New Requirements for the Public Procurement of Services in regards to Minimum Wage under Public Procurement Law (European Court of Justice, decision dated September 18, 2014, Az. C-549/13).
Since being introduced in 2012 the “Law on Securing Collective Bargaining and Social Standards as well as Fair Competition in Public Procurement” (Gesetz über die Sicherung von Tariftreue und Sozialstandards sowie fairen Wettbewerb bei der Vergabe öffentlicher Aufträg) (TVgG-NRW) has placed higher demands on public procurement in North Rhine-Westphalia. In addition to the still valid requirements of national and EU procurement law, the promotion of fair competition is moving towards the most economical bid that also simultaneously takes into account the social sustainability, environmental protection, energy efficiency, quality and innovation of the bids. Similar requirements for procurement are now in place in almost all the German states, which makes legally binding procurement contracts much more difficult owing to the copious regulations.
In its ruling of September 18, 2014 (Az. C-549/13), the ECJ was forced to examine the provisions of the TVgG-NRW. In particular, the decision concerned collective bargaining regulations for service contracts made in accordance with §4 of the TVgG-NRW, which states that public authorities are obliged to request a statement from the bidders concerning collective bargaining or payment of a minimum wage of 8.62 EUR.
The catalyst for the decision of the ECJ was a Europe-wide tender from the city of Dortmund for digitalizing and converting data from both the Agency of Urban Planning and the Building Regulatory Agency. The bidders had to commit to paying a minimum wage of 8.62 EUR to their employees and to binding sub-contractors to this obligation. A bidder challenged this requirement before the Arnsberg Procurement Supervisory Committee, which submitted the question to the ECJ for review.
On September 18, 2014 the ECJ ruled that services rendered in other EU countries outside of Germany do not have to be remunerated in accordance with German minimum wage provisions. Bidders who wish to have a public contract performed entirely in another EU member state are not subject to German minimum wage requirements and cannot be excluded from the public procurement process. The free movement of services across borders under Article 56 TFEU must not be restricted by national regulations, especially when those regulations apply only to public procurement contracts.
Practical recommendations:
The ECJ has made a highly praised decision with far-reaching consequences for the TVgG-NRW and similar provisions in other German states. In many cases, the statutory minimum wage under public procurement law may not be imposed on services contracts. The regulations will either be strictly limited to Germany, as recommended in North Rhine-Westphalia with the “Note on the Application of §4(3)(1) of the TVgG-NRW for the Provision of Services through Persons in other EU Countries”, or remain entirely inapplicable. Until there is a much-needed legislative decision, the question of how this will proceed will remain open. Public entities should therefore request declarations of commitment to the minimum wage for services only if performance in another EU country can be excluded. Otherwise, they may face challenges and review proceedings before a procurement review authority.