Practical Question Public Procurement

How should public transport (by bus) be put out to tender under the new concession directive?

March 2016

Our province’s current public transport contract with a bus company is about to expire and we would like to enter into a new agreement. We know that the new European concession directive will be implemented in the Netherlands at short notice. Are our Provincial services for public (bus) transport obliged to start a public procurement procedure on the basis of a concession?

Answer (short version)

Yes, pursuant to Article 61 of the Dutch Passenger Transport Act 2000 (‘Wet Personenvervoer 2000’), (local and regional) authorities are obliged to start a public procurement procedure on the basis of a concession. In accordance with the regulation on public passenger transport services and the pending interpretative guidelines, the public procurement procedure should lead to actual competition. In order to do so in conformity with Article 37 of the Dutch Passenger Transport Decree 2000 (‘Besluit personenvervoer 2000’), the Provincial authorities must observe the legal requirements laid down in the Public Procurement Act. Furthermore, a number of additional requirements for Provincial authorities with respect to (the preparation of) public contracts has been laid down in the Passenger Transport Act 2000. As soon as the three new European directives are transposed into the revised version of the Public Procurement Act, the Provincial authorities will have to observe these requirements when opening up a tendering procedure for public bus transport.

In order to identify the exact requirements regarding the granting of concessions for public passenger transport, we will briefly explain the nature of a concession, both under the regime of the current Directive 2004/18 and in the light of the amendments under the concession directive (2014/23). After that, we will explain the nature of the requirements laid down in the regulation on public passenger transport services, including the interpretative guidelines of the European Commission and the ensuing national legislation.

Concessions

The Dutch legislator has decided that public passenger transport makes the tendering of a service contract by means of a concession contract mandatory. Other than classical government contracts, concession contracts constitute a contract for the execution of works or services, meaning that part of the compensation received by the executive party consists of the right to utilise the work or the service. A contract granted by a public authority for the delivery of public bus transport, is a clear example of a contract that can be granted by means of a concession. The party accepting the contract has an exclusive right to deliver the bus transport in the province’s region.

Concessions under Directive 2004/18

Article 17 of Directive 2004/18 provides that this directive does not apply to service concessions. However, the general provisions of the TFEU do apply. This has been laid down in, among other things, case-law. Still, the exclusion of service concessions will change as soon as the new European directives are implemented. In 2014, the European Commission approved three new public procurement directives, including the entirely new concessions directive (2014/23/EU). These new European directives will be transposed into the revised Dutch Public Procurement Act not later than 1 July 2016.

Concessions directive (2014/23)

The issue of awarding concessions for services will be further elaborated in the new regime of the concessions directive (2014/23). Pursuant to Article 5(1) and Article 8 of the directive, the performance of services falls explicitly within the scope of application of the directive if the value is equal to or greater than €5,186,000. Article 10(3) provides that the concessions directive shall not apply to concessions for public passenger transport services within the meaning of the regulation on public passenger transport services, such as bus transport services. This means that concessions for public passenger transport services, such as bus transport services, do not fall under the public procurement regime of the new concessions directive 2014/23. In such cases, the rules laid down in the regulation on public passenger transport services must be observed.

Regulation on public passenger transport services

The regulation on public passenger transport services provides for a regulation on domestic passenger transport by rail and by road on the basis of so-called public service contracts. After all, Article 3 of this regulation provides that where a competent authority decides to grant an operator an exclusive right (a concession), it shall do so within the framework of a public service contract. In other words, the regulation sets conditions to the granting of exclusive rights.

State aid and the regulation on public passenger transport services

The regulation on public passenger transport services also set conditions to granting an additional subsidy as compensation for the operation of public service obligations in the field of passenger transport. Above all, such an operation subsidy must be permitted according to the state aid rules. As regards state aid, aid measures are deemed to be allowed on the basis of the regulation if and in so far as there is fair competition with respect to the relevant public service obligations, in a manner that meets the requirements of the relevant regulation.

Interpretative guidelines

In the event there are no exceptions to the obligation to put contracts out to tender, Provincial authorities are obliged to set up a tendering procedure for public passenger transport per bus in accordance with Article 5(3) of the regulation on public passenger transport services. However, the regulation does not specify which conditions must be observed when setting up a tendering procedure in accordance with the regulation’s standards. Still, the regulation does provide that the granting must be done on the basis of a fair, open, transparent and non-discriminatory public procurement procedure. The requirements have been further elaborated by the Commission in the interpretative guidelines published in 2014. In these guidelines, the Commission provides that there must be effective competition. According to the guidelines, the member states are allowed to follow the three new public procurement directives, however, they are not obliged. The Commission argues that, in the event the European public procurement procedures are followed, the contracting authority automatically observes the above requirements.

National regulations

In the Netherlands, the key requirements ensuing from the regulation on public passenger transport services are implemented in the Passenger Transport Act 2000 (‘Wet Personenvervoer 2000’) and in the Passenger Transport Decree 2000 (‘Besluit Personenvervoer 2000’). Article 19 of the Passenger Transport Act 2000 provides that it is not allowed to perform public bus services without a concession being granted. Chapter III of that same Act provides for the further public procurement regime voor public transport concessions for bus services. Article 61 concerns the obligation for authorities to put contracts out to tender. Therefore, the Provincial authorities are obliged to set up a tendering procedure for bus services on the basis of a concession. Article 37 of the Dutch Passenger Transport Decree 2000 provides that this public procurement procedure for bus services must meet the legal requirements laid down in the Dutch Public Procurement Act. The afore-mentioned Act is the predecessor of the current Public Procurement Act 2012. In practice, contracting authorities will meet the requirements of the Public Procurement Act materially if they set up the concession procedure in accordance with the rules of the current Public Procurement Act 2012.

Additional national requirements

Chapter III of the Passenger Transport Act 2000 contains the requirements that must be observed when granting concessions. Pursuant to Article 44 of the afore-mentioned Act, the Provincial authorities must include a requirement scheme in the invitation to tender’s announcement. This scheme should at least define the accessibility of the area, the function of the public transport service, the general requirements for the performance of the transport services, the alignment with other public transport services in adjacent areas, the environmental objectives as well as the infrastructural facilities to be constructed. Furthermore, the Provincial authorities are obliged, before they grant a concession, to obtain advice from the consumers’ organisations about the rules to be connected to the concession (Article 27).

By:

Stijn Bijleveld and Paul Zondag, Europa decentraal

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