The Italian Government definitively approved Legislative Decree no. 50 in April this year, implementing Directives 2014/23/EU, 2014/24/EU and 2014/25/EU of the European Parliament and European Council. The revised legislation resulting from the Directives coming into force affect the Italian construction market. Notably, the new Italian Public Procurement Code impacts “public procurement and awarding concession contracts, procurement by entities operating in the water, energy, transport and postal services sectors and on the reorganization of the Public Procurement Regulation”. The new code has been introduced to deliver high quality standards for public works and to limit excessive cost increases due to variances in project execution.

According to data made available by the Italian National Association of Building Contractors (Associazione Nazionale dei Costruttori Edili), the regulatory change has already resulted in the retreat of the public works market. In addition to strengthening the role of Autorità Nazionale Anticorruzione (ANAC), the national anti-bribery and corruption authority in the public procurement sector, the new code has also established a qualification system of contracting authorities and introduced other provisions to consolidate public tenders. Such revisions have led to a decline in both the value of the calls to tender made public and the number of large public procurement procedures launched. In May this year, there was a 75% decrease in tender value compared to the calls for tender published in May 2015. With respect to the number of public procurement procedures commenced, only 10 procedures with an awarding value higher than €5 million were kicked-off in May 2016, while 45 procedures of the same size were recorded in 2015.

The new code has also updated the award criteria to determine preference based on the “most economically advantageous tender”. While many building contractors agree that cost increases should be limited due to variances in project execution, they encourage the Italian Government to consider a temporary change in the new regulation to allow contracting authorities to proceed with calls for tender on the definitive projects which are already available. This suggestion has not been adopted by the Italian Government to date.

Significantly, the new code has identified three projects for public building construction planning:

1. The new “technical and economic feasibility” project
2. The definitive project
3. The executive project, which now constitutes the planning standard for all bidders (while, pending the former rules, contracting authorities could proceed with the tender on the basis of the definitive project)

Most commentators noted that the new code was likely to produce uncertainties for economic operators, particularly whilst the issuance of general guidelines on the new applicable regime by the Ministry of Infrastructure and Transport (Ministero delle Infrastrutture e dei Trasporti) is pending. Three months after the entry into force of the New Code, it is evident the regulatory changes have significantly impacted the large public works market in Italy.

This post was prepared with the assistance of Francesca Serafini in the Milan office of Latham & Watkins.