Ceci est une version HTML d'une pièce jointe de la demande d'accès à l'information 'Documents regarding contacts between DG Markt and Commissioner Barnier and private water companies and related lobby groups'.



 
 
 
SUEZ ENVIRONNEMENT 
1 RUE D’ASTORG 
75008 PARIS, FRANCE 
TEL +33 (0)1 58 18 43 05 
FAX +33 (0)1 58 18 51 68 
WWW.SUEZ-ENVIRONNEMENT.COM 
 
 
 
 
Mrs Joanna SZYCHOWSKA 
 
COMMISSION EUROPEENNE 
Direction Générale Marché 
Intérieur et Services 
1049 Bruxelles 
BELGIQUE 
 
 
Paris, 11th May 2010 
 
 
 
RE : Fair and open procurement rules for Services of General Interest 
 
 
 
Dear Madam, 
 
As a follow up of our discussion in your offices on 3 December 2009, I am 
pleased to forward you two memos prepared by Suez Environnement. 
 
The first one (appendix 1) focuses on the issue of fair competition between 
management models for Services of General Interest : “in house” provision, and 
outsourcing to an external operator (PPP).  
 
In the sectors in which Suez Environnement is active (water, wastewater, 
solid waste management) we can see many cases of economic distortions 
between these two models, which skew the decisions of the publics officials 
and affect their freedom of choice.  
 
Specific examples are reported in our memo, mostly related to unequal 
taxation, unfair conditions of access to public subsidies, or abuse of “in 
house” status. 
 
The second memo deals with the procurement of concession contracts.  
 
You invited us to express our views about the appropriateness of the 
existing awarding procedures for public works or services contracts, in case 
they should  be applied to concessions. 
 
 
 

In summary, we think that the contracting public authorities should keep 
the freedom to choose the procedure they feel most appropriate on a case 
by case basis, taking into account :  
 
  The nature and level of risk transferred to the private operator, 
  The duration of the contract, and the level of uncertainty about the 
future evolution of its economic drivers (the unpredictability of the 
economic equilibrium of the contract may more or less significant), 
  The level of complexity of the project and the nature of this 
complexity (projects with high technical complexity may be awarded 
in a different manner than projects with managerial complexity), 
  The existing legal frameworks and practices in Member States. 
 
While the procurement process should be adjusted to the specificity of the 
projects, it should be described precisely in the tender documents so as to 
provide full information to the bidders from other member states who may 
not be familiar with national practices. 
 
In our opinion, in the short term the Commission should take initiative on 
publicity of tenders. So far, there is a legal vacuum on this matter for 
service concessions, which creates legal uncertainty. The rules applicable to 
works concessions (articles 58 of directive 2004/18/EC) should also be 
suitable for service concessions. 
 
We would be pleased to continue this discussion with you and your team in the 
upcoming weeks . Our contact persons for this matter are Jacques Labre , vice 
president European Affairs (xxxxxxx.xxxxx@xxxxxxxx.xxx) , and Florence 
Mourey, our representative in Brussels (xxxxxxxx.xxxxxx@xxxxxxx.xxx) . 
 
Yours sincerely, 
 
 
 
 
 
 
Bernard Guirkinger 
Senior Executive Vice President 
 
 

link to page 3

 
SUEZ ENVIRONNEMENT 
DEPARTMENT OF INSTITUTIONAL RELATIONS 
& EU PUBLIC AFFAIRS 
1 RUE D’ASTORG 
75008 PARIS, FRANCE 
TEL +33 (0)1 58 18 50 00 
FAX +33 (0)1 58 18 50 50 
WWW.SUEZ-ENVIRONNEMENT.COM 
 
 
Appendix 1  
 
Towards a true freedom of choice by public authorities  
in the way they manage local public services 
 
Analysis and proposals by SUEZ ENVIRONNEMENT 
 
April 2010 
 
 
 
 
EXECUTIVE SUMMARY 
 
In its November 2009 Communication on PPPs and recovery, the European Commission declares 
that it is « urgent and important to look at new ways to support the development of PPPs ». SUEZ 
ENVIRONNENT believes that the key to supporting the development of PPPs in Europe is 
to allow local governments to freely decide which management model is best suited to the 
public services for which they are responsible. 
 
Maintaining a fair competition between management models is crucial 
 
  The benefits of PPPs in “promoting efficiency in public services” have recently been 
underlined by the Commission1.  
  Competition between the two models creates a mutual incentive to improving efficiency 
and service quality, to the benefit of all consumers. 
  Unfair competition between public and private operators of services of general interest 
means unequal treatment of the users served by different types of operators. For 
example, all other things being equal, VAT exemptions for public entities lead to a 
situation where the users of services managed by private operators pay higher tariffs. 
 
Many distortions of competition between public and private operators remain in the 
current legal framework of Member States 

 
  Unequal taxation, notably as regards VAT 
  Unfair allocation of national / local subsidies 
  Discriminatory national rules regarding the access to EU funds 
  Lack of knowledge and practice of public procurement procedures 
  Attempts by in-house operators to try and circumvent competition with the private 
sector 
 
The European Commission should take action to ensure fair competition 
 
  In the field of VAT, action at the EU level is necessary.  
  In the other areas, the European Commission should encourage Member States 
towards more fairness in the access of private operators to the market of local public 
service provision. 
  Direct contract awards should be subject to the scrutiny of competition authorities.   
 
                                                 
1 COM(2009) 615 final “Mobilising private and public investment for recovery and long term structural change: 
developing Public Private Partnerships” 
 
1

link to page 4 link to page 4 Maintaining a fair competition between management models is crucial 
 
The European Commission has repeatedly declared its neutrality with regard to the way 
national or local public authorities decide to manage services of general interest, as in its 
November 2007 Communication2, where the Commission states “Public authorities can decide to 
carry out the services themselves or they can decide to entrust them to other entities, which can 
be public or private, and can act either for-profit or not for-profit”.  
 
SUEZ ENVIRONNEMENT - a key actor in the water and waste services in Europe - is of the view 
that it is now time for the Commission to go further than simply declaring its neutrality, and to 
ensure that responsible public authorities can actually make a free and non-biased 
choice regarding the way they manage local public services
.  
 
Imposing open and fair competition between private operators is fine but not enough. Maintaining 
a fair competition between management models
 is also crucial as: 
  The benefits of PPPs in “promoting efficiency in public services” have recently been 
underlined by the Commission3.  
  Competition between the two models creates a mutual incentive to improving efficiency 
and service quality, to the benefit of all consumers. 
  Unfair competition between public and private operators of services of general interest 
means  unequal treatment of the users served by different types of operators
For example, all other things being equal, VAT exemptions for public entities lead to a 
situation where the users of services managed by private operators pay higher tariffs. 
 
Unfortunately,  many distortions of competition between public and private operators 
remain in the current legal framework of Member States. They lead to a bias towards direct 
public management, and thus undermine the efficiency of public services.  
 
 
 
Many distortions of competition between public and private operators 
remain in the current legal framework of Member States 
 
 

1. Unequal taxation 
 
The main source of unequal treatment between public and private operators as 
regards taxation lies in the VAT rules applied to the public sector. Pursuant to art. 13 of 
Directive 1006/223/EC on the common system of value added tax, activities of public bodies are 
out of the scope of the VAT Directive when public bodies engage in these actions as public 
authorities, provided that this does not lead to “significant distortions of competition”. For activities 
not already identified as such in annex I of the Directive, it is the responsibility of the Member 
States to identify cases where distortions of competition are such that public bodies should be 
regarded as taxable persons. 
 
While the supply of water is listed in this annex, waste and wastewater management are not. This 
does not make sense, as the waste sector, just like the water sector, is an area where private 
undertakings are actively involved, and where the non-taxation of public operators leads to 
significant distortions of competition. One could even say that distortions of competition through 
differentiated VAT treatment are even greater in the waste management sector. Indeed, distortions 
of competition are greater in the case of labor-intensive services, and also in periods without 
significant investment programmes.   
 
 
We estimate that distortions of competition through unequal VAT treatment amount to: 
- 6% of total service costs in the wastewater sector (labor costs representing about 30% of    
total costs) 
- up to 14% of total service costs in the domestic waste collection sector (labor costs 
representing about 70% of total costs) 
                                                 
2 COM(2007) 725 final “Services of general interest, including social services of general interest: a new 
European commitment”, 
3 COM(2009) 615 final “Mobilising private and public investment for recovery and long term structural change: 
developing Public Private Partnerships” 
 
2

link to page 5 As it was very well explained in the specifications attached to the invitation to tender for the 
provision of a study on VAT rules applied to the public sector and the exemptions in the public 
interest4, “The exempt and non-taxable status applicable to public bodies creates an incentive to 
self-supply inputs since, through self-supply, non-deductible VAT can be avoided. This results in a 
bias towards in-house supplies of goods and services and use of own employee labor. This bias can 
create  inefficiencies in the production and delivery of services by the public sector
Spending decisions are often based on VAT rather than on real economic factors.” 
 
 
This has been observed notably in the German waste management sector, where many 
municipalities have in the recent years decided to establish their own waste management 
companies, or to switch from private to public law status in order to take advantage of the VAT 
exemption: 
 
Bergkamen:  
In May 2005, the town council decided to municipalize waste disposal, which had been 
outsourced to private companies since 1966. This decision followed the results of a study carried 
out by Ernst & Young, which concluded – among other things- that the VAT exemption would 
contribute to saving costs.  
 
- Rhein-Hunsrueck district:  
In January 2006, it was decided to municipalize waste disposal, which had previously been 
outsourced to private companies. This decision followed a comparative analysis carried out by the 
district itself of the fees charged by a private company and by an in-house operator. The costs 
analysis identified potential costs savings of 1 million euros per year – ascribed to the VAT 
exemption – if waste disposal services were carried out by a municipal company. 
 
- Lueneburg:  
GfA Lueneburg, a publicly owned company operating under private law, currently carries 
out waste management services. The municipality is considering changing the status of the 
company to a public law one, notably in order to benefit from the VAT exemption.   
 
- Luebeck: 
Waste management services are currently carried out by Stadtreinigung Luebeck GmbH 
(SRL), a PPP operating under private law, 49 % of the shares being held by a private waste 
company. The city council decided on April 1, 2010 to transfuse SRL into the public entity 
Entsorgungsbetriebe Luebeck (EBL) with retrospective effect as of January 1, 2010, as then 
operating under public law entirely. 
 
 
 
While the VAT case is the most emblematic as it is common to several Member 
States, several other examples of distortions of competition through national taxes exist.  
 
 
In France for example, public operators will continue to be exempted from the new “Contribution 
Economique Territoriale” (a local tax, which is to replace the “Taxe Professionnelle”). The burden of 
this tax for Lyonnaise des Eaux France is estimated at around 15 million euros per year.  
 
 
2.  Unfair allocation of national / local subsidies 
 
In several countries of the EU, national and local authorities favor public 
operators in the access to public subsidies.  
 
 
An emblematic example of such distortions of competition in France is the repeated attempt by the 
Département des Landes - a local authority - to favor direct public management when allocating 
public subsidies. In 2004, it for example decided to increase by 5% the rate of subsidies allocated 
to water and wastewater works when municipalities directly managed these services, and to 
decrease this rate by 5% for the same type of works carried out by municipalities delegating their 
management.  
                                                 
4 Invitation to tender n°TAXUD/2009/AO-03 
 
3

link to page 6  
The 2006 water act offered a welcomed clarification on the allocation of public subsidies, by clearly 
stating that  “public subsidies allocated to local authorities responsible for water and sanitation 
shall not be adjusted depending on the management model”. The Département des Landes 
however decided to overlook this piece of regulation and to cut off any subsidies allocated to 
municipalities having delegated the management of water and wastewater services.  
 
 
 
3.  Discriminatory national rules on access to EU funds 
 
In the spirit of the general provision on structural funds5, no difference is made between 
public and private operators in the access to EU funding. What matters is the nature of the 
project, not the nature of the operator
: the “beneficiary” can be “an operator, body or firm, 
whether public or private, responsible for initiating or initiating and implementing operations”.  
It is however the responsibility of the Member States to set eligibility rules in their Operational 
Programmes, and some take advantage of this concern for subsidiarity to introduce restrictions 
on the access of Public-Private Partnerships to EU grants such as the ERDF or the 
cohesion funds.   
 
 
The  Czech Environmental Operational Programme for 2007-2013 seeks to ensure that existing 
operational contracts (tendered and negotiated before the accession of the Czech Republic to the 
EU) achieve a better balance between the interests of the public and consumers and the private 
interests. The eligibility to Community financial assistance is thus subject to adaptation of the 
contracts with regards to performance criteria and tariff formula. What is more, the rate of 
subsidies to which projects can claim decreases with the length of the contract. This concern for an 
increased competition of existing operational contracts is clearly legitimate. However, it is very 
unfortunate that this rules should only apply to contractual models where private capital is 
dominant. There is no reason why joint ventures where public capital is dominant should not abide 
by the same rules.  
 
 
 
The  Romanian Environmental Operational Programme for 2007-2013 provides that Regional 
Operating Companies – newly created public entities, which are to be directly awarded the 
concession contract from the corresponding intermunicipal authorities – will be the only entities 
eligible to EU funding in the water sector. This means that EU funding will only benefit to users of 
water services operated by these public entities.  
 
 
In this regard, the November 2009 Communication from the Commission on “Mobilising 
public and private investment for recovery and long-term structural change: developing Public 
Private Partnerships” has given us hope that this situation could change. It indeed states: “a level 
playing field between public and private management of public infrastructure and services in the 
allocation of EU funding to investment projects should be guaranteed. To this end, rules and 
practices should be reviewed in order to ensure that there is no discrimination in the allocation of 
funds for investments projects in which the private sector participates.” 
 
 
4.  Lack of knowledge and practice of public procurement procedures 
 
Public procurement rules are often complex and can certainly discourage local authorities, 
which sometimes lack the necessary expertise and human resources, from engaging into 
outsourcing. Indeed, though PPPs bring many benefits to the delivery of public services, they 
require significant resources at the bidding stage to design financial and contractual arrangements, 
as well as long-term political commitment.  
 
We very much welcome the several actions announced in the November 2009 
Communication
 in this area of improvement of information, expertise and know-how, and would 
be happy to contribute to this effort. 
                                                 
5 Council Regulation n°1083/2006 laying down general provisions on the European Regional Development 
Fund, the European Social Fund and the Cohesion Fund.  
 
4

link to page 7  
 
5.  Attempts by in-house operators to try and circumvent competition with the 
private sector 
 
The above-mentioned distortions of competition are sometimes amplified by attempts to try 
and circumvent competition with the private sector from the part of in-house operators. These 
attempts have lately taken the form of: 
 
  Abuse of in-house status to avoid tendering: public authorities sometimes choose 
an in-house construction while they do not meet the requirements set by the ECJ in 
order to avoid tendering. 
 
 
An emblematic example of such an abuse of in-house status to avoid tendering in France is the 
“Piémont de Barr” case law6. The inter-municipal entity “Piémont de Barr” decided in 1997 to 
award the management of the water and wastewater service on its territory to a public water 
operator (SDEA) set up by another local authority (département du Bas-Rhin) without any prior 
tendering. The Piémont de Barr authority did not intend to transfer its competence on water and 
wastewater to SDEA, but simply decided to outsource the operation to SDEA against payment.  
 
The resolution of this legal argument can be seen as an example of good practice: the highest 
administrative court ruled that since it involved payment, the contract should be subject to 
publicity and tender.  
 
 
  Involvement of in-house operators in tenders resulting in economic dumping
in-house operators bidding for contracts outside of their original territory or mandate 
and offering prices below the market level thanks to their protected home markets. 
 
 
In Germany as well as in Sweden, the collection of household waste is qualified as a municipal 
public service, while the collection of commercial waste is not and should be open to free 
competition. However, many in-house  operators set up for municipal waste management unfairly 
compete with private operators in the area of commercial waste management. They offer lower 
prices in a non-transparent way, taking advantage of their monopoly on the municipal waste 
management segment.  
 
In Sweden, the new Competition Act might help in putting an end to such unfair competition. Its 
section on Anti-competitive sales activities by public entities provides that “a certain conduct by the 
State, a municipality or a county council (…) may be prohibited through an injunction if such 
conduct distorts, by object of effect, the conditions for effective competition in the market, or 
impedes the occurrence or the development of such competition”. Several cases are currently 
being examined. 
 
 
  Qualifying water services as “non economic services of general interest”
which entails the risk of circumventing the guidelines on State aid in favor of public 
operators. 
 
 
The European Commission should take action to ensure fair competition 
 
In the field of VAT, action at the EU level is necessary to ensure that not only the supply of 
water, but also waste and wastewater management are identified as activities where public 
operators should be subject to VAT since their non-taxation would lead to significant distortions of 
competition.  
 
In the other areas, the European Commission should encourage Member States towards 
more fairness in the treatment of public and private operators. 
The European Commission 
                                                 
6 CE, 20 main 1998, « Piémont de Barr » 
 
5

link to page 8 has already declared its intention to do so as regards the allocation of EU funds7. The several 
actions announced to improve the information, expertise and know-how about PPPs are also an 
interesting way forward. We however call on the European Commission to be mindful of the 
increasing attempts by public authorities to try and circumvent competition with the private sector, 
as explained above.  
 
Direct contract awards should be an exception, but remain the rule in the area of public 
service in some Member States. We strongly suggest that the Commission undertakes a close 
review of these procedures.   
 
                                                 
7 COM(2009) 615 final “Mobilising private and public investment for recovery and long term structural change: 
developing Public Private Partnerships” 
 
6



 
APPENDIX 2 : AWARDING CONCESSION CONTRACTS 
ASSESSMENT OF EXISTING PROCEDURES DESIGNED FOR PUBLIC CONTRACTS   
 
 
 
 
 
 
Awarding procedure  Appropriateness for concession contacts 
Possible field of use for concessions 
 
Open procedure 
®  Straightforward procedure 
Not appropriate. 
 
-  Risk of high economic cost (investment in preparation of 
numerous unsuccessful bids) 
- Rigid terms of reference 
⇒ 
No room for creative proposals from the bidders 
 
Restricted procedure 
® Allows for a selection of capable bidders 
Not appropriate (except maybe for small and repetitive 
 
- 
contracts with clear risk allocation) 
Little room for creativity : submission of variants may be 
authorised, but in this case the “most economically. 
advantageous tender” may be difficult to identify 
- No room for adaptation of the proposals once the bids are open 
 
Competitive dialogue 
® Allows for creative proposals by the bidders 
Suitable for cases where complexity lies in technological 
-
aspects and the public client is unable to express his needs in 
 Risk of costly, open ended process for the bidders 
a detailed manner 
- Protection of intellectual property of the bidders not fully  Inappropriate where complexity lies in management/ 
operation. 
guaranteed : 

Risk of leakage from one bidder to another one 

Risk of appropriation of the bidders’ ideas by the public 
client, in the case of abortion of the process and decision to 
manage the project “in house”. 
 
Negotiated procedure 
® Allows for creative proposals by the bidders 
Suitable when the client is able to express his needs, but 
(with prior publication   
complexity lies in operation/management, and/or uncertainty 
of contract notice , 
® Allows for an in depth discussion on organisational matters and  on the future evolution of key drivers .   
and results oriented 
their effect on price after the bids are opened. 
Procedure for concession award should include : 
terms of reference) 
-

Publication of contract notice at EU level above a 
 Risk of open ended process for the bidders 
given threshold. 
- Level of discretion for the decision maker is more important, 

Prequalification phase: same as restricted procedure 
requiring specific rules to preserve fair and equal treatment of the 

Assessment of bids and recommendations to start 
negotiation with one or a few bidders by an evaluation 
bidders. 
committee reporting to the executive of the public 
authority . 
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