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EUROPEAN COMMISSION - PUBLIC CONSULTATION GREEN PAPER on the modernisation of EU public procurement policy Towards a more efficient European Procurement Market
Contribution of DLA PIPER LLP (coordinated by the Brussels' Office)
15 APRIL 2011
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Introduction
DLA Piper LLP welcomes the European Commission’s initiative to launch a consultation on the existing
public procurement rules. We share the objective that by modernising public procurement rules the principle
of "value for money", one of the main underlying concepts of the European public procurement legislation,
will be pursued mory easily. Therefore, we are delighted to have the opportunity to present to the European
Commission our views, as day-to-day practitioners in the public procurement field.
We acknowledge that the European Commission, in its green paper, has highlighted the most important
issues raised in the application of public procurement rules. However, we have chosen not to answer all the
questions raised in the green paper but rather to discuss a number of issues we consider either particularly
relevant or sensitive. Present document will give references to the questions of the green paper addressed
by mentioning Q for question and the number of the question.
Present document will (1) first examine the scope ratione materiae of the public procurement rules. (2) In a
second section, we will discuss whether the generalisation of the recourse to the negotiated procedure with
prior notice to all procedures could be envisaged. (3) Thirdly, the document will address public-public
cooperation. (4) Fourth, we will submit that previous experience should be taken into account without this
amounting to discrimination between economic operators. (5) In a fifth section, we will discuss the issue
modifications in the course of the execution of the contract.
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Discussion
1. Scope ratione personae (Q 9) This section will focus on the scope ratione personae of Directive 2004/17/EC of the European
Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities
operating in the water, energy, transport and postal services sectors1 (hereafter, the "Directive 2004/17")
as it may also relate to Directive 2004/18/EC of the European Parliament and of the Council of 31 March
2004 on the coordination of procedures for the award of public works contracts, public supply contracts
and public service contracts2 (hereafter, the "Directive 2004/18").
a. Outline of the scope ratione personae of Directive 2004/17
Directive 2004/17 is applicable to three categories of entities: contracting authorities, public
undertakings and private undertakings that perform the activities envisaged by the Directive 2004/17.
Article 2 of Directive 2004/17 makes a distinction between contracting authorities and public
undertakings.
A contracting authority covers the traditional authorities such as the State and regional or local
authorities. It also covers bodies governed by public law, i.e. legal persons established for the purpose
of meeting needs in the general interest and not having an industrial or commercial character, and
financed, for the most part, by state resources.
Public undertakings, on the other hand, are defined as "any undertaking over which the contracting
authorities may exercise directly or indirectly a dominant influence by virtue of their ownership of it, their
financial participation therein, or the rules which govern it".
Private undertakings, finally, may also fall under application of the public procurement rules, where they
operate on the basis of special or exclusive rights granted by a competent authority of a Member State.
Hence, public undertakings have as their sole determining characteristic - compared to private
undertakings - the element of being subjected to dominant influence of a contracting authority.
1 OJ L 134 of 30 April 2004, 1. 2 OJ L 134 of 30 April 2004, 114.
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b. The category of public undertakings
Public undertakings as well as contracting authorities are thus under (dominant) influence of a State
body. The only distinguishable element between both categories concerns the performance of tasks of
general interest.
We are of the opinion that the Court of Justice's Aigner judgement3, leads us to conclude that there is a
nearly total overlap between both categories. In this case, a private Austrian undertaking, Fernwärme
GmbH, was under dominant influence of the city of Vienna. The undertaking provided city heating
services, a service which triggers the application of Directive 2004/17. Apart from these services,
Fernwärme also provided commercial services which had no relation to the public procurement
Directives. The Court had to answer whether such undertaking is to be considered as a contracting
authority under Directive 2004/18 or Directive 2004/17.
The Court looked first at the purposes for which the undertaking was created and concluded that it had
been established specifically to meet needs in the general interest.4 To do so the Court did not only or
not specifically take into account the performance by Fernwärme of activities regulated by Directive
2004/18 but did, also take into account its' performance of activities regulated by Directive 2004/17 .5
The Court considered that Fernwärme's virtual monopoly on the district heating market, although this is
an activity that is regulated to Directive 2004/17, had also an impact on the question whether
Fernwärme was or was not, for its activities regulated by Directive 2004/18, to be considered as a
"body governed by public law" .6
The Aigner judgement implies that an undertaking under government influence, once active in a sector
covered by Directive 2004/17, will, for its activities that fall outside the scope of this Directive, almost
always be considered a contracting authority in the sense of Directive 2004/18.
Such reasoning makes, in our opinion, the necessity of a separate "public undertaking" category
obsolete. One cannot but conclude that the distinction between "contracting authorities" and "public
undertakings" is, in fact, characterised by a total overlap.7 Public undertakings that perform activities
subject to Directive 2004/17 will, on the basis of this activity, nearly always be qualified as contracting
authorities for activities performed that do not fall within the scope of application of Directive 2004/17
3 C-393/06, Ing. Aigner, [2008] ECR, I-2339. 4 para 39. 5 para 41. 6 paras 43 and 44. 7 S. Arrowsmith, The law of public and utilities procurement, London, Sweet & Maxwell/Thomson, 2005, 846.
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and thus will have to apply Directive 2004/18 in such cases. Due to the Aigner case law, the existence
of a public undertaking that needs to comply with Directive 2004/17 yet would be exempt from the
application of Directive 2004/18 seems unlikely.
It thus seems that the category of public undertakings has become a notion that is void: when such
public undertaking engages in activity in the utilities sector, the legal and economical regime in such
sectors will almost always imply that this undertaking will be qualified as a contracting authority for its
activities that fall outside the scope of the utilities sector.
c. The category of private undertakings benefiting from exclusive or special rights
Private undertakings may also fall under the application of Directive 2004/17 where they enjoy exclusive
or special rights and are active in the utilities. This constitutes a further category of body falling in the
scope ratione personae of Directive 2004/17.
The determinative nature of Directive 2004/17 lies in the performance of an undertaking in certain
sectors. Hence, the applicability of Directive 2004/17 mainly depends on the field of activity in which an
entity or undertaking is engaged. The field of application in this regard is drafted against the observation
that in those specific sectors there exists no or only limited competition. Public procurement rules are
made applicable in order to ensure that contracts awarded by undertakings in this sector have indeed
been subjected to an objective and competitive procedure. Advocate-General Ruiz-Jarabo Colomer
worded this ambition as follows: "Community public procurement law pursues an immediate, limited aim:
coordination of the procedures for the award of public contracts. However, as may be deduced from
recital 2 in the preamble to Directive 2004/18 and recital 9 in the preamble to Directive 2004/17, and
also from the case-law of the Court, that is nothing more than an instrument for the achievement of a
more important objective, namely, the development of effective competition in the sector, in the interests
of establishing the fundamental freedoms in European integration. The purpose is, therefore, to
eliminate barriers to freedom of movement by protecting the interests of economic operators in one
Member State who wish to sell goods or services to contracting entities in other Member States.
Accordingly, it is necessary to avoid the risk of preference being given to national tenderers (‘buy
national’), excluding the possibility that the body responsible for awarding the contract may be guided by
considerations other than economic (for that reason, the essential criterion when awarding a contract is
that of the lowest or economically most advantageous tender)." 8
The sectors that fall within the scope of Directive 2004/17 are indeed in many Member States
characterised by monopolistic or oligopolistic market structures, and in which State bodies still have a
8 Opinion of AG Ruiz-Jarabo Colomer, C-393/06, Ing. Aigner, [2008] ECR, I-2339, para 31.
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major influence. Such structures allow the European institutions to fear that there exists significant
scope for anticompetitive behaviour.
The rationale behind the application of a specific public procurement framework is thus the need to
allow competition to flow freely in the relevant sectors. Entities should only be driven by economic
concerns and therefore have to run through an objective procedure that seeks the submission that best
answers those economic concerns.
If this is indeed the aim of Directive 2004/17, one can wonder why so much attention is given to a formal
ratione personae structure of application, divided in three categories of contracting authorities, public
undertakings and private undertakings with exclusive or special rights. It is clear that the application of
the scope of Directive 2004/18 is determined by an emphasis on the personal dimension of a certain
entity.9 This is, however, not the case with Directive 2004/17: the application of this directive and its
rationale are mainly determined by a material scope, namely the activities pursued by an entity or
undertaking that qualifies under this directive. As stated by Advocate General Colomer, "[a]ccordingly,
Directive 2004/17 governs procurement in what are traditionally known as ‘excluded sectors’, and its
spirit is different to that prompting Directive 2004/18. The conclusive criterion is not the contracting entity
but rather the nature of the activity to which the contract concerned relates, and the directive applies
only to the sectors concerned."10
Since public as well as private undertakings are caught by Directive 2004/17, questions arise as to why
this distinction is relevant. This Directive is applicable regardless of the public or private statute of an
undertaking:
"As the Commission has correctly observed, that last directive was adopted for the purpose of
extending the application of the Community rules regulating public procurement to the water,
energy, transport and telecommunications sectors which were not covered by other directives. From
that point of view, by employing the concepts of public authorities, on the one hand, and public
undertakings, on the other, the Community legislature adopted a functional approach similar to that
adopted in Directives 92/50, 93/36 and 93/37. It was thus able to ensure that all the contracting
entities operating in the sectors regulated by Directive 93/38 were included in its ambit ratione
personæ, on condition that they satisfied certain criteria, their legal form and the rules under which
they were formed being in this respect immaterial." 11
Directive 2004/17 follows the same course (recitals 2 and 3) and identifies contracting entities
without reference to their legal status (recital 10). Therefore, in addition to contracting authorities,
which are identified in the same terms as in Directive 2004/18, the directive defines as contracting
9 Ibid., para 34. 10 Ibid., para 40. 11 CoJ, C-283/00, Commission / Spain, [2003] ECR, I-11697, para 76.
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entities public undertakings and entities which have special or exclusive rights, provided that they
carry out the activities referred to in Articles 3 to 7 (Articles 2(1) and (2) and 20(1))."12
Together with Advocate General Colomer, we can conclude that the nature of the activity performed by
an undertaking is the main (or even the only) criterion to apply Directive 2004/17 .
d. Recommendation
As demonstrated above, the existence of three different categories of persons subject to the application
of Directive 2004/17 does not give satisfaction. First, we have highlighted a quasi-total overlap between
the categories of "contracting authorities" which are also subject to the application of Directive 2004/18
and of public undertakings active in the utilities, in principle only subject to Directive 2004/17. Secondly,
we have also emphasised that the definition of a scope ratione personae for Directive 2004/17 does dos
not reflect the objectives pursued by the public procurement rules. We therefore advocate a limitation or
even suppression of the definition of a scope ratione personae for Directive 2004/17 . This would clarify
the general scope ratione personae of the public procurement rules. In our opinion the main criterion is
whether a undertaking is or is not operating in a context that is characterised by competition and not the
question whether this undertaking is subject to government influence. If the answer is that the
undertaking is not operating on a competitive market then the undertaking would be subject to the rules
set out in Directive 2004/17. If at the same time, to the undertaking is, because of its activity in the
utilities' sector, considered as a "body governed by public law", they would be subject to Directive
2004/18 for their activities not falling under Directive 2004/17.
Instead of focussing on the application ratione personae, the focus should, thus, be shifted towards
actual analysis of the market structure against the goal of Directive 2004/17. When it would appear that
in a certain Member State a sector is characterised by a monopolistic or oligopolistic structure and that
safeguards need to be installed that ensure award of contracts through objective procedures, than
application of Directive 2004/17 might be needed. If, however, in other Member States these sectors are
subject to free competition (including competition by substitution), it might be desirable not to apply
Directive 2004/17 and allow free competition to regulate the market and the award of contracts.
This can be illustrated by the example of the postal services sector: in several Member States, postal
operators might be considered as falling under the scope ratione personae of Directive 2004/17 and
thus subject to the application of public procurement rules, a reorientation towards a more economic
assessment of the market structure might put the need for such procedures in a different light. In such
case, the development of competition by substitution (such as electronic communication) can also be
taken into account when assessing whether any postal service provider operates in a monopolistic
position or not. Based on such actual market structure assessment, one can then conclude whether or
not there indeed exists a need to safeguard competition through formal procedures.
12 Opinion of AG Ruiz-Jarabo Colomer, C-393/06, Ing. Aigner, [2008] ECR, I-2339, paras 39.
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Thus, a more functional and economical reorientation of the scope of application of Directive 2004/17
seems necessary. Rather than trying to fit certain entities into this framework, the framework should
focus more on its actual goal and thus only be applicable when it is deemed necessary, based on the
market conditions of the sectors in which activities are performed.
We are aware of the applicability of article 30 of Directive 2004/17 but we are of the opinion that this
provision or at least the rationale behind this provision should be applied ex ante. We are of the opinion
that this application ex ante of article 30 should also be considered with regard to the activities that
might qualify as activities that fall under Directive 2004/18.
In any way, it is our experience that the qualification whether activities are subject to Directive 2004/17
or Directive 2004/18 is extremely difficult to make. The Commission (and/or the Community Legislator)
may want to provide some guidance on the subject.
2. Generalisation of the negotiated procedure with prior notice (Q 19-21)
a. The negotiated procedure under Directive 2004/17 and Directive 2004/18
The current Directives provide for a wide range of procedures: the open and the restricted procedure,
the negotiated procedure with or without prior publication of a contract notice and the competitive
dialogue.
Contracting authorities are free to use both the open and restricted procedures. The situation is
somewhat different for the negotiated procedure.
The negotiated procedure has an exceptional nature and its use will therefore have to be justified.
Under Directive 2004/18, the negotiated procedure with prior publication may be used exclusively under
the specific circumstances listed in article 30. The exceptional character of the negotiated procedure, as
often confirmed by the Court of Justice,13 implies that the possible applications of the negotiated
procedure must be interpreted narrowly and that the burden of proof of the existence of exceptional
circumstances justifying a derogation lies with the contracting authority seeking to rely on those
circumstances.14
13 Case 20/01 and C-28/01, Commission / Germany, [2003] ECR, I-3609; Case C-385/02, Commission / Italy,
[2004] ECR, I-8121; Case C-394/02, Commission / Greece, [2005] ECR, I-4713. 14 Case C-199/85, Commission / Italy, [1987] ECR, I-1039; Case C-71/92, Commission / Spain, [1993] ECR,
I-5923; Case C-328/92, Commission / Spain, [1994] ECR, I-1569; Case C-385/02, Commission / Italy,
[2004] ECR, I-8121; Case C-394/02, Commission / Greece, [2005] ECR, I-4713.
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The negotiated procedure with prior publication of a contract notice can, however, be freely chosen
under Directive 2004/17.
In both Directives, the use of a negotiated procedure without publication of a contract notice is limited to
exceptional situations, which are exhaustively listed (and restrictively interpreted) under articles 31
Directive 2004/18 and 40(3) Directive 2004/17.
b. Unjustified limitation to the use of negotiated procedure with prior notice
We consider that the limited choice to make recourse to negotiated procedures with prior notice for
contracts that are subject to Directive 2004/18 is not justified and is even counter-productive.
First, there seems to be no valid justification to freely allow the use of the negotiated procedure with
prior publication under the Utilities Directive but limit the use thereof under the Classic Directive. The
justification for the difference between both sectors can be read in recital 9 of Directive 2004/17: "In view
of the nature of the sectors affected by such coordination, the latter should, while safeguarding the
application of those principles, establish a framework for sound commercial practice and should allow
maximum flexibility." The European legislator took the view that to submit contracting authorities in the
utilities sector to the same rules, formalities and terms would enfeeble their competitiveness. Although
this point of view might be correct in principle, it does no longer seem to justify the distinction made in
the two sectors. On the one hand, as we will further elaborate, the Court of Justice's case law and the
Commission have shaped the negotiated procedure in a way that that procedure also, has become a
regulated procedure. In order to prevent misuse thereof, contracting authorities have shaped the
negotiated procedure to a large extent and, consequently, decreased the degree of flexibility in favour of
the equality between bidders. On the other hand, contracting authorities under Directive 2004/18 are
(more often than used to be the case) frequently involved in complex projects or do acquire works,
goods or services with a certain degree of complexity. The need for maximum flexibility can no longer
only be invoked for entities under Directive 2004/17 only.
Secondly, in our experience and given the fact that the negotiated procedure with prior publication is in
fact broadly used by contracting entities under Directive 2004/17, there seems to be no reason for
restricting the use of the negotiated procedure with prior publication to some, be it smaller or large-
scale, contracts under Directive 2004/18. In our view, in practice, the character of the contract does not
justify the type of the procedure used. Indeed, it is not necessarily the case that a negotiated procedure
with a call for competition is less competitive than an open or a restricted procedure. On the contrary, it
is our belief that this procedure has quite often showed to be a more competitive procedure. Contract
provisions drafted by contracting authorities are very often not in line or even in contradiction with
standard contracting practices on certain markets (for example the financial market or the IT-market).
Furthermore, contracting authorities do not only acquire works, deliveries or services on oligopsonistic
or competitive markets but also on markets that have an oligopolistic or even a monopolistic structure. If
negotiations are made impossible whilst the contract specifications that have been drafted by the
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contracting authority are considered to be indadequate (for example because they contain clauses that
provide for uncapped liability) it happens very often that valuable market players simply do not offer. The
contracting authority has then the choice between putting an end to the award procedure or awarding
the contract to a second-tier operator. It is our experience that discussions between the purchaser and
his economic operators have, contrary to the beliefs expressed by the European legislator, resulted in
more adequate contract award processes and thus to value for money.15 We therefore defend the
stance that the use of the negotiated procedure with prior publication should be allowed in all
circumstances, for all types of contracts. The choice of the procedure should be left to the discretion of
the contracting authority.
Thirdly, despite the lack of specific rules prescribing the course of the procedure, the application of
European primary law (and of Articles 30, 2, 3 and 4 Directive 2004/18) has sufficiently provided
guidance for the contracting authorities to shape this procedure: in conducting a negotiated procedure,
contracting entities must comply with the general principles of equal treatment and transparency. Many
of the specific rules for open and/or restricted procedures will also apply to the negotiated procedure
with prior publication of a contract notice. These rules are after all an elaboration of the general
principles mentioned: e.g. following the publication of a contract notice, a minimum time must be given
to requests to participation to ensure that non-domestic firms are unreasonably excluded. The
importance of the principle of equality in the framework of negotiated procedures was stressed in the
judgement of the Court of Justice of 23 April 2009.16 The contracting authorities must comply with this
principle during the whole negotiation process which means, in particular, that tenderers must be in a
position of equality both when they formulate their tenders and when those tenders are being assessed
by the contracting authority.17 Article 30 paragraph 3, second sentence ("In particular, they shall not
provide information in a discriminatory manner which may give some tenderers an advantage over
others") is just one specific application of the principle of equality. It is preferable to provide more
specifications such as the obligation to offer every candidate an equal amount of time (during
negotiations, for the preparation of the offer, etc.), the obligation to allow the bidders to bid on the same
set of documents, etc. .
Eventually it is necessary to take into consideration article 30, paragraph 2 ("In the cases referred to in
paragraph 1, contracting authorities shall negotiate with tenderers the tenders submitted by them in
order to adapt them to the requirements which they have set in the contract notice, the specifications
and additional documents, if any, and to seek out the best tender …"). This provision limits the subject
of the negotiations by stating that only "the tenders" and not the contract specifications drafted by the
contracting authority are subject to negotiation. This paragraph clearly limits the scope of the
negotations in a sense that bidders cannot negotiate the contract terms and specifications set out in the
15 P. TREPTE, Public procurement in the EU. A practitioner's guide. Oxford University Press, Oxford, 2007,
385. 16 Case C-292/07, Commission / Belgium, [2009] ECR, I-59. 17 Case C-213/07, Michaniki, [2008] ECR, I-9999, para 45.
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tender specification by the contracting authority. The Court of Justice stated that "the determination of
the limits and the goal of the negotiations (…) hold a particular importance with regard to negotiated
procedures which justify a specific implementation of those aspects into national law."18 Further, the
Court holds that this paragraph aims to limit the "negotiation freedom by stating that the negotiations
only aim to adapt the submitted tenders to the requirements set in the contract notice, the specifications
and additional documents."19 The new article 30, paragraph 2 of Directive 2004/18 is therefore, in our
opinion, not in line with the conducted negotiated procedures in large, complex projects and therefore
causes legal uncertainty about the scope of the negotiations. It is not unusual and even to be expected
that, as a result of the negotiations, amendments to the contract documents and tender specifications
are made and communicated to all tenderers. Negotiations for complex contracts usually entail both the
tender (improving value for money) as the tender specifications. In order to improve value for money,
contractual documents might need the redrafting of clauses (e.g. penalty clauses) or the reallocation of
certain risk (adaptation of thresholds, caps, etc.). Price bids are usually made in function of the risks
matrix of a project. If changes to that matrix can benefit the overall value for money of a project,
negotiations should not be limited to the tenders only.
The same reasoning is true for changes to the technical specifications of a contract. In the course of the
negotiations, especially in large and complex PFI projects, it might become clear that technical
specifications (e.g. output requirements) have not sufficiently been made clear, do not lead to
satisfactory solutions or are simply no longer state-to-the-art.
c. Recommendation
As mentioned on page 15 of the Commission's Green Paper, we agree on the suggestion made that
contracting entities should always be allowed to negotiate the terms of the contract with potential
bidders, provided that the choice for the negotiated procedure has been made in the publication. In that
respect, we hold the view that the negotiated procedure with prior publication of the contract notice
should be treated on equal foot with the open and restricted procedures. In other terms, we are
convinced that the choice to make use of the negotiated procedure with prior publication should become
free for contracting authorities. To the contrary, the procedure without any call for competition, which is
similar to a direct contracting method, should only be allowed in duly justified circumstances, as
currently foreseen in the Directives.20
18 Case C-292/07, Commission / Belgium, [2009] ECR, I-59, para 110: "la définition des limites et de l'objectif
de la négociation (…) revêtent une importance toute particulière dans le cadre de la procédure négociée
qui justifie une transposition spécifique de ces éléments en droit national". 19 Case C-292/07, Commission / Belgium, [2009] ECR, I-59, para 107: "marge de manœuvre en énonçant
que la négociation…vise exclusivement à adapter les offres soumises aux exigences prévues dans l'avis
de marché, dans le cahier des charges et dans les documents complémentaires éventuels". 20 Since it may be used in respect of only one candidate, it is clearly the procedure which risks producing the
least competition.
12
In order to benefit the advantages of the negotiated procedure with prior publication, we are not in
favour of adding additional safeguards for transparency and non-discrimination to the Directives. The
working method in current Directive 2004/18 is therefore preferred. It must remain open to the
contracting entities to fill in the procedure at will within the boundaries set out in the Directive.
We suggest that article 30(2) of Directive 2004/18 is removed from the Directive. This would, moreover,
bring the text in line with article 30(1)(b) and (c) thereof. These provisions express the idea that the lack
of information at the contracting entity's side (to determine the price, resp. the technical specifications)
justify the use of the negotiated procedure. This is rather contrary to article 30(2) if, as a result of the
negotiations, the contract documents and technical specifications could not be updated.
3. Public-public cooperation (Q 30-33)
This section will focus on the exclusion from the scope of the public procurement rules of in-house
arrangements.
a. The in-house exemption from the application of public procurement rules
The Teckal case established a doctrine that allows for in-house award of certain contracts without
having to run through an obligation to tender.21 Indeed, public procurement rules apply to contracts.
The Court of Justice held that, for a contract to exist, it must have been concluded between two
separate persons.22 In-house arrangements are excluded from the application of the public procurement
rules.
An arrangement involving two formally distinct entities would nevertheless be considered as an in-house
arrangement when the contracting authority (1) exercises control over the person which is similar to that
which it exercises over its own departments and, (2) at the same time, that person carries out the
essential part of its activities with the controlling local authority or local authorities.23
The first criterion has been given a strict understanding by the Court and will be here further discussed.
21 Case C-107/98, Teckal, [1999] ECR, I-8121. 22 Para 49. 23 Para 50 of the Teckal judgement. S. Arrowsmith makes the distinction between legally distinct entities in
form and in substance. According to that distinction, the Teckal judgement considered that although the
entities at stake were formally distinct, they were considered as the same body in substance. See S.
Arrowsmith, 392.
13
In the Stadt Halle case,24 the Court considered that "the participation, even as a minority, of a private
undertaking in the capital of a company in which the contracting authority in question is also a
participant excludes in any event the possibility of that contracting authority exercising over that
company a control similar to that which it exercises over its own department".25 The Court justified this
approach by stating that public interest objectives cannot be pursued in companies where the private
sector participates26 and that 'the award of a public contract to a semi-public company without calling for
tenders would interfere with the objective of free and undistorted competition and the principle of equal
treatment".27
This strict approach has been criticised as it may discourage public authorities to seek for private
investment for the provision of public services.28
The Carbotermo case29 (and subsequent case law) has further restricted the qualification of in-house
arrangements by excluding contracts awarded to companies over which the control exercised by the
authorities is not direct. In this case, a contracting authority, the municipality of Busto Arsizio, had
awarded a contract relating to the maintenance and renovation of communal city heating to the
undertaking AGESP, without having organised a tender procedure. AGESP was a branch of AGESP
Holding, the shares of which were 99,8% in hands of Busto Arsizio and 0,2% in hands of neighbouring
municipalities.30
According to the Court, the fact that all the capital was held by public authorities tends to indicate that
that contracting authority exercises control over that company similar to that which it exercises over its
own departments.31 However, surprisingly, the Court considered that such indication was not decisive.
On that basis, the Court further considered that, while the board of directors of AGESP was given the
broadest possible powers, Busto Arsizio was not granted any controlling or voting rights through which it
could restrict the board of directors' powers.32 Regarding the AGESP Holding, the Court concluded:
"The intervention of such an intermediary may, depending on the circumstances of the case, weaken
any control possibly exercised by the contracting authority over a joint stock company merely because it
24 Case C-26/03 [2005] ECR I-1. See also Case C-458/03, Parking Brixen [2005] ECR I-8585. 25 Para 49. 26 See Stadt Halle, para 50. 27 Ibid., para 51. 28 See for instance, S. Arrowsmith, 393; D. Yernault, 'La contractualisation (forcée?) du droit administratif de
l'économie et l'organisation des modes de gestion du service public', REV. DR. ULB [2006] 33, 206. 29 Case C-340/04 [2006] ECR I-4137. 30 Para 10. 31 Para 37 of the judgement. 32 Para 38 of the judgement.
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holds shares in that company."33 This led the Court to conclude that the municipality could not exercise
control that is similar to that which it exercises over its own departments.
This case can be read in combination with the Mannesmann case whereby the Court of Justice
established the so-called "infection theory". In this case, an Austrian State printing office produced, on
an exclusive basis, official administrative documents and was judged to provide services with the
specific purpose to meet needs of general interest that are not of a commercial or industrial nature.
Mannesmann was thus qualified as a contracting authority within the meaning of the public procurement
rules.34 Besides these activities, Mannesmann also performed activities which were of a commercial
nature. The Court judged that these activities were also subject to the public procurement rules. It
considered that even when the activity aimed at meeting needs of general, non-commercial and non-
industrial interest constitutes only a small part of the undertaking's activity, the undertaking should for all
its activities still be considered as a contracting authority: "The condition, laid down in the first indent of
the second subparagraph of Article 1(b) of the directive, that the body must have been established for
the `specific' purpose of meeting needs in the general interest, not having an industrial or commercial
character, does not mean that it should be entrusted only with meeting such needs."35 The infection
theory thus implies that, once an undertaking qualifies as a contracting authority, established with the
specific aim of providing services of general, non-commercial and non-industrial, interest, also its
commercial and industrial activities fall within the application of the public procurement directives. A
contracting authority will thus always have to comply with the relevant public procurement rules,
regardless of whether its specific activity would in itself trigger application of the relevant rules. The
rationale behind this theory is that such entity may be guided by considerations other than economic.36
Therefore, this judgement can be seen as an incentive for public entities to create separate entities, one
pursuing the general economic interest, and the other acting as a commercial entity. On the basis of the
Carbotermo case, contracts between these entities should be awarded in compliance with the public
procurement rules. Where in many cases, it can be indeed considered that such new commercial entity
does not constitute any longer an "in-house" operator of the contracting authority, there might still be
cases where the authority would continue to exercise genuine control on such entity though be subject
to procurement. These cases should not be excluded upfront from the in-house exemption.
The strict approach of the Court was softened in its Coditel37 and Asemfo38 judgements, in which the
Court expanded its Teckal doctrine.
33 Para 39 of the judgement. 34 Paras 18-24. 35 Para 26 of the Mannesmann judgement. 36 Opinion of AG Ruiz-Jarabo Colomer, C-393/06, Ing. Aigner, [2008] ECR, I-2339, para 31.
37 C-324/07, [2008] ECR, I-8457. 38 C-295/05, [2007] ECR, I-2999.
15
In Asemfo, the Court the Court judged that the provider was an in-house provider because it was
required to execute the orders given by its shareholders and had no liberty to independently fix certain
tariffs. In Asemfo and in Coditel the Court also considered that several contracting authorities could
jointly exercise the required influecen over an in-house operator.
While these judgements do allow for a certain degree of in-house policy in contracting authorities'
activities, it remains unclear to what extent there is room for such policy.
b. Recommendation
With its case law, the Court of Justice has considerably reduced the thrust of the in-house exception it
has itself created, by stretching the concept of control,39 for the sake of a broad application of the public
procurement rules.
We advocate a more flexible approach, which would reconcile the Teckal case with subsequent
judgements, while taking into account the criticisms against a too strict approach.
This more flexible approach could either find inspiration in article 23 of Directive 2004/17 or in
Regulation (EC) n° 1370/2007 on public passenger transport services by rail and by road.
First. the question of control could be addressed by applying the affiliated undertakings exemption
under article 23 of Directive 2004/17, whereby contracts awarded to an "affiliated undertaking", at
least 80% of the turnover of which relates to the contract services, are excluded from the
application of the Directive.40 We are aware of the fact that the analogy has been rejected by the
Court in Stadt Halle41. We are, nevertheless, of the opinion that a transposition of article 23 of
Directive 2004/17 would substantially clarify the conditions under which the exemption for in-house
provides can be applied.
Second, we are of the opinion that inspiration could also be drawn from Regulation (EC) n° 1370/2007.
lthough the Regulation also raises various questions of interpretation,42 it uses a more flexible concept
of "internal operator". Under that Regulation, "internal operator" to which the contracting authority can
award directly a contract, provided advertising obligations have been fulfilled, is defined as "a legally
distinct entity over which a competent local authority, or in the case of a group of authorities at
least one competent local authority exercises control similar to that exercised over its own
department"' (Article 2(j)). According to Article 5(2)(a) of the Regulation, "100% ownership by the
39 For a study of the concept of 'control' under public procurement law, antitrust law and Belgian corporate
law, see T. Delvaux, "Le contrôle d'une société - Sens et contresens d'un concept polysémique, Variations
sur un même thème en droit des sociétés, droit de la concurrence et droit des marches publics", J.T. [2007]
699-803. 40 Article 23 of Directive 2004/17. 41 Case C- 340/04, Carbotermo and Consorzio Alisei, [2006] ECR I-4137, para 36. 42 See Study on the implementation of Regulation (EC) n° 1370/2007 on public passenger transport services
by rail and by road, available at <http://ec.europa.eu/transport/rail/studies/rail_en.htm>.
16
competent public authority, in particular in the case of public-private partnerships, is not a
mandatory requirement for establishing control within the meaning of this paragraph, provided that
there is a dominant public influence and that control can be established on the basis of other
criteria" (the authors underlines). That provision does, thus, not require 100% ownership by the
competent public authority, which allows for private investment and in particular public-private
partnerships.
4. Taking past performance into account (Q 25)
a. Outline of the current situation regarding past performances
Under the current Directives, the choice of the winning bidder has to be carried out in two stages. During
the selection stage, the contracting authority assesses the capacity and suitability of the economic
operators. This is done on the basis of exclusion criteria and criteria of economic and financial standing,
professional and technical knowledge and ability. Considerations linked to the tenderer's ability to
perform the contract, such as his experience, are not allowed during the award stage.
A possible element to assess the tender's ability to perform the contract could be previous experiences
which the contracting authority might have had with the performance of bidders. This past experience
could provide useful pointers to the quality of the bidder and his future work. Indeed, in our experience,
contracting authorities do not want to be forced to enter into a contract with a bidder they have negative
experience with. It is to be examined whether the current Directives provide appropriate instruments to
take account of those experiences and whether this experience can be used in the selection of the
bidders.
One of the exclusion criteria mentioned under article 45(2) (d) of Directive 2004/18 and article 54(4)
Directive 2004/17 that could possibly provide guidance on this issue is the finding that the tenderer has
been guilty of "grave professional misconduct proven by any means which the contracting authorities
can demonstrate". The question rises what has to be understood under "grave professional
misconduct". Advocate General Gulmann appeared to consider than an act of grave professional
misconduct can include deliberate breaches of previous contracts43. Trepte however holds that "grave
professional misconduct" suggests more than mere dissatisfaction of the purchaser with the tenderer's
previous conduct44. According to the author, this provision precludes a purchaser from using his own
personal knowledge of the tenderer as a means of excluding him since this ground also requires proof,
even if it is the purchaser that identifies the type of proof required. In any event, this exclusion criterium
43 AG Gulmann's opinion of 30 June 1993 in C-71/92, Commission v Spain, cons. 95. 44 P. TREPTE, Public procurement in the EU. A practitioner's guide. Oxford University Press, Oxford, 2007, 343.
17
does not seem to be adequate enough to apply for passed satisfaction. Even if one defends the view of
the Advocate General, this only takes into account "deliberate" breaches of previous contracts.
Further, the means set out in article 48 of Directive 2004/18 by which the technical and/or professional
abilities of the economic operators are to be assessed, do not create room for taking into account the
contracting authorities' own experience with a tenderer. Past performance is a standard test for
technical competence and may be used to assess likely future performance, however, the Directives do
not seem to allow own previous experience.
The Directives should therefore explicitly allow previous experience with one or more several bidders to
be taken into account. The need therefore, is undisputed.
b. Recommendation
The way how the entity's own experience should be taken into account is, in our opinion, of major
importance to obtain value for money. Contracting authorities should have the right to sanction
economic operators that have been underperforming. As mentioned in the Commission's report, this
possibility would entail obvious risks of discrimination between bidders.
A suggestion could be that the contracting authority can take into account past experience only if it has
objectified in a transparent and non-discriminatory way how it would measure performance. Contracting
authorities could, for example, produce satisfaction reports once a contract has executed. That report
could then be used in the context of a new tender procedure to motivate that a tenderer is not selected.
Another option would be that tenderers would only be allowed to participate in the award procedure if
they have minimum score on a scorecard produced by a contracting authority on the basis of passed
experience. Tenderers without such a scorecard would have to provide evidence of their experience by
the normal means as mentioned under the Directives.
It is, however, our opinion, only passed bad experiences with tenderers might be invoked. Previous
positive experiences would lead to a market closure and would have larger anti-competitive effects as
this would have a cumulative effect for tenderers that already worked with the contracting authority
before.
5. Modifications during the execution of the contract (Q 39 and 40)
a. Importance of modifications
As mentioned on p. 24 of the Commission's Green Paper, a complex issue relating to contract execution
is the problem of subsequent developments which have an impact on the contract itself or its execution.
But not only post-tender modifications raise the issue concerned here, also modification to the contract
specifications during a phased negotiated procedure where certain bidders, after an assessment of their
18
bids, had not been retained for the subsequent phases (e.g. invited to submit their BAFO). In both
circumstances (post and prior to the award) the question raises whether and in what circumstances
changes to the contract or the contract specifications give rise in effect to an new contract award and
hence to an obligation to undertake a new competitive tendering procedure.45
The importance of the question is not to be underestimated. The question of acceptability of planned
amendments has been frequently raised by clients. An example of the award of large, complex PFI- or
PPP-projects might enlighten this great importance. This type of projects is in principle awarded after a
negotiated procedure or a competitive dialogue. In most, if not all, cases this type of projects is typified
by the following characteristics:
o (prior to the award) contracting authorities are not in a position to entirely determine
the specifications of the project. In the course of the negotiations, the contracting
authority will gradually develop an advanced understanding of the project and the
technicalities thereof;
o (prior to the award) the contract specifications will be shaped during negotiations in
function of the financiability of the project, value for money, market practice, etc.;
o (prior and post the award) a great number of stakeholders has to be taken into
account. A project might need amendments under the pressure of the public opinion
(e.g. when a public infrastructure project is under fire), advisory bodies (e.g. in order to
obtain the necessary permits), technical developments, lenders…, ;
o (prior and post the award) the award procedure take mostly several years, the contract
is often of a long time duration46;
o (prior and post the award) bidders usually consist of several enterprises invoking the
help of several subcontractors.
The risk taken by the authority (and consequently the private contractor) by implementing amendments
is considerable. The conclusion that the authority had to undertake a new competitive tendering
procedure could undermine the execution of a large project or could invoke the nullity of an ongoing
tender procedure.
b. The current stance on the basis of the case-law of the Court
45 Brown, A., "When do changes to an existing public contract amount to the award of a new contract for the
purposes of the EU procurement rules? Guidance at last in Case C-454/06", P.P.L.R. 2008, 6, NA253. 46 See also the Commission's decision of 2 October 2002, n-264/2002, United Kingdom London Underground
Public Private Partnership that: "such modifications cannot be considered to automatically constitute a form
of discrimination even where they are introduced after appointment of the preferred bidders. This is all the
more important in connection with particularly complex tenders which are negotiated over a long period of
time (3 years in the case of PPP)."
19
According to the case-law of the Court of Justice, amendments to the provisions of a public contract
during its currency require a new contract award procedure if they are "materially" different in character
from the original contract47. This is notably the case where amendments introduce conditions which
would have allowed the participation or the success of other tenderers, if they considerably extend the
scope of the contract or if they change the economic balance of the contract. We agree with the stance
of the contracting authorities that, for certain types of amendments, the case-law does not appear to be
sufficiently clear in terms of establishing whether a new tender procedure is needed.
In the Pressetext-case, the Court stated three instances in which an amendment of a public contract
may be regarded as material:
- When the amendment introduces conditions which had they been part of the initial award
procedure, would have allowed for the admission of tenderers others than those initially admitted or
would have allowed for the acceptance of a tender other than the one initially accepted;48
- When it extends the scope of the contract considerably to encompass services not initially
covered;49 or
- When it changes the economic balance of the contract in favour of the contractor in a manner which
was not provided for in the terms of the initial contract50.
The ECJ further stated that "as a rule, the substitution of a new contractual partner for the one to which
the contracting authority had initially awarded the contract must be regarded as constituting a change to
one of the essential terms of the public contract in question, unless that substitution was provided for in
the terms of the initial contract, such as, by way of example, provision for sub-contracting."51
Nevertheless, the Court had investigated the transfer of the contract in detail and judged that "some of
the specific characteristics of the transfer of the activity in question permit the conclusion that such
amendments, made in a situation such as that at issue in the main proceedings, do not constitute a
change to an essential term of the contract." This would not be the case when an arrangement is, in
essence, an internal reorganisation of the contractual partner, which does not modify in any
fundamental manner the terms of the initial contract. Still, the Court held that if the shares of the
subsidiary to whom the contract had been transferred to, were transferred to a third party during the
currency of the contract, this would no longer be an internal reorganisation of the initial contractual
partner, but an actual change of contractual partner, which would, as a rule, be an amendment to an
essential term of the contract. Such an occurrence would be liable to constitute a new award of contract.
47 Case C-454/06, pressetext Nachrichtenagentur, [2008] ECR, I-4401. 48 Ibid. para 35. 49 Ibid. para 36. 50 Ibid. para 37. 51 Ibid. para 40.
20
The Court further elaborated on the Pressetext judgement in Wall AG.52 The city of Frankfurt awarded a
contract for exploitation and maintenance of public lavatories to a contractor, FES. One of the reasons
why Frankfurt decided to award the contract to FES, was the fact that FES could rely on the services of
subcontractor Wall, who held several patents relating to the method of functioning of such lavatories.
During the execution of the contract, however, FES did not call upon Wall, but decided to make use of
the services of a different subcontractor.53 The Court judged that a change of subcontractor, even if the
contract foresees in such possibility, in "exceptional circumstances" can constitute a substantial
modification that necessitates organisation of a new tender procedure. The change of a subcontractor
constitutes such substantial modification "where the use of one subcontractor rather than another was,
in view of the particular characteristics of the services concerned, a decisive factor in concluding the
contract (…)."54 The Court concludes with the observation that in the case at issue, it was indeed likely
that the contract was awarded to the contractor due to the specific identity of the original
subcontractor.55
c. Substantial modifications - recommendation
We believe that the issue of substantial modifications of a contract while it is still in force or after a first
selection of bidders should be dealt with in the Directives. The regulation thereof should focus on two
objectives: (i) fair competition but with (ii) a reasonable degree of flexibility.
Our opinion can thus be summarised as follows:
First, changes or amendments prior to the award of a contract often take place in the course of
negotiations. This procedure should and does essentially allow room for manoeuvre56 and should thus
allow that modifications to the contract are made. This is also the Court's view: "Second, it cannot be
ruled out that, in a negotiated procedure which, by its nature, may extend over a long period of time, the
parties might take account of technological developments which take place while the negotiations are
under way, without that being regarded each time as a renegotiation of the essential terms of the
contract justifying the application of new rules of law." It belongs to the nature of a phased negotiated
procedure that competing bidders take the risk of being excluded prior to amendments which, if they
would have been made before their exclusion, could have led to the submission of their bid with more
economic advantageous conditions. Nevertheless, this seems to be a purely commercial risk on the
condition that the bids of the competing tenderers relied on the same set of contract and technical
52 Case C-91/08, Wall [2010] 53 Paras 8 - 27 of the judgement. 54 Para 39 of the judgement. 55 Para 40 of the judgement. 56 We refer to what is mentioned under 2; See also Case C-337/98, Commission v. France [2000] para 51;
Commission's decision of 2 October 2002, n°. n-264/2002, United Kingdom London Underground Public
Private Partnership;
21
specifications at the moment they were compared to each other and evaluated. A mitigating factor in the
context of an award procedure is the concept of a "Waiting Room"57. This makes it possible for the
contracting entity to maintain a form of competitive pressure on the preferred bidder. The authority could
argue that the modified bid of the preferred bidder is unacceptable and would constitute a material
change of the contract. It would then be justified to re-open competition and allow the bidders in the
waiting room to make a bid.
Second, changes or amendments both post or prior to the award of a contract often take place under
pressure of external circumstances. The latter is true especially in the case of large and complex
projects. In practice, at the moment of the publication of the contract notice, the definition, the scope and
the modalities of a project are never final. Politics, the public but also regulatory bodies and advisory
instances often require that the contracting entity modifies the project's conditions. These modification
justify the submission of a modified offer (prior to the award) or contract changes (post award).
Advocate-General Bot, in its opinion in the Wall case, seems to realise that the doctrine of substantial
modifications should not be applied too strictly: "As I have pointed out, the holder of the concession
takes on the responsibility of organising the service as well as the consequent operating risks. Given the
complex and long-term nature of a service concession, a concession-holder must have sufficient leeway
to adapt to market conditions and to any changes in the economic, technical or legal context of the
concession. The parties must therefore be particularly flexible and act in a spirit of cooperation, in view
of the unforeseeable constraints and performance setbacks which are inevitable in the case of long-term
investments. Accordingly, there are many reasons to renegotiate contracts. Nevertheless, some of them
may constitute abuse if they substantially alter the structure of the contract, making the transparency of
the procedure and the prior call for competition illusory."58 The award procedure and the contractual
terms of complex, large and lengthy projects therefore require a certain degree of flexibility to make
amendments. Depending on the timing of the amendments, this might mean that some -and post award
of the project even all- bidders might not have had a chance to bid on the project as it will be finally
awarded (prior to the award) or executed (post award). It is however, to our opinion, not desirable to
sanction the winning bidder for changes to the contract made under purely external pressure, i.e.
changes that have not been a made on the sole demand of the contracting authority or bidder
themselves. There is a great possibility that those changes would have also been necessary if a
different bidder had been chosen as preferred bidder or contractor of the contracting entity. Although
every contracting entity should strive to allow bidders to make a bid on a project that is nearly final,
lessons learned teach us that this is not possible in the majority of the cases. Amendments made under
external pressure are therefore to be approached differently than amendments that could proof the will
57 The concept of the "waiting room" means that certain bidders are excluded from the next stage in the
award procedure but remain standby in the event that contract negotiations with the preferred bidder(s) do
not lead to contract close. 58 Opinion of AG Bot, CoJ, C-91/08, [2010] ECR, 0, para 48.
22
of the contracting authority to avoid competition. This is also the opinion of Arrowsmith: "In deciding on
the extent and nature of permitted changes, the reasons for those changes also appear relevant."59
Third, the consequence of amendments that constitute material changes to the contract, i.e. to conduct
a new award procedure, is not always proportionate to the benefits for the contracting authority
concerned. Indeed, it might be the case that changes are to be classified as material changes and
therefore should be awarded by conducting a new award procedure. However, in the context of a large
project, it might not be logical, fair and proportionate to compel the authority to start a new expensive
and long award procedure. Moreover, it is not cost-efficient to ask for new biddings to several bidders. A
new procedure would thus entail high transaction costs and might not be fair in certain circumstances,
especially when changes are made due to external circumstances. This consideration has also been
raised by the Commission.
That said, we would suggest that the Directives clarify the circumstances in which modifications to the
contract can be made.An exception must be foreseen for changes that, given the factual circumstances,
do not reflect a will of the contracting authority and/or contractor to rule out any form of competition. The
latter would be for example the case in the event a contract would be prolonged beyond the contractual
provisions foreseen or broadened beyond the initial scope, without any acceptable justification.
Changes in that respect would also bring in line the Court's case law, with the Commission's view in its
decision in the London Underground case, in which it decided: "In this respect the Commission notes
that the objective of the contracts (outsourcing responsibility for the provision of track, stations and
trains while retaining operating responsibility in-house) is original. Their duration (30 years) is long.
These factors unavoidably make the contracts complex and their value difficult to assess. The
transaction and information gathering costs involved in preparing the contracts are high, for both clients
and contractors. The gap between the selection of the preferred bidders and the conclusion of the
contracts has been lengthy. These factors inevitably mean that unanticipated issues have emerged
since the selection of preferred bidders and have had to be addressed under the non-competitive
conditions then prevailing."
d. Changes concerning the contractor - recommendation
The question arises to what extent the change of a contractor indeed necessitates the reorganisation of
a tender procedure. For example, an undertaking entrusted with the execution of a contract legally
awarded through a tender procedure, might become subject to a takeover. The mere transfer of all or
part of its shares and a consequent change of control within this undertaking can change the identity of
the undertaking and thus could be conceived as the change of a contractor, if one strictly applies the
Pressetext- and Wall-jurisprudence. This could necessitate the organisation of a new tender procedure,
while the undertaking remains entirely the same undertaking, and all relevant know-how or specific
59 S. Arrowsmith, The law of public and utilities procurement, 2005, Sweet&Maxwell, 8.68;
23
technical production methods still lie within this undertaking. The fact that the controlling shareholder is
succeeded by a new shareholder might lead the contracting entity to decide that such change of identity
could not be approved within the framework of the original contract. If the Court, as in Wall with regard
to a subcontractor, would judge that the identity was crucial in awarding the contract to the undertaking,
it might deem it essential that a new procedure be organised in order to preserve free competition.
While the preservation of a legal framework relating to modifications of awarded contracts is a
necessary consequence of the preservation of competition, this should not a equally lead to a formalistic
set of rules in the context of changes concerning the contractor and that does not take into account the
economic reality that contractors face, i.e. reorganisation of business, take-overs, mergers, etc.
Therefore, we do not agree with the general consideration of the Court in the Pressetext-case that the
substitution of a new contractual partner for the one to which the contracting authority had initially
awarded the contract quasi-automatically constitutes a substantial modification provide that the 1) the
essential provisions (duration, price, …) of the contract remain the same and 2) the authority has
accepted the new contractor. The mere change of the contractor should not be subject to the "material
modification" - test. .
Only when the contract is substantially altered with a major risk of anti-competitive behaviour or a risk
for the continuation of the qualitative execution of the contract for the contracting authority, should one
reconsider the need to reorganise a tender procedure. In most cases this is a purely contractual issue
and does not seem to need regulatory intervention in the Directives. Further, if the terms of the contract
itself do not change (e.g. the price, the timing, etc.), it is hard to see where the anti-competitive effect of
such a change lies.
Two options could be envisaged:
Either, the counterparty of the contracting authority is changed. This can only be done with the consent
of the contracting authority itself on contractual grounds. The change of the contractual counterparty can
only be done by mutual agreement. If the contracting entity refuses to give its consent, because it fears
that the quality of the execution of the contract is endangered or the financial standing of the
counterparty appears to be weaker, no change of the contractor can take place. The contracting
authority could also ask for guarantees from the entity assigning the contract. This should offer sufficient
protection.
Or the counterparty of the contracting authority is not changed, but only the shareholders,
asubcontractor, etc. have been changed. In those cases, one cannot but recognize that the terms of the
contract itself have not been changed. From a legal point of view, the contractual counterparty remains
the contractor that has been chosen as a result from an award procedure. The bid he has initially made
must still be respected. If not, contractual sanctions and penalties shall apply. From a practical point of
view, these type of changes may indeed influence the execution of the contract. This could have been
the case in the Wall-case, where the subcontractor had proven to be essential to the contracting
24
authority for the award of the contract. It seems however, that again, if the contracting authority fears a
significant impact on the contractual balance or sound execution of the contract in the event of such
changes, it should foresee contractual protection to prevent such from happening. As an example, one
might think of the obligation for the contractor to ask for permission to change a (nominated)
subcontractor. A contractualisation of this issue seems to be the appropriate manner to tackle this type
of changes. The suggestion that the contracting authorities should be able to terminate the contract in
the event of major changes relating to the contractor, could not be applauded. If, indeed, it seems that
the execution of the contract is no longer done according to the contract specification and the original
bid of the contractor, the authority should invoke a breach of the contract in order to finally terminate the
contract. Indirect changes of the contractor should not lead to the automatic possibility to terminate the
contract just because of that indirect change in itself.
In the light of such observations, it seems desirable to introduce a more flexible and functional approach
towards change of contractors is followed. While such regulation should indeed counter any attempt to
circumvent public procurement rules or competition principles, the actual aim of preservation of these
rules must be served. A general principle relating to modifications of contracts should not create fear
over the legality of the slightest of changes who want to respond to day-to-day business affairs. This
surely cannot serve the aim of public procurement rules, which is to ensure that only economic
considerations triumph.
Any substantial modifications regulation should thus keep in mind that a too formalistic approach should
not contradict the very essence of public procurement regulation. When regulation is installed in order
for economic considerations to triumph, it should as a logical consequence be deemed necessary to
allow for a more flexible regulation of the change of contractors.
25
Conclusion
Our contribution has focussed on a limited number of specific issues raised in the Green paper on the
modernisation of the EU public procurement policy.
We have first discussed the definition of the scope ratione personae of Directive 2004/17. We have shown
that the category of public undertaking is now void compared to the category of contracting authority
regarding the quasi total overlap between both concepts, as interpreted by the Court of Justice. The keeping
of separate formal categories where public undertakings will almost always also qualify as contracting
authorities may in some cases create a wrong belief that an entity would only be subject to Directive
2004/17 for its utilities activities and not to Directive 2004/18 for its other activities. Further, the distinction
between public and private undertakings does not adequately reflect the purposes of Directive 2004/17 to
allow competition to flow freely in the relevant sectors. Therefore, we advocated for a suppression of the
definition of a scope ratione personae and a more functional and economic reorientation of the scope of
Directive 2004/17, based on the level of competition on the relevant markets.
Secondly, we advocated for a generalisation of the negotiated procedure with prior notice, also for contracts
covered by Directive 2004/18. We have shown that the limitation of the use of that procedure for contracts
falling under Directive 2004/18 were not justified regarding the principle of equal treatment. On the one
hand, the Court of Justice and the Commission have regulated that procedure. On the other hand,
complexity and scale of certain contracts under Directive 2004/18 call for an enhanced flexibility.
Third, our contribution highlighted the need to establish a clear set of rules articulated around the concept of
"control", guiding the authorities in the assessment of in-house arrangements which are exempt from the
application of public procurement rules. This would allow reconciling the various positions defended by the
Court of Justice in way that better serve the purpose of applying public procurement rules to contracts
between separate entities.
Our fourth recommendation related to the taking into account of previous performances of the operator by
the contracting authority. Indeed, current provisions preclude contracting authorities from using their own
personal knowledge of the tenderer as a means of excluding them. However, if the contracting authority sets
out objective, non-discriminatory and transparent criteria to measure performance, such measures should
be available and possible to use for subsequent tenders with a view to obtaining value for money.
Our fifth recommendations is related to the modification of contracts. The exercise to be made whether a
modification constitutes an actual material change and thus leads to the award of a new contract is or has
become perilous. We would therefore like to put emphasis on a flexible approach towards changes in case
of external events invoking those changes, large, lenghty and costly procedures, etc. A strict application of
the case-law seems to be restrictive and does not take into account those factual circumstances.
26
Further, we do not defend the point of view that the Directives should contain rules in order to clarify whether
the change of a contractor constitutes a material change. It should be left as a purely contractual matter
between the contracting entity and the contractor. The anti-competitive effects of such a behaviour is too
remote to justify legislative intervention.
We are confident that enhanced clarity and flexibility is the fulcrum around which modernisation of public
procurement rules should occur.
This report has been authored by
Bob Martens (Bob.Martens@dlapiper.com)
Barteld Schutyser (Barteld.Schutyser@dlapiper.com)
Carole Maczkovics (Carole.Maczkovics@dlapiper.com)
Tom Villé (Tom.Ville@dlapiper.com)
Stijn Goovaerts (Stijn.Goovaerts@dlapiper.com)
Jackie Joossen (Jackie.Joossen@dlapiper.com)
The report has been written under the sole responsibility of its authors.
DLA Piper UK LLP (Brussels'office)
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