The International Procurement Instrument (IPI) Regulation adopted by the European Union on 23 June 2022 has come into force. The IPI aims at opening protected markets and strengthening the level playing field in the global procurement market.
Investigation and consultations by the European Commission
The IPI gives the European Commission new tools to tackle market protection in public procurement by third countries. Under the IPI, the Commission will launch investigations and consultations if a third country adopts or maintains any measure, procedure or practice which seriously and recurrently undermines EU goods, services and companies’ access to the third country’s procurement market. The EU Commission can act on its own initiative or react to a complaint by a Member State or by an interested EU party, such as a potential tenderer. Interested parties will be able to file a complaint via the European Commission’s website.
The measures: score adjustment and exclusion
To reciprocate a third country’s restrictive practice, the European Commission can decide to implement one of two measures. It can use a score adjustment that negatively affects the evaluation of bids submitted by bidders from that third country, and thereby procure a competitive advantage to other bidders. Excluding bids by that third country’s bidders is a second possible measure.
Implications for the successful tenderer
An undertaking winning a contract through a procurement procedure that was subject to an IPI measure will have certain obligations to observe throughout contract execution.
- The successful tenderer will not be allowed to subcontract more than 50 % of the total value of the contract to undertakings from a third country subject to an IPI measure;
- For contracts under which goods are to be supplied, the successful tenderer must ensure that the goods or services it provides and which originate in the third country subject to the IPI measure represent maximum 50 % of the total value of the contract.
Failing to observe the above obligations could expose the successful tenderer to the payment of a financial charge. That financial charge will either be proportionate or amount to between 10% and 30% of the contract value.
Scope of application
IPI measures can only concern procurement procedures for contracts of at least EUR 15 million for works and concessions, and EUR 5 million for goods and services. As the IPI Regulation primarily aims at opening up public procurement markets of major trading partners of the EU, least-developed countries are in principle not concerned.
In parallel, the EU is working on a foreign subsidies regulation to tackle the distortion of the internal market for public procurement contracts following from foreign subsidies.
Do not hesitate to contact us if you have any questions regarding access to third-country public procurement markets.