Fast payments and green procurement in the EU public procurement reform

Payments will be monitored throughout the duration of the contract, with larger advance payments for strategic contracts and the option for subcontractors to be paid directly by the public administration. It is one of the least publicised, yet most practical, sections of theproposed European regulation on procurement presented yesterday by the European Commission. The reform will now be examined by the Parliament and then by the EU Council: at the end of this process, it will come into force and be directly applicable in Member States, marking a historic change from the system based on the three directives currently in force.

Article 108 governs the financial relations between businesses and contracting authorities. This is in line with the European Directive on late payments, which sets a deadline of 30 days for payments. Within this framework, subcontractors must be guaranteed payment terms equivalent to those of the main contractor. The text thus seeks to promote punctuality in payments throughout the supply chain.

Compliance with deadlines will also be monitored. Member States will be required to make information available, via their national procurement data portals, on the status of payments for individual contracts. An annual report on punctuality will also be published for each public authority – a sort of ‘Big Brother’ system that will make it possible to identify contracting authorities that accumulate delays and to compare their performance. Article 108 also introduces another safeguard mechanism in favour of businesses. ‘At the request of the subcontractor and where the nature of the contract so permits,’ states paragraph 6, ‘the contracting authority shall pay the sums due for the services, supplies or works carried out on behalf of the main contractor directly to the subcontractor’. Furthermore, ‘mechanisms may be provided for to enable the main contractor to contest undue payments’. Finally, ‘the arrangements for direct payment shall be set out in the tender documents’.

Then there is the issue of advance payments. The proposal allows public authorities to include provisions for these in tender documents, to encourage the participation of small and medium-sized enterprises, but raises the bar for contracts of particular innovative significance: in such cases, the contractor must be granted an appropriate advance payment, although an explicit reference to a minimum limit of 30 per cent has been removed from previous versions of the text.

The other aspect of the reform concerns green procurement, which is closely linked to the issue of digitalisation. Public authorities will be able to include environmental considerations in technical specifications, award criteria and performance clauses. The regulation refers to the reduction of emissions, adaptation to climate change, water protection, pollution prevention, biodiversity and the transition to a circular economy. With the introduction of ‘green’ criteria prior to the tender: when drawing up procurement plans, public authorities will have to assess how planned purchases can contribute to ‘resource efficiency and the transition to a circular economy’. Public authorities may also assess whether their needs can be met through ‘circular economic models’, such as hire, leasing, sharing or the purchase of a service instead of a new product.