EU's newly-opened procurement market should increase business opportunities for U.S. exporters

Business America, June, 1995 by Bob Straetz

Heavy Electrical Equipment MOU

In May 1993, the United States and EU reached a Memorandum of Understanding opening each other's markets in the heavy electrical equipment sector. The EU utilities market is estimated at $28 billion by the U.S. Trade Representative. The market for power generation equipment in the EU is estimated to be worth just over $5 billion per year over the next 10 years.

After being cited under Title VII of the Omnibus Trade Act, the EU agreed to lift the discriminatory provisions of Article 36 of the Utilities Directive for the United States. Both sides agreed to the MOU.

The MOU extended all the benefits of the EU Utilities Directive to U.S. firms in the heavy electrical equipment sector: open advertising of supply, works, and services (including construction) contracts above a certain threshold, judgments based on objective criteria, and recourse to a remedies procedure if a company felt it had received unfair treatment. The MOU opens both government-owned and privately-owned utilities in the EU to U.S. bidders.

The United States agreed to drop "Buy America" provisions on the Tennessee Valley Authority and the five power authorities run by the Department of Energy. USTR estimates this U.S. government-owned utilities market is worth $1.8 billion. The U.S. privately-owned utilities have long been open to competitive bidding. These U.S. utilities purchase products regularly from EU firms, such as Siemens and ABB. USTR estimates the privately-owned utilities market in the United States to be worth $21.8 billion.

Besides opening each other's electric utilities market, the U.S. and EU agreed in the MOU to open each other's central government procurement market in services (including construction) contracts.

Remedies Directive

When the European Union opened its member countries' procurement market to competition and to competitive bidding, it needed a mechanism to handle any complaints arising from companies appealing unfair procedures and awards made by the utilities.

The EU Remedies Directive (92/13/EEC), which was implemented at the same time as the EU Utilities Directive (July 1994), sets the groundwork for an appeal process for companies to redress grievances. The directive requires that each member state maintain a review body, whether administrative or judicial, to hear and decide on disputes for utility bids. These review bodies have the power to correct discriminatory decision-making practices by the utilities and to either suspend a contract award if discrimination or other infringements are proven to exist, or make the utility reimburse the company for the cost of preparing the bid. The company does not have to prove it would have won the contract, only that it had a chance to win.

The Remedies Directive allows the EU Commission to get involved with contract disputes during the award process if the Commission determines the member state or the utility has committed a clear violation. The Commission can ask that the award procedure be suspended and started over again. A company must make its complaint to the Commission during the award procedure.