European law - New rules for public transport tenders
The way in which the authorities of EU member states award public transport service contracts is bound to change after the European Parliament recently adopted a law setting out the rules in which such contracts ought to be awarded.Over the years,...
The way in which the authorities of EU member states award public transport service contracts is bound to change after the European Parliament recently adopted a law setting out the rules in which such contracts ought to be awarded.
Over the years, public enterprises and their established private-contract partners have acquired a stronghold on the public rail and road sector. This has been mainly due to the fact that efforts to preserve and expand services in this sector, without implementing substantial fare increases, have become increasingly dependent on public funding.
The objective of this new law, which has been in the pipeline for the last seven years, is to create a level playing field for businesses wishing to operate public rail and road services. It seeks to do so by introducing compulsory tendering of public-service contracts.
This law has been the cause of severe controversy with private enterprises pushing for a stronger focus on market opening and with public operators seeking to maintain the status quo. Local authorities, as well as users' organisations, green groups and trade unions, have always argued that carrying out public-procurement procedures in every case would put publicly-owned operators out of business. Furthermore, the five-year period suggested by the European Commission for such contracts would create a lack of continuity that would hamper investment and create job insecurity, authorities maintained.
The text which was finally agreed upon is in fact a compromise text. The law now provides that contracts with an average annual value of more than €1 million, or for the annual provision of more than 300,000 kilometres of public transport services, will automatically be subject to open competition. This will be the case unless the local authority chooses to provide the service itself or to award it directly to an "internal operator" that it controls. For the purposes of this law, an "internal operator" is deemed to be a legally distinct entity over which the authority exercises control similar to that exercised over its own departments.
For smaller-scale contracts, local authorities will also retain the right to choose whether to award directly or open them to tender. Furthermore, to help smaller businesses to survive, the rules allow local authorities to grant more important contracts, of up to €2 million or 600,000 km, directly to SMEs employing between 50 and 250 people.
Where public-procurement procedures are required, local authorities will have the right to award tenders based not only on price but also on certain social, environmental and quality standards.
The duration of such contracts will be for a three to 15-year-period in the case of rail services and for up to 10 years for coach and bus services.
This law is expected to enter into force in 2008. However, the award of public transport service contracts for road and rail must comply with the new regulation within 10 years of its entry into force, that is, in 2018.
With public transport becoming an increasingly important tool, in order to tackle rising congestion and environmental problems related to excessive car use, these new rules on public passenger transport services will seek to rebalance the award of contracts for these services between the public and private sectors. However, the lengthy transitional period envisaged for its actual coming into effect questions the true efficacy of these new regulations.
• Dr Vella Cardona is a freelance consultant in EU, intellectual property and competition law. She is also a visiting lecturer at the University of Malta.
Over the years, public enterprises and their established private-contract partners have acquired a stronghold on the public rail and road sector. This has been mainly due to the fact that efforts to preserve and expand services in this sector, without implementing substantial fare increases, have become increasingly dependent on public funding.
The objective of this new law, which has been in the pipeline for the last seven years, is to create a level playing field for businesses wishing to operate public rail and road services. It seeks to do so by introducing compulsory tendering of public-service contracts.
This law has been the cause of severe controversy with private enterprises pushing for a stronger focus on market opening and with public operators seeking to maintain the status quo. Local authorities, as well as users' organisations, green groups and trade unions, have always argued that carrying out public-procurement procedures in every case would put publicly-owned operators out of business. Furthermore, the five-year period suggested by the European Commission for such contracts would create a lack of continuity that would hamper investment and create job insecurity, authorities maintained.
The text which was finally agreed upon is in fact a compromise text. The law now provides that contracts with an average annual value of more than €1 million, or for the annual provision of more than 300,000 kilometres of public transport services, will automatically be subject to open competition. This will be the case unless the local authority chooses to provide the service itself or to award it directly to an "internal operator" that it controls. For the purposes of this law, an "internal operator" is deemed to be a legally distinct entity over which the authority exercises control similar to that exercised over its own departments.
For smaller-scale contracts, local authorities will also retain the right to choose whether to award directly or open them to tender. Furthermore, to help smaller businesses to survive, the rules allow local authorities to grant more important contracts, of up to €2 million or 600,000 km, directly to SMEs employing between 50 and 250 people.
Where public-procurement procedures are required, local authorities will have the right to award tenders based not only on price but also on certain social, environmental and quality standards.
The duration of such contracts will be for a three to 15-year-period in the case of rail services and for up to 10 years for coach and bus services.
This law is expected to enter into force in 2008. However, the award of public transport service contracts for road and rail must comply with the new regulation within 10 years of its entry into force, that is, in 2018.
With public transport becoming an increasingly important tool, in order to tackle rising congestion and environmental problems related to excessive car use, these new rules on public passenger transport services will seek to rebalance the award of contracts for these services between the public and private sectors. However, the lengthy transitional period envisaged for its actual coming into effect questions the true efficacy of these new regulations.
• Dr Vella Cardona is a freelance consultant in EU, intellectual property and competition law. She is also a visiting lecturer at the University of Malta.