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Complying with EC Directive 2004/18/EC

• Introduction
• Key extracts from EC Directive 2004/18/EC and PCR 2006
• Key points from NBS Journal Issue 16
• Guidance
• BREEAM and PCR 2006

Introduction

• EC Directive 2004/18/EC, which came into force on 31 March 2004, covers, in considerable detail, "the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts".
• The Public Contracts Regulations 2006, and the equivalent Regulations applicable to Scotland, implement the EC Directive as it applies to the United Kingdom. For the purposes of this Knowledge page, the two UK Regulations are considered as one.
• The wording in both the EC Directive and the UK Regulations have the effect of making it extremely difficult, or even impossible, to name branded products in the specification for a public works contract.
• This Knowledge page attempts to provide specifiers with pragmatic guidance on complying with the EC Directive, and the UK Regulations, with regard to the naming of branded products.

Key extracts from EC Directive 2004/18/EC and PCR 2006

EC Directive 2004/18/EC

Read EC Directive 2004/18/EC [PDF]

Clause (29) - Page 6 (6 of 150 in the PDF version)

The technical specifications drawn up by public purchasers need to allow public procurement to be opened up to competition. To this end, it must be possible to submit tenders which reflect the diversity of technical solutions. Accordingly, it must be possible to draw up the technical specifications in terms of functional performance and requirements, and, where reference is made to the European standard or, in the absence thereof, to the national standard, tenders based on equivalent arrangements must be considered by contracting authorities. (Continues ...)

Article 23 - Page 26 (26 of 150 in the PDF version)

8. Unless justified by the subject-matter of the contract, technical specifications shall not refer to a specific make or source, or a particular process, or to trade marks, patents, types or a specific origin or production with the effect of favouring or eliminating certain undertakings or certain products. Such reference shall be permitted on an exceptional basis, where a sufficiently precise and intelligible description of the subject-matter of the contract pursuant to paragraphs 3 and 4 is not possible; such reference shall be accompanied by the words "or equivalent".

Annex VI - (122 of 150 in the PDF version)

Provides the definitions for "technical specification".

The Public Contracts Regulations 2006

Read The Public Contracts Regulations 2006 [PDF]
Read The Public Contracts (Scotland) Regulations 2006 [PDF]

Regulation 9 - Page 15 (16 of 88 in the non-Scottish PDF version)

(4) A contracting authority shall ensure that technical specifications afford equal access to economic operators and do not have the effect of creating unjustified obstacles to the opening up of public procurement to competition.

(16) Subject to paragraph (17), a contracting authority shall not lay down technical specifications in the contract documents which refer to—
(a) materials or goods of a specific make or source or to a particular process; or
(b) trademarks, patents, types, origin or means of production;
which have the effect of favouring or eliminating particular economic operators.

(17) Notwithstanding paragraph (16), exceptionally, a contracting authority may incorporate the references referred to in paragraph (16) into the technical specifications in the contract documents, provided that the references are accompanied by the words “or equivalent”, where—
(a) the subject of the contract makes the use of such references indispensable; or
(b) the subject of the contract cannot otherwise be described by reference to technical specifications which are sufficiently precise and intelligible to all economic operators.

Key points from NBS Journal Issue 16

The wording of the EC Directive, particularly Article 23, was of sufficient concern to the International Construction Information Society (ICIS) that, in 2007 and on behalf of their European members, they submitted 21 specific questions to the European Commission. The almost-totally-inconclusive answers to some of these questions were reported, and analysed, by John Gelder in the May 2010 issue of the NBS Journal.

Read NBS Journal Issue 16 [PDF]

Key points

• The EC have advised that defining standards higher than, or different from, national or international standards is not a justifiable reason for naming a branded product and reference should be made to "performance or functional requirements".
• The EC have advised that the desire to match a brand in an existing building, or defining appearance precisely, are not justifiable reasons for naming a branded product and reference should be made to "performance or functional requirements".
• NBS provided anecdotal evidence that the Regulations have, so far, been comprehensively ignored by clients, specifiers, and contractors alike, but there was also evidence that clients ("contracting authorities" in PCR 2006 speak) were beginning to take their responsibilities more seriously and are starting to require specifiers to comply with the Regulations.
• NBS advise that it is necessary to add "or equivalent" to every reference to a standard in a specification covered by The Public Contracts Regulations 2006. This includes all BSs and all BS ENs. NBS do not currently include this wording in their clauses and it must be added by the specifier.
• NBS advise that a clause similar to Preliminaries clause A31/230, with wording to cover the inadvertant omission of "or equivalent" to standards, may be desirable. NBS do not currently provide such a clause.
• NBS advise that, if naming a proprietary product in a specification covered by The Public Contracts Regulations 2006, it is necessary to add "or equivalent" to every reference to the product. NBS do not currently include this wording in their clauses and it must be added by the specifier.
• NBS advise that their Preliminaries clause A31/230 is for "inadvertant omission" and is not intended as a catch-all alternative to adding "or equivalent" to every product reference.
• NBS caution that their Preliminaries clause A31/200 (as currently written) does not adequately cover the substitution of products proposed by the contractor as "equivalent", particularly with regard to the timing of any such proposals.

Guidance

Specifiers working on public works contracts can no longer afford to ignore the requirements of EC Directive 2004/18/EC and PCR 2006 and this may require a fundamental change in the way in which products are specified.

Specifying by brand

Where a project is covered by The Public Contracts Regulations 2006, it is our opinion that specifiers should name brands in a specification only with the express permission of the client (the "contracting authority") and in situations where the client is prepared to defend their decision against a challenge from the contractor (the "economic operator").

The wording of PRC 2006 Regulation 9 paragraph (17) would appear to be more restrictive than the equivalent wording in EC 2004/18/EC Article 23 paragraph 8 and clients should be advised to take legal advice as to whether they can rely on the more relaxed wording of Article 23 paragraph 8 to justify their decision.

Specifying by brand - justifying the decision

There would appear to be three key words or phrases in Article 23 paragraph 8 which govern product naming in technical specifications. Paragraph 8 must be read in context with the remainder of Article 23, particularly paragraph 3.

• justified : This would seem to allow the client ("contracting authority") to name products if such naming can be justified. An example might be a proprietary floor finish "where a sufficiently precise description ... is not possible" because all published standards are deemed inadequate and the client has past experience of the named proprietary product performing satisfactorily in a similar situation or building.
• with the effect of favouring or eliminating certain undertakings or certain products : It is quite feasible to write a performance specification, complying with Article 23 paragraph 3(b), which effectively defines a unique product. This approach could be challenged by a contractor as contrary to the spirit, although maybe not the exact wording, of Directive 2004/18/EC.
• exceptional : This depends on the implied meaning of "exceptional". If it is taken to mean "forming an exception; not ordinary; uncommon" rather than the more usual meaning of "better than the average; superior", then this would seem to allow the naming of products, where appropriate and "justified", providing always that such products are in the minority taken across the complete project/contract.

Defining equivalents

Specifiers may wish to define the term "or equivalent" or, at the very least, define the information required to determine equivalence. NBS Preliminaries clauses A31/200 Substitution of products and A31/240 Substitution of standards are good starting points but they may need additional wording to ensure that the information is supplied at the appropriate time to allow for proper evaluation of the alternatives.

Specifiers should be aware of the provisions of PRC 2006 Regulation 9 which define the contractor's responsibilities when offering alternatives, in particular paragraphs (10) to (15) inclusive. The requirements of NBS clauses A31/200 and A31/240 go significantly further than the requirements of these paragraphs and disputes could arise if contractors refer to the wording of Regulation 9 as a reason for not providing the detailed information required by the two NBS clauses.

Specifiers should also note the wording in paragraphs (10) and (11) "... an economic operator proves ... to the satisfaction of the contracting authority by any appropriate means ...". Paragraph (14) defines appropriate means as including "... a technical dossier of a manufacturer or a test report from a recognised body.. There is potential for dispute if the specifier, on behalf of the client (contracting authority), questions the adequacy of a "technical dossier" to provide the required degree of "satisfaction".

Tender evaluation

There is no doubt that tender evaluation for contracts complying with PRC 2006 will be considerably more onerous than for contracts with more limited use of the phrase "or equivalent". There is, of course, the potential for equivalents to be offered for every standard and/or product and, of course, different equivalents may be offered by different tendering contractors.

There would seem to be little scope for saving time at the specification stage with the hope of offsetting this against the extra time required for tender evaluation. Architects may wish to take this into account when negotiating fees for public works contracts, presumably arguing that the additional time required for tender evaluation will be more than offset by the potential savings of opening-up the specification process to competition.

BREEAM and PCR 2006

The Public Contracts Regulations 2006 make provision, in Regulation 9 paragraphs (1)(b)(i) and (7), for the specification of products by environmental performance/ characteristics providing that "... the requirements are sufficiently precise to allow an economic operator to determine the subject of the contract and a contracting authority to award the contract." It is not clear whether environmental requirements may, uniquely in the Regulations, be allowed to be so precise that they define a specific product without actually naming it.

There is, however, also the theoretical possibility that contractors might challenge the specification of a product, or products, by environmental performance on the basis that BREEAM is a certification scheme (a) operated by a commercial organisation, and (b) self-defined as "a benchmark that is higher than regulation".

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