Describes how major projects are secured and financed. Explains activities of the multilateral development banks in and other aid-funded projects.
Selling to the Government
Portuguese Public Procurement Regulation derives mostly from the European Union’s regulations on public procurement. Government procurements may be issued in various ways, based on the amount or characteristics of the tender. The Portuguese Public Contracts Portal (BASE) created by the Portuguese Government back in 2010 improved the transparency of award procedures in Portugal.
Government procurement in Europe is governed by both international obligations under the WTO Government Procurement Agreement (GPA) and EU-wide legislation under the EU Public Procurement Directives. U.S.-based companies are allowed to bid on public tenders covered by the GPA, while European subsidiaries of U.S. companies may bid on all public procurement contracts covered by the EU Directives. The EU directives on public procurement have recently been revised and new legislation on concession has also been adopted. Member States were required to transpose the provisions of the new directives into domestic law by April 16, 2016. The four relevant pieces of legislation are:
- Directive 2014/24/EU (replacing Directive 2004/18/EC) on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts applies to the general sector;
- Directive 2014/25/EU (replacing Directive 2004/17/EC) coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors;
- Directive 2009/81/EC on defense and sensitive security procurement. This Directive sets Community rules for the procurement of arms, munitions and war material (plus related works and services) for defense purposes, but also for the procurement of sensitive supplies, works and services for non-military security purposes;
- Directive 2014/23/EU on the award of concession contracts. A concession contract (either for the delivery of works or services) is conducted between a public authority and a private enterprise that gives the right to the company to build infrastructure and operate businesses that would normally fall within the jurisdiction of the public authority (e.g. highways).
The EU has three remedy directives imposing common standards for all member states to abide by in case bidders identify discriminatory public procurement practices.
Electronic versions of the procurement documentation must be available through an internet URL immediately on publication of the Official Journal of the European Union (OJEU) contract notice. Full electronic communication (with some exceptions) will become mandatory for all public contracts from October 2018. Central purchasing bodies are required to publish their contracts and requests for tenders since April 2017.
Electronic invoicing (e-invoicing) will be introduced beginning the 3rd quarter of 2018, based on the requirement set forth in Directive 2014/55/EU. The Directive makes the receipt and processing of electronic invoices in public procurement obligatory. Standards for e-invoicing are being developed by the European Committee for Standardization (CEN).
There are restrictions for U.S. suppliers in the EU utilities sector, both in the EU Utilities Directive and in EU coverage of the GPA. Article 85 of Directive 2014/25 allows EU contracting authorities to either reject non-EU bids where the proportion of goods originating in non-EU countries exceeds 50% or give preference to the EU bid if prices are equivalent (meaning within a 3% margin). Moreover, the Directive allows EU contracting authorities to retain the right to suspend or restrict the award of service contract to undertaking in third countries where no reciprocal access is granted.
There are also restrictions in the EU coverage of the GPA that apply specifically to U.S.-based companies. U.S. companies are not allowed to bid on works and services contracts procured by sub-central public contracting authorities in the following sectors:
- Water sector
- Airport services
- Urban transport sector as described above, and railways in general
- Dredging services and procurement related to shipbuilding
Many governments finance public works projects through borrowing from the Multilateral Development Banks. Please refer to “Financing of Projects” Section in “Selling to the Public Sector” for more information.
U.S. companies bidding on Government tenders may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult Advocacy for Foreign Government Contracts for additional information.
Financing of Projects
Project finance and Public Private Partnerships (PPP) had been popular models in Portugal since the early 90´s, thanks to a stream of state-funded projects that included the construction of the second Tagus Bridge, development of major roads and highways, hospitals and more recently the high-speed rail and airports. Energy projects had also been abundant, particularly renewable energy projects like solar, wind and photovoltaic plants.
EU financial assistance programs provide a wide array of grants, loans, loan guarantees and co-financing for feasibility studies and projects in several key sectors (e.g., environmental, transportation, energy, telecommunications, tourism, public health). Several centralized financing programs are also generating procurement and other opportunities directly with EU institutions.
The EU supports economic development projects within its Member States, as well as EU-wide “economic integration” projects that cross both internal and external EU borders. In addition, the EU aids candidate and neighbor countries.
The EU provides project financing through grants from the EU budget and loans from the European Investment Bank. Grants from the EU Structural and Investment Funds program are distributed through the Member States’ national and regional authorities. Projects in non-EU countries are managed through the Directorate-Generals Enlargement, Development and Cooperation (EuropeAid), Humanitarian Aid and Civil Protection (ECHO).
EU Structural and Investment Funds (ESIF)
EU Structural Funds, including the European Regional Development and the European Social Fund, were created in 1975 with the aim to mitigate economic and social differences between the regions of the European Union. New budgets are approved every seven years for all Member States. The budgets and the allocation of funding between the different priorities (social, economic or environmental) are based on the conclusions of the “Partnership Agreements” (PAs) which are negotiated between the European Commission and the member state national authorities. For the period of 2014 – 2020, the EU has earmarked 352 billion euros for regional development and cohesion policy projects.
From the 2021 to 2027 programming period, the European Commission foresees a simplification of these funds and is expected to focus on the following objectives:
- Smart Europe (e.g., innovation, digitalization, and support for SMEs)
- Green Europe (e.g., carbon free economy, implementation of the Paris Agreement, and renewables)
- Connected Europe (e.g., strategic transport and digital networks)
- Social Europe (e.g., social rights, quality employment, education, and social inclusion)
- Citizens’ Europe (e.g., support to locally led development strategies and urban development).
In a response to the coronavirus pandemic, a crisis repair initiative was launched under the name Recovery Assistance for Cohesion and the Territories of Europe (REACT-EU). The REACT-EU fund includes €55 billion of additional funds that will be made available via ESIF funds.
For projects financed through ESIF, Member State regional managing authorities are the key decision-makers. They assess the needs of their country, investigate projects, evaluate bids, and award contracts. To become familiar with available financial support programs in the Member States, would-be contractors should develop a sound understanding of the country’s cohesion policy indicators.
Tenders issued by Member States’ public contracting authorities for projects supported by EU grants are subject to EU public procurement legislation. All ESIF projects are co-financed by national authorities and many may also qualify for a loan from the European Investment Bank in addition to private sector contributions.
The Cohesion Fund
The Cohesion Fund is another instrument of the European Union’s regional policy, which supports investments in the field of environment and trans-European networks in the area if transport infrastructure. For the 2021-2027 programmatic period, the Cohesion Fund applies to Bulgaria, Czechia, Estonia, Greece, Croatia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Portugal, Romania, Slovakia, and Slovenia. In addition, 37% of the overall financial allocation of the Cohesion Fund are expected to contribute to climate objectives.
In addition, the European Regional Development Fund finances programs under shared responsibility between the European Commission and national and regional authorities in Member States. The Member States’ administrations choose which projects to finance, and they take responsibility for day-to-day management.
Other EU Grants for Member States
Other sets of sector-specific grants such as Horizon 2020 aid EU Member States in the fields of science, technology, communications, energy, security, environmental protection, education, training and research. Tenders related to these grants are posted on the websites of the European Commission and the relevant Member State authorities. Participation is usually restricted to EU-based firms or tied to EU content. Information pertaining to each of these programs can be found at: EU Funding and Tenders.
Horizon Europe is the new Framework Program, which will run from 2021 until 2027, with a total budget of 75.9 billion euro. The Horizon Europe program aims to implement mission-driven research focusing on adaptation to climate change, including social transformation; cancer; climate-neutral and smart cities; healthy oceans, seas, coasts, and inland waters; soil health and good. It is expected that these missions will be addressed within the Global Challenges and European Industrial Competitiveness pillar.
External Assistance Grants
“Development and Cooperation – EuropeAid” is the Directorate–General (DG) responsible for implementing EU development policies through programs and projects across the world. Its website offers extensive information on the range of grant programs, the kind of projects that are eligible, as well as manuals to help interested parties understand the relevant contract law. However, participation in these calls for tender is reserved for enterprises located in the EU Member States or in the beneficiary countries and requires that the products used to respond to these projects are manufactured in the EU or in the aid recipient country. Consultants of U.S. nationality employed by a European firm can participate. European subsidiaries of U.S. firms are eligible to participate in these calls for tender.
In addition, the Instrument for Pre-accession Assistance II (IPA II) is an EU program for pre-accession countries that provides support for political and economic reforms, preparing the beneficiaries for the rights and obligations that come with EU membership and that are linked to the adoption of the acquis communautaire (i.e., the body of European Union law that must be adopted by candidate countries as a precondition to accession). These programs are intended to help build up the administrative and institutional capacities of these countries and to finance investments designed to aid them in complying with EU law. The successor program, IPA III, will build on IPA II, but will aim to accelerate project implementation by reducing the time gap between project selection, which will be based on technical maturity besides alignment to the country-specific recommendations of the enlargement package, and effective contracting. In addition, the final selection of actions will also consider the assessment of the performance of the beneficiaries in the enlargement agenda, and their commitment to and progress in implementing reforms, with particular attention to fundamental areas like the rule of law.
The Connecting Europe Facility (CEF) is an EU financing mechanism that uses the EC budget as well as the Cohesion Funds to finance projects in transport, energy, and digital. Along with EFSI, CEF is expected to play a role in bridging the investment gap in Europe, which is one of the Commission’s top priorities. In all three main categories, the focus is on creating better conditions for growth and jobs. For the 2021-2027 period, the budget amounts to 25.8 billion euro for transport, 5.8 billion euro for energy, and €2.1 billion euro for digital. Annual and multi-annual work programs specify the priorities and the total amount of financial support allocated for these priorities in a given year, and there are certain regulations limiting eligibility for support. Only actions contributing to projects of common interest in accordance with Regulations 1315/2013, 347/2013, and a Regulation on guidelines for trans-European networks in the area of telecommunications infrastructure, as well as program support actions, are eligible for support.
Loans from the European Investment Bank
Headquartered in Luxembourg, the European Investment Bank (EIB) is the financing arm of the European Union. Since its creation in 1958, the EIB has been a key player in building Europe. As a non-profit banking institution, the EIB assesses reviews and monitors projects, and offers cost-competitive, long-term lending. Best known for its project financial and economic analysis, the EIB makes loans to both private and public borrowers for projects supporting four key areas: innovation and skills, access to finance for smaller businesses, climate action, and strategic infrastructure. The EIB opens credit lines for financial institutions that then lend funds to creditors.
While the EIB mostly funds projects within the European Union, it lends outside the European Union as well. In 2020, the EIB loaned 66 billion euros for projects. The EIB also plays a key role in supporting European Union enlargement with loans used to finance improvements in infrastructure, research, and industrial manufacturing to help those countries prepare for eventual European Union membership. The EIB presents attractive financing options for projects that contribute to those objectives, as EIB lending rates are lower than most other commercial rates.
Projects financed by the EIB must contribute to the socio-economic objectives set out by the European Union, such as fostering the development of less favored regions, improving European transport and environment infrastructure, supporting the activities of SMEs, assisting urban renewal and the development of a low-carbon economy, and generally promoting growth and competitiveness in the European Union.
Multilateral Development Banks and Financing Government Sales
The U.S. Commercial Service maintains Commercial Liaison Offices at the World Bank and the European Bank for Reconstruction and Development. These institutions lend billions of dollars in developing countries on projects aimed at accelerating economic growth and social development by reducing poverty and inequality, improving health and education, and advancing infrastructure development. The Commercial Liaison Offices help U.S. businesses learn how to get involved in bank-funded projects, and advocate on behalf of U.S. bidders. Learn more by contacting the Commercial Liaison Offices to the European Bank for Reconstruction and Development and the World Bank.