STATE bodies field enormous economic muscle. This power was illustrated by the way the multi million pound GSM mobile phone licence and the £20 million for a National Convention Centre were granted.
The award of the contract to the proposed Europeat 1 peat fired power station in the Midlands, under the eight billion Ecu EU Structural Funds, is another example. Recent controversies over State contracts, such as the GSM licence and the Balbriggan bypass, underline the importance of clear procedures for the awarding of major contracts.
Fortunately, there are rules which govern the award of State contracts. The degree of regulation depends on the type of contract involved. Unlike concessions such as the award of the mobile phone licence, the rules for the award of contracts which fall under the EU Public Procurement Directives, such as large construction and civil engineering contracts, are quite clear.
The state is obliged, "hen awarding large construction or civil engineering contracts to observe the detailed provisions of the European Directives on Public Procurement. These set out procedures under which a contractor is selected for a works, supplies or services contract. The EU directives are designed to ensure that State contracts of a certain size are awarded in an open, transparent and non discriminatory manner. It is essential to the creation and maintenance of the Single European Market that businesses all around the EU can tender freely. The rules also apply to contracts awarded by bodies over which the State exercises control.
The EU Procurement Directives state that the criteria for evaluating tenders must be spelt out in advance. In a landmark case (the Beentjes decision), the Advocate General said that awarding authorities are not entitled to confer on themselves "unrestricted freedom of choice as regards the awarding of the contract".
The ban on discrimination which is enshrined in the Treaty of Rome, together with the need for foresee ability in the assessment process oblige the awarding authority to adhere to the award criteria which it has itself laid down. The Court of Justice has endorsed the Advocate General's opinion, noting that even earlier court decisions found that observing the principle of equal treatment of tenders means that all of them must comply with whatever requirements are in the tender documentation, so That they dank be objectively compared.
In the recent Belgian Bus case taken by the European Commission against Belgium, the Court of Justice made it plain that it will not allow governments or other authorities awarding tenders to move the goal posts after tenders have been submitted.
The implications of all this are significant. What it means is that after the first stage of any tendering process, where clear non starters are weeded out the contract should in principle be given to the contractor with the lowest bid.
The awarding authority is not supposed to analyse what might happen to prices if changes were made to the instructions for example, say, to quantities. It should simply compare the bottom line of the various tenders.
This approach has the merits complete transparency and removes the dangers inherent in any subjective evaluation of prices.
Other types of contracts Government decisions to award concessions such as the GSM licence or Europeat involve more complex and unfortunately less explicit rules than those covering construction or civil engineering contracts as outlined above.
The principles involved are non discrimination, fair competition and transparency. The State is not allowed to discriminate on the basis of nationality against non Irish produced goods or services. If discriminatory criteria are applied, affected parties or the Commission itself may take action.
In the Commission's case, this could include withholding project funding where the contract includes EU funds.
The Government is obliged, under the Treaty of Rome, to ensure that competition in the Community is not distorted. States must institute and maintain systems to ensure that competition is not distorted.
A state failing to ensure open competition and transparency in the award of grants or public contracts by, for example, changing the ground rules during the course of a tender process or by applying discriminatory criteria between tenders would be in breach of the principles of Articles 3 and 5 of the Treaty of Rome.
Where Structural Funds are involved, the regulations insist that the fund operation must lie consistent with Community policies such as those on competition and the award of public contracts.
Last year, the Commission took action against the Italian government over its auctioning" of a GSI licence, the effect of which was to impose a heavy financial burden on the new licensee which was to the advantage of the incumbent state licensee. In the light of this, Minister for Transport, Energy and Communications, Mr Lowry was right to "cap" the tenders for the Irish GSM licence bid last year.
It will be interesting to see the arguments put forward by the losing consortia who have asked the Commission to investigate the Irish Government's procedures in awarding the GSM licence.
In summary, the European procurement rules are models of simplicity, but are vital elements in the workings of the Single Market. Openness, transparency and accountability are the essential oils which make the machinery work. Their application can sometimes be difficult there is still much to be learned.
