Fourth railway package
Demise of public service contracts without tender procedures
By Isabelle Smets | Wednesday 05 December 2012
The European Commission will be presenting its proposals for the fourth railway package (see
Europolitics4542) on 23 January 2013. One of its proposals will concern the revision of rules on the award of public service contracts. In Europe, these currently cover a large part of domestic passenger traffic, which is not commercially profitable. According to a draft regulation previewed by
Europolitics,the Commission is considering making the use of a tender procedure mandatory for such contracts, from December 2019, with contracts of 15 years maximum. It is convinced that the resulting competition cannot but improve the quality of services. Existing legislation (Regulation 1370/2007) still permits the direct award of these contracts by public authorities without a competitive procedure. So this marks a huge change.
It is likely to spark a great deal of debate in light of the states’ reaction to an earlier attempt at the start of the 2000s. After six years of negotiation and deadlock, the Commission had no choice but to accept an extremely watered down version of its text - Regulation 1370/2007 – which gives states latitude to choose between a tender procedure and the direct award of contracts.
So today it is going back on the attack but will make provision for transitional periods and exceptions. Public service contracts awarded without a competitive procedure between 1 January 2013 and 2 December 2019 could thus remain in force until their expiry, provided their date of expiry is no later than 1 January 2023. That is enough time, finds the Commission, to enable the railway companies that have until now been awarded direct contracts to prepare for competitive procedures. During this transitional period – until 1 January 2023 – the states may also, if they wish, limit the number of public service contracts that can be granted to the same transport company under a tender procedure, so as to encourage the participation of competitors.
Small contracts could still be awarded directly without a tender procedure. This would only concern contracts with an average annual value of less than €5 million or that aim to provide annually less than 150,000 kilometres. For contracts in force today, the rules in the current regulation will continue to apply.
The proposal will also require states to make sure that access to rolling stock is not a hindrance to the entry of new operators. How? Basically it will be up to them, but options are suggested, such as the acquisition of rolling stock by the public authorities themselves or an obligation to transfer the rolling stock to the new operator once the contract has expired.