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OPINION

on:

SOCIAL CRITERIA IN EU PROCURE-MENT DIRECTIVES AND DUTCH PRO-CUREMENT POLICY

by Phon van den Biesen

Amsterdam, 24 February 2006

Introduction and background

1. In 2004, two new Procurement Directives have been adopted by the European Union (EU).1 These new Directives have prompted questions for various Civil Society Organisa-tions as to whether it is (still) possible to use procurement policies to guarantee sustainable forest administration. In this view sustainable includes not only economical and ecological aspects, but also ‘social criteria’. These social criteria include the right to land, user rights, labour rights, human rights etc.2

2. Uncertainty has arisen among various Civil Society Organisations as to which social cri-teria are considered to be covered by the definitions of the new Directives, and whether these new Directives limit the possibilities to include certain social criteria in national pro-curement policies. For example, Great Britain has developed a national policy on the basis of these Directives, explicitly excluding social criteria from the procurement procedure. It is important to know whether a legal basis exists for this exclusion, especially in the light of other states establishing their national policies.

1 Directive 2004/17/EC of the European Parliament and of the Council and Directive 2004/18/EC of the European Parliament and of the Council, both of 31 March 2004

2 This term is used throughout this opinion, and is assumed to have the same meaning as the term ‘social considerations’, used by the EU.

Advies inzake sociale criteria in Europese Aanbesteding Pagina 2 van 23ICCO 24 februari 2006

3. The purpose of this opinion is, therefore, to explore in what ways social criteria may be applied in procurement policy in the EU in general and the Netherlands in particular. Spe-cifically, the focus is on how social criteria may be inserted into procurement policy in ac-cordance with the recent new EU Procurement Directives.

4. This issue will be addressed by way of answering three main questions posed by the Inter-church Organisation for development Co-Operation (ICCO):1. What do current EU legislation and case law say about the admissibility and applica-

tion of social criteria? 2. May the EU Directives be interpreted in a way as to allow social criteria to be inserted

in national procurement policy?3. If yes, what does this mean for the inclusion of social criteria in Dutch national pro-

curement policy?3

5. In this opinion, an assessment of relevant legal instruments will be followed by the ana-lysis of documents that may be used for the interpretation of these instruments. It will con-clude with answers to the main questions including recommendations.

Legal instruments

International framework

6. Social criteria are linked to two areas in which international law has developed in the last few decades. First of all, international law increasingly recognises the importance of pro-tection of the environment, as reflected in the concept of sustainable development. Secondly, the importance of the protection of fundamental human rights, especially in the economic and social realm, is only increasing. The European Union and its member states actively promote the development of international law in these areas and have committed themselves in various ways to them. Thus, the international framework for the application of social criteria in procurement policy consists of both environmental law and human rights law.

7. In the environmental area, the European Union has endorsed the Rio Declaration on En-vironment and Development as agreed upon during the 1992 UN Conference on Environ-ment and Development. Agenda 21, also agreed upon during the 1992 UN Conference on Environment and Development and endorsed by the European Community, recognises

3 Terms of Reference, ‘Sociale criteria in EU Procurement Directives en Nederlands aanbestedingsbeleid’, 6 july 2005, Great Britain.


that trade and environmental agreements should be mutually supportive with a view to achieving sustainable development.

8. At the same time, the European Community is a member of the World Trade Organisation (WTO). Any national procurement policy has to be ‘WTO-compatible’. WTO law allows for limitations on free trade when these have to do with sustainable development, which is indeed among the primary goals of the WTO, as reflected in the preamble of the WTO agreement and Article XX(g) of GATT 1994, which – in short – lists measures ‘relating to the conservation of exhaustible natural resources’ as measures which, subject to certain re-quirements, can justify exceptions to the general rules with regard to free trade. The WTO appellate body adopted a rather wide interpretation of the phrase ‘exhaustible natural re-sources’ in the Shrimp-Turtle case.4

9. In a less explicit way, human rights language has been adopted in the GATT and the WTO Treaty. The Appellate Body has accepted the existence of a link between trade and human rights.5 In this respect, it should be noted that violations of certain human rights norms, such as the prohibition of forced labour (and also the use of child labour) could produce an unfair economic advantage that would be contrary to free trade, and thus viol-ate provisions of both WTO law and EU law.6

10. In the field of human rights, all Member States of the EU are party to the International Covenant on Economic, Social and Cultural Rights and the International Covenant on Civil and Political Rights.7 They are also all party to the Convention on the Rights of the Child.8

Council of Europe Conventions

11. All member states of the European Union are members of the Council of Europe. Within the Council of Europe, a number of treaties have been adopted. For our purposes, the most important ones are the ones adopted in the field of human rights, especially the Conven-tion for the Protection of Human Rights and Fundamental Freedoms (ECHR) and the European Social Charter.

4 Report of the Appellate Body, 12 October 1998, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WTO/DS58/AB/R.

5 Report of the Appellate Body, 12 March 2001, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WTO/Doc/DS135/AB/R.

6 See also J.P. Denkers, W.J.M. van Genugten and N.M.C.P. Jägers, ‘Handelsgerelateerde schendingen van mensenrechten: een taak voor de WTO’, NJB 9 December 2005, pp. 2309-2314.

7 New York, 16 December 1966, UNTS 171; UNTS 3.8 New York, 20 November 1989, A/RES/44/25.


12. The ECHR in particular has grown to take a central place in the human rights protection within the EU. Even though the European Community and the European Union cannot (yet) accede to the ECHR (the European Constitution was supposed to change this), it is settled case-law of the European Court of Justice that the requirements laid down in the ECHR are fundamental rights recognised by Community law:

“[I]nternational treaties for the protection of human rights on which the Member States have collabor-ated or of which they are signatories, can supply guidelines which should be followed within the frame-work of Community law.”9

This is also reflected in the preamble to the Single European Act of 1986.

EU legislation

13. Article 6 of the Treaty on European Union states:

“1. The Union is founded on the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law, principles which are common to the Member States.

2. The Union shall respect fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms signed in Rome on 4 November 1950 and as they result from the constitutional traditions common to the Member States, as general principles of Community law.

3. The Union shall respect the national identities of its Member States.

4. The Union shall provide itself with the means necessary to attain its objectives and carry through its policies.”

14. Article 2 of the Treaty Establishing the European Community (EC Treaty) states:

“The Community shall have as its task, by establishing a common market and an economic and monet-ary union and by implementing common policies or activities referred to in Articles 3 and 4, to promote throughout the Community a harmonious, balanced and sustainable development of economic activities, a high level of employment and of social protection, equality between men and women, sustainable and non-inflationary growth, a high degree of competitiveness and convergence of economic performance, a

9 ECJ, Case 4/73, Nold v. Commission, Judgment of 14 May 1974, par. 13; see also: ECJ, Case 11/70, Internationale Handelsgesellschaft, Judgment of 17 December 1970, par. 4: “Respect for fundamental rights forms an integral part of the general principles of law protected by the Court of Justice.”; Case 249/86, Commission v. Germany, Judgment of 18 May 1989, par. 10. For references to the European Social Charter (and Convention No. 111 of the ILO), see Case 149/77, Defrenne, Judgment of 15 June 1978, par. 28.


high level of protection and improvement of the quality of the environment, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.”

15. Article 6 of the EC Treaty states:

“Environmental protection requirements must be integrated into the definition and implementation of the Community policies and activities referred to in Article 3, in particular with a view to promoting sustainable development.”

16. According to their preambles, the new Directives were adopted to recast the then existing Directives10 on public procurement in light of the case-law of the European Court of Justice, in particular case-law on award criteria. Preambular paragraph 1 of both new Dir-ectives states that they aim to clarify

“the possibilities for the contracting authorities to meet the needs of the public concerned, including in the environmental and/or social area, provided that such criteria are linked to the subject-matter of the contract, do not confer an unrestricted freedom of choice on the contracting authority, are expressly

mentioned and comply with the fundamental principles of the common market.” [emphasis added]

17. These fundamental principles are also listed in the preamble, in particular

“the principle of freedom of movement of goods, the principle of freedom of establishment and the principle of freedom to provide services and to the principles deriving therefrom, such as the principle of equal treatment, the principle of non-discrimination, the principle of mutual recognition, the principle

of proportionality and the principle of transparency.” [preamble paragraph 2 of 2004/17/EC, paragraph 9 of 2004/18/EC]

18. The preambles of both Directives explicitly mention the need to incorporate environ-mental criteria:

“Under Article 6 of the Treaty, environmental protection requirements are to be integrated into the definition and implementation of the Community policies and activities referred to in Article 3 of the Treaty, in particular with a view to promoting sustainable development. This Directive therefore clarifies how the contracting entities may contribute to the protection of the environment and the promotion of sustainable development, whilst ensuring the best value for money for their contracts.”

[preamble paragraph 12 of 2004/17/EC, paragraph 5 of 2004/18/EC]

19. Furthermore, they provide for the incorporation of other criteria.

“Nothing in this Directive should prevent the imposition or enforcement necessary to protect public policy, public morality, public security, health, human and animal life or the preservation of plant life, in particular with a view to sustainable development, provided that these measures are in conformity

with the Treaty.” [preamble paragraph 13 of 2004/17/EC, paragraph 6 of 2004/18/EC]10 Council Directives 92/50/EEC of 18 June 1992, 93/36/EEC of 14 June 1993 and 93/37/EEC of 14 June 1993.


20. Par. 46 of the preamble sets out how the procurement process works and explicily mentions the possibility to include social criteria.

“Contracts should be awarded on the basis of objective criteria which ensure compliance with the principles of transparency, non-discrimination and equal treatment and which guarantee that tenders are assessed in conditions of effective competition. As a result, it is appropriate to allow the application of two award criteria only: "the lowest price" and "the most economically advantageous tender".

To ensure compliance with the principle of equal treatment in the award of contracts, it is appropriate to lay down an obligation - established by case-law - to ensure the necessary transparency to enable all tenderers to be reasonably informed of the criteria and arrangements which will be applied to identify the most economically advantageous tender. It is therefore the responsibility of contracting authorities to indicate the criteria for the award of the contract and the relative weighting given to each of those criteria in sufficient time for tenderers to be aware of them when preparing their tenders. Contracting authorities may derogate from indicating the weighting of the criteria for the award in duly justified cases for which they must be able to give reasons, where the weighting cannot be established in advance, in particular on account of the complexity of the contract. In such cases, they must indicate the descending order of importance of the criteria.

Where the contracting authorities choose to award a contract to the most economically advantageous tender, they shall assess the tenders in order to determine which one offers the best value for money. In order to do this, they shall determine the economic and quality criteria which, taken as a whole, must make it possible to determine the most economically advantageous tender for the contracting authority. The determination of these criteria depends on the object of the contract since they must allow the level of performance offered by each tender to be assessed in the light of the object of the contract, as defined in the technical specifications, and the value for money of each tender to be measured.

In order to guarantee equal treatment, the criteria for the award of the contract should enable tenders to be compared and assessed objectively. If these conditions are fulfilled, economic and qualitative criteria for the award of the contract, such as meeting environmental requirements, may enable the contracting authority to meet the needs of the public concerned, as expressed in the specifications of the contract. Under the same conditions, a contracting authority may use criteria aiming to meet social requirements, in response in particular to the needs - defined in the specifications of the contract - of particularly disadvantaged groups of people to which those receiving/using the works, supplies or

services which are the object of the contract belong.” [Preamble paragraph 46 of 2004/18/EC, emphasis added; similar wording in paragraph 55 of 2004/17/EC.]

21. Certain articles in the Directives explicitly allow for the insertion of social criteria in dif-ferent stages of the procurement process, such as Article 26 of Directive 2004/18/EC (and Article 38 of Directive 2004/17/EC), which states:

“Contracting authorities may lay down special conditions relating to the performance of a contract, provided that these are compatible with Community law and are indicated in the contract notice or in the specifications. The conditions governing the performance of a contract may, in particular, concern social and environmental considerations.”


22. Article 27 of 2004/18/EC (and Art. 39 of 2004/17/EC) specifically refers to the need to oblige to provisions with regard to environmental protection and employment protection provisions.

“1. A contracting authority may state in the contract documents, or be obliged by a Member State so to state, the body or bodies from which a candidate or tenderer may obtain the appropriate information on the obligations relating to taxes, to environmental protection, to the employment protection provisions and to the working conditions which are in force in the Member State, region or locality in which the works are to be carried out or services are to be provided and which shall be applicable to the works carried out on site or to the services provided during the performance of the contract.

2. A contracting authority which supplies the information referred to in paragraph 1 shall request the tenderers or candidates in the contract award procedure to indicate that they have taken account, when drawing up their tender, of the obligations relating to employment protection provisions and the work-ing conditions which are in force in the place where the works are to be carried out or the service is to be provided.

The first subparagraph shall be without prejudice to the application of the provisions of Article 55 con-cerning the examination of abnormally low tenders.”

23. Article 55 of 2004/18/EC qualifies the criterion of the lowest price by explicitly address-ing the issue of abnormally low tenders. The contracting authority can reject these tenders, but must request further information first, in particular about, amongst others, certain so-cial considerations. The relevant provision reads (emphasis added):

“1. If, for a given contract, tenders appear to be abnormally low in relation to the goods, works or ser-vices, the contracting authority shall, before it may reject those tenders, request in writing details of the constituent elements of the tender which it considers relevant.

Those details may relate in particular to:

(a) the economics of the construction method, the manufacturing process or the services provided;

(b) the technical solutions chosen and/or any exceptionally favourable conditions available to the ten-derer for the execution of the work, for the supply of the goods or services;

(c) the originality of the work, supplies or services proposed by the tenderer;

(d) compliance with the provisions relating to employment protection and working conditions in force at the place where the work, service or supply is to be performed;

(e) the possibility of the tenderer obtaining State aid.”


Interpretation of legal instruments

24. In its ‘Interpretative Communication on the Community law applicable to public procure-ment and the possibilities for integrating social considerations into public procurement’11, the European Commission has discussed the possibility of “integrating social considera-tions” into public procurement. With respect to the meaning of social considerations, the Commission states:

“The expression ‘social considerations’ used in this Communication covers a very wide range of issues and fields. It can mean measures to ensure compliance with fundamental rights, with the principle of equality of treatment and non-discrimination (for example, between men and women), with national legislation on social affairs, and with Community directives applicable in the social field. The expression ‘social considerations’ also covers the concepts of preferential clauses (for example, for the reintegration of disadvantaged persons or of unemployed persons, and positive actions or positive discrimination in particular with a view to combating unemployment and social exclusion).”12

25. The Communication elaborates on the possibilities to include social criteria in procure-ment procedures. In this paragraph we provide a summary of the points mentioned in the Communication.

Defining the subject matter of the contractWhen choosing the good or service to be purchased, the contractor has a great deal of freedom to include social considerations. However, this may not go against the general rules and principles of Community law, in particular the principle of free movement of goods and the principle of freedom to provide services. Access to the contract by ten-derers from other member states may not be restricted.

o Technical specificationsIn order to define the subject matter contracting authorities may use technical spe-cifications. These have to be indicated in advance and may not go against the rules set out in the Directives nor eliminate or favour a given tender. Besides incorporat-ing social regulations (on safety, health of workers etc.), contractors may require a specific production process. Moreover, use can be made of variants.

Selection of suppliersAn exhaustive list exists of cases in which the personal situation of the supplier may lead to its exclusion. Exclusion is optional for contracting authorities, except for cer-tain cases (article 54 2004/17/EC, article 45 2004/18/EC). It is possible to exclude suppliers when they have not fulfilled obligations relating to payment of social secur-ity contributions or when they have been guilty of professional misconduct. Proof of such misconduct may be found in a conviction, or – in case of grave professional mis-

11 COM(2001) 566 final, 15 October 2001.12 Ibid., p. 5.


conduct – by any means by which the contracting authorities can justify exclusion (emphasis added). The latter concept is still to be defined by European legislation or case law. Another exhaustive list of criteria exists relating to the economic, financial or technical capacity of tenderers. These are mandatory criteria to be used for selection purposes. While assessing economic and financial standing, social considerations may not be included. Assessment of technical capacity leaves room for social considera-tions by using specific know-how in the social field as a criterion (article 48 (5) 2004/18/EC).

Contract awardWhile evaluating tenders, two criteria may be used: ‘lowest price’ or ‘most economic-ally advantageous’. When the latter criterion is used, it must be indicated in the con-tract documents or in the contract notice which criteria will be applied. Social consid-erations may be included, provided that it is linked to the subject matter; does not go against the principle of non-discrimination; and that it offers an economic advantage. Case law13 has introduced the possibility of using additional criteria, when two eco-nomically equivalent tenders exist and the condition is in line with all the fundamental principles of Community law. The criterion, which may be a ‘social criterion’, must be announced in the contract notice and may not have any direct or indirect impact on those submitting bids from other Member States.

Execution of a contractA contractual clause or condition for execution may be used to pursue social object-ives. This may not go against Community law or the principle of non-discrimination. For example, it may be required to comply with the substance of the provision of the ILO core conventions during the execution of the contract.

26. The Commission makes a statement regarding norms that are not specifically referred to in the Directives:

“even if the public procurement directives do not contain a specific provision to this effect, all Com-munity, international and national regulations, rules and provisions which are applicable in the social field shall apply fully during the performance of a public procurement contract following the award of the contract. Where necessary, they should be stated in the contract notice or contract documents.”

[page 18]

27. It continues to explain the limitations made by EU law to obligations in the social field. The EC treaty contains the fundamental principle of freedom to provide services. There-fore, the freedom to provide services may only be limited by rules justified by imperative reasons relating to the public interest and which apply to all persons and undertakings

13 This concept was first introduced in the Beentjes case. Case 31/87, Gebroeders Beentjes V.B. v. State of the

Netherlands, 1988, ECR 4635.


pursuing an activity in the State of destination, insofar as that interest is not protected by the rules to which the service provider is subject in the Member State in which he is estab-lished (emphasis added). This must be necessary to achieve the objective pursued and may not exceed what is necessary to attain this objective.

Case law of the ECJ

28. The new Directives may be considered to include a codification of the legal situation ex-isting before the Directives, and therefore to cover the case-law developed the field of public procurement which developed in light of previous directives.

29. A review of this case-law of the European Court of Justice with regard to public procure-ment was provided in 2002 by Bovis14. He discusses how the Court has maintained the im-portance of the economic approach to the regulation of public sector contracts, but that it has also recognised the relative discretion of contracting authorities to use non-economic considerations as award criteria, including social and environmental criteria. These policy choices may be included under the so-called ‘most economically advantageous offer’. However, the social criteria he discusses all have a domestic character. He concludes:

“The Court’s approach in recent case law [...] recognizes the fact that the relevant legal framework has to move on with the times, requirements and priorities of the common market. With the fourth genera-tion of the public procurement Directives imminent, the legislature should incorporate the above themes that have emerged from the Court’s jurisprudence and provide for a comprehensive regime that takes into account the needs of the supply and demand sides of equation, as well as all relevant policies of the common market.”15

30. In the Beentjes Case16 the European Court of Justice ruled that a social criterion relating to long term unemployment may be used in the process of awarding a public contract, if it reflects the discretion that authorities awarding contracts have in order to determine on the basis of objective criteria what is the most economically advantageous offer, and thus does not involve an element of arbitrary choice:

“In this case specific experience relating to the work to be carried out was a criterion for determining the technical knowledge and ability of the tenderers . It is therefore a legitimate criterion for checking contractors' suitability under Articles 20 and 26 of the directive.

The exclusion of a tenderer because its tender appears less acceptable to the authorities awarding the contract was provided for, as appears from the documents before the Court, in Article 21 of the Uniform

14 Christopher Bovis, ‘Recent case law relating to public procurement: a beacon for the integration of public markets’, CMLR 39 (2002), pp. 1025-1056. Specifically, p. 1050-1051.

15 Ibid., p. 105616 Idem Supra note 7.


Rules . Under Article 21 ( 3 ), "the contract shall be awarded to the tenderer whose tender appears the most acceptable to the awarding authority ".

The compatibility of such a provision with the directive depends on its interpretation under national law. It would be incompatible with Article 29 of the directive if its effect was to confer on the authorities awarding contracts unrestricted freedom of choice as regards the awarding of the contract in question to a tenderer . On the other hand, such a provision is not incompatible with the directive if it is to be interpreted as giving the authorities awarding contracts discretion to compare the different tenders and to accept the most advantageous on the basis of objective criteria such as those listed by way of

example in Article 29 ( 2 ) of the directive.” (paragraph 24 to 27)

The additional condition must be mentioned in the contract notice and comply with all rel-evant principles of Community law:

“As regards the criterion of "the most acceptable offer", it should be noted that even if such a criterion were compatible with the directive in the circumstances set out above, it is clear from the wording of Article 29 ( 1 ) and ( 2 ) of the directive that where the authorities awarding the contract do not take the lowest price as the sole criterion for awarding the contract but have regard to various criteria with a view to awarding the contract to the most economically advantageous tender, they are required to state these criteria in the contract notice or the contract documents. Consequently, a general reference to a provision of national legislation cannot satisfy the publicity requirement.

A condition such as the employment of long-term unemployed persons is an additional specific condition and must therefore be mentioned in the notice, so that contractors may become aware of its

existence.” (paragraph 35, 36)

The norm given in the Beentjes Case was repeated in the Nord-pas-de-Calais Case.17 In the Beentjes Case the European Court of Justice also confirmed that the Directive did not give a complete set of rules for procurement:

“(…) the directive does not lay down a uniform and exhaustive body of Community rules; within the framework of the common rules which it contains, the Member States remain free to maintain or adopt substantive and procedural rules in regard to public works contracts on condition that they comply with all the relevant provisions of Community law, in particular the prohibitions flowing from the principles laid down in the Treaty in regard to the right of establishment and the freedom to provide services

( judgment of 9 July 1987, cited above.” (paragraph 20, referring to joined Cases 27 to 29/86 CEI and Bellini (1987) ECR 3347).referring to joined Cases 27 to 29/86 CEI and Bellini (1987) ECR 3347).

31. In the Concordia Bus Case18 a similar norm was given for an ecological criterion, relating

to the degree of noise and atmospheric pollution. According to the European Court of Justice, criteria relating to the preservation of the environment may be included in the award criteria for the most economically advantageous offer,

17 Case 225/98, Commission v. France, 2000, ECR I-7445.18 Case C-153/99, Concordia Bus Finland Oy Ab v. Helsingin Kaupunki, 2002, ECR I-7213.


“provided that they are linked to the subject-matter of the contract, do not confer an unrestricted free-dom of choice on the authority, are expressly mentioned in the contract documents or the tender notice, and comply with all the fundamental principles of Community law, in particular the principle of non-

discrimination” [par. 64]

The Court’s requirement that a link exists with the subject-matter was met in this case.

32. The Court of Justice has further developed the norm from the Concordia Bus Case in a case on the supply of electricity: EVN AG & Wienstrom GmbH v. Austria.19 In this case, a link between the criterion and the subject-matter was not established. However, the Court stated:

“In the light of all the foregoing, the answer to the first question submitted to the Court must be that the Community legislation on public procurement does not preclude a contracting authority from applying, in the context of the assessment of the most economically advantageous tender for a contract for the supply of electricity, an award criterion with a weighting of 45% which requires that the electricity supplied be produced from renewable energy sources. The fact that that criterion does not necessarily serve to achieve the objective pursued is irrelevant in that regard.

On the other hand, that legislation does preclude such a criterion where

- it is not accompanied by requirements which permit the accuracy of the information contained in the tenders to be effectively verified,

- it requires tenderers to state how much electricity they can supply from renewable energy sources to a non-defined group of consumers, and allocates the maximum number of points to whichever tenderer states the highest amount, where the supply volume is taken into account only to the extent that it exceeds the volume of consumption expected in the context of the procurement.

It is for the national court to determine whether, despite the contracting authority's failure to stipulate a specific supply period, the award criterion was sufficiently clearly formulated to satisfy the requirements of equal treatment and transparency of procedures for awarding public contracts.”[par. 72]

This case makes clear that award criteria must be specific and objectively quantifiable.

National policies adopted in Denmark and Great Britain

33. In this section we will give a summary on the national procurement policies implemented in the United Kingdom and Denmark. In the legal analysis we will value both approaches.

19 Case C-448/01, EVN AG & Wienstrom GmbH v. Austria, 2003.


United Kingdom

34. The policy on procurement in the United Kingdom is to be found in ‘Government Ac-counting, Chapter 2220. The objective of this policy is that “all public procurement of goods and services, including works, is to be based on value for money, having due regard to propriety and regularity”. Value for money is not the lowest price; it is defined as “the optimum combination of whole-life cost and quality (or fitness for purpose) to meet the user’s requirement”. All public bodies have to apply both the EC Treaty and the EC pro-curement Directives, but these do not contravene the value for money policy. The Direct-ives are implemented in the UK by means of regulations.

35. On 28 July 2000, Environment Minister Michael Meacher announced action against il-legal timber import.21 He announced that existing voluntary guidance to encourage Gov-ernment departments to purchase from legal and sustainable sources would become a binding commitment. The Minister stated:

“This programme does not involve banning the purchase of timber or timber products which cannot be shown to be sustainably and legally produced. That would be both unfair and im-practical. There is currently not enough timber that can be independently guaranteed to have come from sustainable and legal sources to meet all needs; albeit that different assurance schemes are growing quickly. We would also not want to penalise poorer countries and produ-cers which have not been able to put in place such schemes. We will continue to work with such producers to ensure they have fair market access, and that any action is fully consistent with our international obligations. Our aim is to give confidence to those obeying their coun-try's laws and managing their forests responsibly that they will find a welcome market in the

UK, and will not be undercut by unscrupulous and illegal competitors".

According to the press release in which the policy was announced, combating illegal logging includes:

“working with other countries to: encourage good governance and remove corruption; tackle the burden of debt; improve awareness of the true value of forests; and develop alternative, rural live-lihoods for the poor.”

36. In November 2001, an interdepartmental Sustainable Procurement Group (SPG) was es-tablished to look at the scope to improve the way in which sustainable development con-siderations are incorporated into purchasing. The report was published on 30 October 2003.22 In this report the SPG states i.a. that “We have recognised that social issues are more problematic to tackle in the procurement process (although by no means impossible) and that further work is needed.” (page vii). In the report it is explained that in the UK,

20 Government Accounting 2000 manual, incorporating Amendment 4/05, http://www.government-accounting.gov.uk/current/frames.htm

21 News Release 2000/0516, 28 July 2000 http://www.press.dtlr.gov.uk/pns/DisplayPN.cgi?pn_id=2000_051622 Sustainable Procurement Group, Report and Recommendations, January 2003, United Kingdom

http://www.press.dtlr.gov.uk/pns/DisplayPN.cgi?pn_id=2000_0516

http://www.government-accounting.gov.uk/current/frames.htm

http://www.government-accounting.gov.uk/current/frames.htm


“the early focus was on environmental issues in procurement – green procurement. Social issues such as labour considerations, social exclusion and equal opportunities, have been emerging during the last few years both domestically and at EC level. However, these have been addressed on a case-by-case basis, reflecting that, unlike environmental issues, there is no single lead department for all social issues and

the procurement angle in each case can be very different.” [page 3]

37. The SPG recommends further research. It mentions examples: equal opportunities, local labour and the long-term unemployed, training and development, health and safety of workers, pay, and rights to unionise. It is stated that:

“The UK Government, European Commission and other Member States all agree that there is far less scope to incorporate social issues in public procurement than is the case with environmental issues. The proposed new EC procurement directive makes that clear. This is because environmental issues tend to relate to what is being procured – eg green specifications, production processes, energy efficiency and recyclability – whereas many social issues do not. They relate, instead, to how a company treats or manages its own workforce. Of course, where a social issue is relevant to the subject of the contract and does not undermine value for money, it can be taken into account. For example, a requirement for specific staff training may contribute to delivery of a good quality service but general working

conditions at a factory where goods are produced may not.” [emphasis added, page 41]

38. The Sustainable Procurement Group recommends that while revision and reissue of the HMT/Defra Joint Note on Environmental Issues in Purchasing will not be able to cover social issues to the same level of detail as green issues (as more research is needed), it should include a clear explanation of the current position on incorporation of social issues into procurement process (page 7).

39. This current position was indeed described in a revised ‘Joint Note on Environmental is-sues in Purchasing’.23 In this joint note, it was said that the consideration of certain social issues is also encompassed by the term sustainable procurement. In general, the scope to take social issues into account during the procurement process is considered to be more limited than that for environmental issues because:

“by virtue of their nature, they are less likely to be clearly related to the subject of the contract. And, frequently, there will be other, more efficient and effective, means of achieving social outcomes than through their consideration in the procurement process. However, there will be cases where social is-sues can legitimately be taken into account. Services contracts, for example, are much more likely to

have a social aspect than supply contracts” [page 16]

23 Office of Government Commerce and Department for Environment, Food and Rural Affairs, ‘Joint note on environmental issues in purchasing’, October 2003, United Kingdom


40. The circumstances in which the consideration of social issues are most likely to be appro-priate are described in paragraph 9.3 of the Joint Note (page 16, 17) These circumstances include, by way of example:- the existence of obligations of a social nature under the Race Relations Amend-

ment Act;- ensuring that an IT system is accessible to disabled users; - provision of meals suitable for special religious diets by caterers; - exclusion of a candidate after breaching social or employment legislation; and- requirement of special skills of a social nature.It is made clear that general policies that go beyond what is relevant to the particular con-tract should not be revised, nor should there be a requirement to employ a certain per-centage of local people. It is also not permissible to include in the award criteria elements that do not provide a benefit to the contracting authority.

41. In January 2004, an ‘Advice Note’ was published on the specific issue of timber procure-ment.24 Regarding timber procurement, as was described above, UK policy requires the active search for the purchase of legal and sustainable timber and wood derived products since the year 2000. According to the policy document, social issues of timber procure-ment are unlikely to be related to the subject-matter of the contract and should therefore not be included:

“To ensure transparency and non-discrimination, procurement regulations do not allow the Authority to include social and ethical criteria in contract specifications if they do not directly relate to the subject matter of the contract. There are unlikely to be any government contracts involving timber/wood sup-plies where social and ethical matters are a primary consideration in the specification of goods, services and works. Therefore, the criteria for “sustainable” timber, as set out in the variant specification cannot include specific requirements dealing with social customs, behaviour and conditions. However, it is le-gitimate to require that forests are managed in sustainable ways that may also have the consequence of benefiting social well being. The model specification is drafted with this aim.

The interests of people who depend on forests for their livelihoods or social well being may be protec-ted to an extent as a consequence of forests being managed to sustain forest productivity, health, vitality and bio diversity. These are outcomes that can be legitimately reflected in production and process spe-cifications because they relate directly to the material used to create the product being demanded. It doesn’t matter that the finished product could look and perform equally well if made from trees grown in a badly managed forest. The Authority can legitimately specify production and process methods that

can affect the physical product or sustain its future supply.”[emphasis added]

24 DEFRA, Timber Procurement Advice Note January 2004, http://www.sustainable-development.gov.uk/delivery/integrating/estate/documents/DefraTimberAdviceRevised28Jan04.doc

http://www.sustainable-development.gov.uk/delivery/integrating/estate/documents/DefraTimberAdviceRevised28Jan04.doc

http://www.sustainable-development.gov.uk/delivery/integrating/estate/documents/DefraTimberAdviceRevised28Jan04.doc


42. In October 2004, the ‘Framework for Sustainable Development on the Government Estate was made public’.25 In this general policy document on procurement, reference is made to the ongoing work to prepare guidance on how to take social issues into account during the procurement process (page 6).

43. The Directives are implemented in the UK by means of regulations. The Draft regulations, dated May 2005, include an article on conditions for performance of contracts, stating:

“(1) - A contracting authority may stipulate conditions relating to the performance of a public contract, provided that those conditions are compatible with Community law and are indicated in—

the contract notice and in the contract documents; or

the contract documents.

(2) The conditions referred to in paragraph (1) may include social and environmental considerations.

[emphasis added].26

Denmark

44. According to the Danish Government, the EU Directives stipulate the following rules for purchasing tropical timber :

“- The amount of the purchase is crucial to whether the procurement is to follow the specific EU rules on public procurement. Various threshold values indicate when a purchase needs to follow the rules of public procurement.(…) Additional threshold values exist within works contracts and within public ser-vice contracts. The following conditions require special attention in considering purchase of legally and sustainably produced wood:

Authorities cannot demand timber from wood grown in specific areas, whereas authorities can demand specific tree species or wood with specific properties.

Authorities can specify in what way trees are to be grown and harvested. Authorities can define demands to and criteria for sustainable forest management and in-

dicate certifications providing acceptable documentation for the criteria. However one or more certain certification schemes cannot be demanded. Other sorts of documentation for the criteria must be accepted as well.

A technical specification may be that the product complies with certain criteria of environ-mental labels, but no demand can be made for one particular label. Nor can demands be made for a particular certification scheme, but certification schemes may be recognized as documentation for the compliance with the criteria/specifications.

25 ENV, ‘Framework for Sustainable Development on the Government Estate’, October 2004, United Kingdom

26 Artikel 39, 2006 No. 000 public procurement, ENGLAND AND WALES AND NORTHERN IRE-LAND, The Public Contracts Regulations 2006, draft 25 may 2005. Artikel 36, idem (Utility Contracts Regula-tions 2006).


Authorities may state criteria for the evaluation of alternative forms of documentation, for instance that it is subjected to independent verification by third party.

Authorities may refuse to accept suppliers that have violated legislation concerning com-merce in and production of wood. The Danish Competition Authority and Danish Environ-mental Protection Agency have drawn up a guide on environmental considerations by pro-curement: “Offentlige grønne indkøb – en vejledning i mulighederne for at varetage miljøhensyn i forbindelse med afholdelse af udbud” /20/. www.ks.dk. (Available in Danish only).”27

45. In the definition of ‘legal wood’ and ‘sustainable forest management’ social aspects are included. On legal wood, the policy document states:

“The wood may be illegal in several manners. Rules and legislation may for instance be broken by: Felling trees outside the permitted forest area/area of concession. Harvest exceeding the allowed quantity or dimensions. Harvesting species illegal to felling or to trading. Erroneous declaration of the shipment. Issuing permissions through bribe and corruption. The neglect of the rights of forest workers concerning wages and working conditions. Not respecting the traditional rights of the local population. Not paying the relevant taxes, rates and dues.” [p. 9 Background Material]

46. On sustainable development, Danish policy states:

“There are no unambiguous and globally accepted standards for the concept of sustainable forest man-agement. (…) There is however globally agreement on the overall principles and criteria and a broad definition was adopted during the United Nations Conference on Environment and Development (UN-CED) that was held in Rio de Janeiro in 1992. The International Tropical Timber Organisation (ITTO)

introduced a similar definition.” [p.11 Background Material].

47. According to the background material to Danish policy, criteria for sustainable forest management include i.a. socio-economic, cultural and spiritual commodities:

“Comparisons show that the above mentioned fora are more or less agreeing upon 7 overall criteria for sustainable forest management /24/, /27/. These criteria are:

Legislative and institutional framework The size of the forest resource The condition of health and vitality of the forests The production function of the forests The protection function of forests Biodiversity

27 Danish Ministry of the Environment, Danish Forest and Nature Agency, Danish Environmental Protection Agency, ‘Purchasing Tropical Timber. Environmental guidelines’, ………. , Background Material to the Environmental Guidelines, p.3


Socio-economic, cultural and spiritual commodities.” [p. 12 Background material]

Legal Analysis

48. In this part of the opinion a legal analysis will be drawn up on the basis of the legislation, case law, documents used for interpretation and national policies of Denmark and the United Kingdom that were described above. This will lead to conclusions as to what ex-tent social criteria may be included in EU procurement procedures. For the purpose of this legal analysis we do not define social criteria only within the concept of sustainable forest development, but interpret them in a way that includes all social issues in procurement procedures, including human rights concerns.

Fundamental rights

49. In the areas of human rights and environmental rights, several norms have been accepted by the European Union as a whole, and separate Member States. These include binding norms from international conventions that have been ratified, such as the International Covenant on Economic, Social and Cultural Rights, the International Covenant on Civil and Political Rights and the Convention on the Rights of the Child. This is the case for all EU members, including the Netherlands. WTO laws are also binding on members of this organisation, such as the European Community. Other examples of international norms in-clude the Rio Declaration on Environment and Development and Agenda 21. Although the norms in these declarations are not legally binding, they are nonetheless considered authoritative and could arguably be considered a partial reflection of customary interna-tional law. International customary law and regional conventions may also provide for binding norms in the area of human rights and environmental rights. For example, all EU member states have adopted the ECHR and the European Social Charter. Binding norms on fundamental rights that are accepted by EU and/or its Member States must be respected at all times, and may not be disregarded because of a certain framework in which the State is operating, such as the EU or the WTO.

50. In its case law, the European Court of Justice has confirmed this (see above, paragraph 11). Furthermore, Article 6 of the EU Treaty states specifically that the Union is founded on the principles of ‘liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law, principles which are common to the Member States.’ More specifically, the EU guarantees the respect for fundamental rights as guaranteed by the ECHR as general principles of Community law. What is more, several articles in the EC


Treaty refer to social and environmental protection. Finally, the EU has adopted policy on social issues, human rights and the environment.

51. The conclusion is therefore justified, that the European Union and its Member States do not operate in a vacuum and may not part with their obligations to respect fundamental rights imposed by international and European law. The EU itself has also adopted rules and policy lines that confirm the importance of these issues. The simple fact that certain rights are not mentioned in specific procurement Directives does not mean that they are not relevant.

52. The obligation to respect human rights is not limited to the territory of member states alone. Even though the above-mentioned examples of social criteria mostly concern the room that national authorities have for taking domestical social concerns into considera-tion, it can be argued that in light of the object and purpose of international human rights instruments, they must also take their human rights obligations in account when dealing with third states.

How much, if any, room do the Directives leave for inclusion of social criteria?

53. If the relevant social criteria are not to be considered a fundamental right, it is important to know how they may be included in the procurement process anyway. As was concluded in point 48, it is important to keep in mind that the EU Directives do not offer an exhaustive set of rules. An exhaustive regulation would have been excluding the possibility to take into account issues that are not mentioned in the Directives. This was confirmed by the European Union Court of Justice in the Beentjes Case (see paragraph 26 of this opinion). Member States remain free to maintain or adopt additional rules as long as they comply with provisions of Community law, such as the freedom to provide services and the principle of non-discrimination.

54. In general, the spirit of directives is to include social criteria, as is made clear in their pre-ambles, the provisions quoted above and the explicit provisions dealing with issues such as employment protection.

The procurement process step by step

55. In addition to the conclusions drawn earlier, we will go back to the stages mentioned by the Commission in its Interpretative Communication (see above) and describe at each


stage of the procurement process, what specific possibilities for inserting social criteria exist.

56. As a preliminary matter, it is clear from both case-law and the background papers that we have discussed, that transparency is essential in the procurement process. All tenderers should be informed of the criteria that will be used to determine the most economically advantageous tender. This means that any social criteria must be defined at the beginning in the procurement process, also the inclusion of social criteria must be clearly communic-ated to the tenderers.

57. Stage I: definition of subject matter of the contract and technical specifications. While defining the subject matter, the contracting authorities may include social criteria. Technical specifications may include a specific production process. Use can be made of variants. Specifications of a ‘legal’ or ‘sustainable’ nature may be inserted.

58. Stage II: selection of suppliers. Exclusion on the basis of the exhaustive list of criteria provided by the Directives is pos-sible, when a supplier has, in the past, failed to pay social security contributions or when the same has been found guilty of (grave) professional misconduct. Furthermore, specific know-how in the social field may be used while assessing technical capacity of the sup-plier. ‘Legal’ and ‘sustainable’ may also be inserted into the award criteria.

59. Stage III: contract award. When the criterion ‘economically most advantageous tender’ is used, it is possible to take social criteria into account. It follows from the Beentjes Judgement that the inclusion of social criteria as such is acceptable and, likewise, they may be used in the process of de-termining on the basis of objective criteria what is the most economically advantageous offer. In its Judgement the European Court of Justice made it clear, however, that this op-tion is not unconditional but restricted by the requirement to mention the criterion in the contract or tender notice, and, moreover, by the obligation to comply with all relevant principles of Community law. European Case law with respect to environmental criteria has also made clear that any such additional criterion must be specific and objectively quantifiable, and, on top of that, linked to the subject matter.

60. Stage IV: execution of contract, according to the conditions specified in the contract.In the execution phase it is possible to include social criteria, such as the requirement to comply with ILO conventions.


61. Our analysis of the procurement process itself does not differ much from the Communica-tion of the Commission. This is not surprising for two reasons.

62. First, since the Communication has most likely been instrumental in the drafting of the new Procurement Directives and part of their preambles are indeed identically phrased to the Communication, it is quite clear what shape the procurement process was intended to take.

63. Second, and more importantly, the admissibility of social criteria itself is not a matter of controversy. The controversy arises with regard to the exact range of social criteria that can be included.

64. The wording of the provisions and case-law dealing with social considerations, as well as the variety of criteria that can be qualified as social, mean that there is room for interpret-ation: some social criteria require a balancing test, in which they are weighed against the principles of free movement of goods, persons and services. Social criteria, just like other criteria, must also be linked to the subject-matter of the contract. It seems highly unlikely that the exact extent of this link can be defined generally, and it appears that the admissib-ility of specific social criteria must be determined on a case-by-case basis.

65. One aspect in which we differ from the Commission Communication, is the possibility to insert criteria of a ‘legal’ or ‘sustainable’ nature in the technical specifications and/or in the award criteria. Another result of the wide range of considerations and criteria that can be qualified as ‘social’, means that in public procurement policy they can be ‘legal’, ‘sus-tainable’, or both. It is therefore possible to insert them, or, alternatively, to specify that ‘legal’ and ‘sustainable’ are criteria by themselves.

English and Danish policy

66. British policy with regard to timber procurement is not particularly inviting to the inclu-sion of social criteria. In other policy documents, dealing with a broader subject matter, however, more space can generally be found for the insertion of social criteria, and ways are described to include them in the process. Danish procurement policy with regard to timber generally allows for the inclusion of social criteria, e.g. in the form of “socio-eco-nomic commodities.”


67. In light of our analysis, we see no reason to follow the British timber example and to ap-ply a restrictive approach to the inclusion of social criteria in procurement policy in gen-eral.

Conclusion

68. This Opinion is to be concluded by returning to the initial questions:

1. What do current EU legislation and case law say about the admissibility and applica-tion of social criteria?

EU legislation and case-law explicitly allow for the inclusion and application of social criteria in public procurement, as long as this is done in a transparent and timely manner and as long as they are framed as objective criteria which satisfy the principles of trans-parency, non-discrimination and equal treatment and which guarantee that tenders are assessed in conditions of effective competition. Moreover, social considerations are part of the object and purpose of the procurement directives.

2. Can the EU Directives be interpreted in a way as to allow social criteria to be inserted in national procurement policy?Yes. Depending on the specific right in question, social criteria can be framed in one or more of the following ways:

(1) as fundamental rights, which always have to be respected by the member states;

(2) they can be presented as environmental criteria, which need to satisfy the same conditions as mentioned hereafter in (3), but for which there is generally more room;

(3) they can be inserted into the technical specifications and/or the award cri-teria, provided this is done in a transparent way and satisfies the principle of non-discrimination and equal treatment; is done in an objective and quantifi-able way; and is linked to the subject-matter of the contract.

The application of social criteria is never excluded or prohibited.

3. If yes, what does this mean for the inclusion of social criteria in Dutch national pro-curement policy?

The Dutch government is free to introduce social criteria in its national procurement policy, provided it satisfies the conditions described above.


69. What ‘social criteria’ are, has not been defined clearly. ‘Social criteria’ can thus be con-sidered a so-called ‘container term’ for all kinds of rights, obligations and policy object-ives in the social area. This makes the admissibility of social criteria in procurement policy a casuistic exercise. However, governments can define social criteria more clearly in their own policies and even choose to have a different policy for different social cri-teria.

Recommendations

We recommend that ICCO, in advising the Dutch government how to set up its procurement policy, proceeds as follows:

● Define ‘social criteria’ on the most fundamental level possible, in the following order:1. As part of Dutch human rights obligations (e.g. prohibition of forced and child la-

bour, respect for self-determination);2. As part of environmental criteria in the area of sustainable development (e.g. Re-

spect for land rights and rights of indigenous peoples guarantees a continuing sup-ply now and in the future, whereas violations of these rights may create instabil-ity). This also makes it easier to define them as ‘most economically advantageous’.

3. As additional criteria.● In case of 2 and 3, make sure that it is argued that social criteria are linked to the sub-

ject-matter of the contract.

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