Do the procurement rules apply to public-public co-operation?

Tuesday October 25th, 2011

 By Ruth McNaught, Solicitor, Harper Macleod LLP

The European Commission has issued a guidance document on the application of the EU public procurement rules to co-operation between contracting authorities (‘public-public co-operation’).

There have been a number of cases before the Courts considering the issue of the extent to which the public procurement rules apply to situations in which two contracting authorities co-operate with each other in performing their public tasks. Comparisons have been drawn between public-public co-operation and the ‘Teckal’ in-house exemption. 

Teckal established an exemption from the normal application of procurement rules in cases where contracting authorities award contracts for providing services or works to an ‘in–house’ provider, where the following criteria are met:

  • The contracting authority exercises a level of control over the entity to which it awards the contract which is similar to that which it exercises over its own departments; and
  • The economic operator carries out the essential part of its activities with the contracting authority that controls it.

The procurement rules do not, therefore, apply where a contracting authority performs a public task in such a way that no contract for pecuniary interest is concluded, because the situation is internal to one and the same legal person.

The Commission notes in its guidance that this exemption can, in some circumstances, extend to co-operation with other contracting authorities – even where, despite the general principle, contracts for pecuniary interest are concluded:

  • ‘Horizontal co-operation to jointly fulfil public tasks’case law has indicated that the public procurement rules do not apply where contracting authorities establish horizontal co-operation amongst themselves and:
  • the arrangement involves only contracting authorities, with no participation of private capital;
  • the agreement is aimed at the joint performance of a public task which all the co-operation partners have to perform; and
  • co-operation is governed only by the public interest such that there are no commercial considerations and the co-operation agreement does not include activities to be offered on the open market.
  • Competence for the public task is transferred to another public authority’ – the transfer of competence for a given public task from one contracting authority to another is not governed by public procurement rules. It involves transferring both the official authority and any associated economic activities – the transferring authority does not retain any responsibility nor any right to determine the performance.
  • If an entity carries out an activity on account of its obligations resulting from national legislation, rather than on a contractual basis, it is not covered by the EU Public Procurement Directives. 
  • ‘The performance of a task is entrusted to another contracting body that enjoys an exclusive right’ – the exclusive right needs to be granted to particular public sector bodies to provide certain services on an exclusive basis to the public sector, by a law, regulation or administrative provision which is published and compatible with the EU Treaty.
  • The performance of the task is entrusted to another body through joint procurement or through central purchasing bodies. In the case of simple administrative co-operation in drawing up common specifications that does not necessitate any contracts for pecuniary interests between the parties (when public authorities limit themselves to organising a common call for tenders) they are applying the public procurement rules together but their co-operation is not subject to these rules.

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