Competitive tendering for rail public service contracts – amendment of Regulation 1370/2007 Marek Stavinoha Legal officer DG MOVE A4 European Commission Warszawa, 12 April 2017

Purpose of Regulation (EC) No 1370/2007 Regulation defines how competent authorities may act in the field of public passenger transport to guarantee the provision of services of general interest which are among other things more numerous, safer, of a higher quality or provided at lower cost than those that market forces alone would have allowed.

Scope of Regulation (EC) No 1370/2007 Regulation lays down the conditions under which competent authorities, when imposing or contracting for public service obligations, compensate public service operators and/or grant exclusive rights in return for the discharge of public service obligations. This Regulation applies to the national and international operation of public passenger transport services by rail and by road.

Content of Regulation (EC) No 1370/2007 Mandatory content of public service contracts General rules under which the Member States may impose tariffs Award of public service contracts Compensation for discharging of public service obligations Reporting on public service contracts State aid rules

Types of award of public service contracts On the basis of procurement directives if concerning service contracts or public service contracts for public passenger transport services by bus or tram Direct award to an internal operator Direct award if the value of the contract or amount of services fall under certain value (de minimis)

Types of award of public service contracts Direct award in case of disruption of the service (emergency award) Direct award in case the public service contract concerns transport by rail Award on the basis of a competitive tendering procedure

Objectives of the Commission's proposal (2013) Improvement of the quality of rail passenger services and increase of their operational efficiency. Introduction of the principle of mandatory tendering of rail public service contracts. Introduction of additional measures to improve the tendering procedures.

What can we expect from competitive tendering What can we expect from competitive tendering? (from the Commission's impact assessment) Savings of public funding for tendered rail public service contracts: NL 20%-50% DE ca. 20% SE 20%-30% Improvements in rail service quality: DE: transport volume increased by 30% thanks to improved frequency and quality UK: punctuality increased between 2002-2009 despite increasing traffic intensity

Regulation 2016/2338 Amending Regulation (EC) No 1370/2007 Outcome of difficult negotiations, balancing out very diverging political positions between the European Parliament and the Council Concerns primary rail transport but has an impact also on other modes falling within the scope of Regulation (EC) No 1370/2007

Main changes brought by Regulation (EU) 2338/2016

Definition of public passenger transport services by rail New definition of "public passenger transport services by rail" excludes passenger transport by other track-based modes, such as metros or tramways. These modes are therefore not concerned with specific provisions encompassed in the Regulation which are applicable to rail (e.g. performance-based exemption).

Specification of public service obligation Obligation to lay down specifications of public service obligations while respecting proportionality principle. Possibility to group cost-covering services with non-cost-covering services.

Specification of public service obligation and compensation Specifications and compensation must achieve the objectives of the public transport policy in a cost-effective manner, and be consistent with the policy objectives stated in public transport policy documents of the Member States.

Social rights Public service operators must comply with obligations applicable in the field of social and labour law established by Union law, national law or collective agreements. Possible additional social standards or rights of employees subject to transfer between two operators must be included in the tender documents and in the public service contracts. Mandatory transfer of staff in cases when Directive 2001/23/EC applies.

Provision of information in the competitive procedure The operator must provide the competent authority with the information necessary for the preparation of the tender (e.g. passenger demand, fares, costs and revenues). Competent authority must provide this information to all interested parties for the preparation of an offer.

New conditions of award to an internal operator In case a group of authorities award a rail public service contract to an internal operator controlled by one them, their area of competence may not be national. The public service contract awarded in this way may only cover the transport needs of urban agglomerations or rural areas.

Introduction of principle of mandatory competitive tendering for all public service contracts Public service contracts for public passenger transport services by rail must, in principle, be awarded through mandatory competitive tendering.

Exemptions from the principle of mandatory competitive tendering Exceptional circumstances: a competent authorities are already carrying out other tenders, which could have an impact on the number and quality of bids or competent authority wants to change the scope of public service contracts (only railways). Simplified procedure: The competent authority has received only one bid following the announcement of the award of public service

Exemptions from the principle of mandatory competitive tendering De minimis: value / size of the public service contract is lower than the newly elevated thresholds specified in the Regulation. Railway infrastructure manager and operator of the public service obligation on its infrastructure are the same entity and the infrastructure is excluded from the scope of the Directive (EU) No. 2012/34 (only railways).

Exemptions from the principle of mandatory competitive tendering Emergency situation in the event of a disruption of services or the immediate risk of such a situation

Performance based exemption Where competent authority considers that the direct award is justified by structural and geographical characteristics of the market or network, and if the contract results in an improvement in quality of services or cost-efficiency, in comparison to the previous one.

Performance based exemption Competent authority must define in contract measurable, transparent and verifiable performance requirements and periodically check whether the operator fulfils them. In case of a failure to fulfil the requirements, the competent authority must take deterrent measures, including suspension or termination of the contract. The decision of competent authorities may be assessed by an independent body.

Limitation of number of contracts awarded to the same operator Competent authorities may decide that contracts for public passenger transport services by rail covering parts of the same network or package of routes are to be awarded to different railway undertakings. To this end, the competent authorities may, decide to limit the number of contracts to be awarded to the same railway undertaking.

Access to the rail rolling stock With a view of competitive tendering, competent authorities must make public an assessment whether it is necessary to take measures to ensure effective access to rail rolling stock. Competent authorities may take measures to ensure such an access: acquisition of rolling stock, guarantees for the financing of rolling stock, commitment to takeover rail vehicles after the contract finishes, creation of rolling stock pool

Transition arrangements 2017: (24.12.) entry into force of new Regulation 2019: Application of the principle of competitive award and of new performance based exemption next to possibility of direct award 2023: Expiry of application of direct award possibility max. duration of existing rail PSC of 10 years direct award only in exceptional cases (exemptions)

Implementing the new law: Consequences for market stakeholders Member States: To decide whether to prohibit exemptions to competitive award Competent authorities: To acquire administrative competence and resources to prepare and organise competitive award procedures To create trust in their capacity to ensure non- discriminatory award conditions (e.g. rail rolling stock) To decide whether transfer of staff is needed to facilitate competition

Implementing the new law: Consequences for market stakeholders Railway undertakings To undertake activities in accordance with new rules Rail Regulatory Bodies To fully use their competencies to facilitate effective market opening European Commission to reap synergies between enforcing rail legislation on market opening and applying EU competition rules Passengers will be able to benefit of competitive rail transport services

Thank you for your attention!