complaint could be also sent to:


Director Bertrand Carsin, Directorate C - PUBLIC PROCUREMENT POLICY
DG Internal Market & Services
European Commission
B-1049 Brussels
Belgium

A sample complaint form can be found at:


http://ec.europa.eu/community_law/docs/docs_your_rights/complaint_form_en.rtf

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APPENDIX 2

Mr. José Manuel Barroso, President of the European Commission


Contact details: José Manuel Barroso
President of the European commission
1049 Brussels, Belgium
You can find an electronic form to send comments or questions at:
http://ec.europa.eu/commission_barroso/president/contact/mail/index_en.htm

Mr. Charlie McCreevy, Commissioner, DG Internal Market & Services


Contact details: Charlie McCreevy
European Commissioner for Internal Market and Services
European Commission
B - 1049 Brussels
(Belgium)
E-mail: Charlie.Mc-Creevy@ec.europa.eu

Ms. Günter Verheugen, Commissioner, DG Enterprise and Industry


Contact details: Vice President Günter Verheugen
European Commission
Rue de la Loi, 200
B-1049 Brussels (Belgium)
Fax: + 32 2 29 91827
E-mail: Guenter.Verheugen@ec.europa.eu

Ms. Neelie Kroes, Commissioner, DG Competition


Contact details: Commissioner Kroes
European Commission
B-1049 Brussels
Belgium
You can find an electronic form to send comments or questions at:
http://ec.europa.eu/commission_barroso/kroes/contact_en.html

Ms. Viviane Reding, Commissioner, DG Information Society and Media


Contact details: Viviane Reding
Member of the European Commission
BE-1049 Brussels
Belgium
Fax: +32 2 299.92.01
E-mail : viviane.reding@ec.europa.eu

Ms. Meglena Kuneva, Commissioner, DG Consumer Protection


Contact details: Commissioner Meglena Kuneva
European Commission
B-1049 Brussels
Belgium