Shared Services are a topical issue given the pressure on public bodies to save money. There are lots of different legal structures that can be used in shared services provision, including in-house service provision and setting up a company which may provide services to its member companies. Public procurement is an essential consideration when setting up shared services arrangements as the fact that another public body is the proposed supplier does not automatically mean that the public procurement regime does not apply.
The two main ways in which shared services arrangements are structured, in order to be compliant with the public procurement regime, are to rely on the Teckal ("in-house") exemption or the principles of the Hamburg Waste case. For the Teckal exemption to apply, the purchasing body must exercise control over the proposed contractor which is similar to the control which it exercises over its own departments (the "control" criterion) and the proposed contractor must carry out the essential part of its activities with the purchasing public body (the "essential part" criterion). Control can be exercised jointly by several public bodies but there must be no private sector involvement in the proposed contractor and it should also be remembered that the proposed contractor will itself most likely be subject to the procurement regime.
For the Hamburg Waste principles to apply, services must be provided by one public body to another, at cost, on the basis of a "shared community of interest", utilising its own resources and not receiving any remuneration or other benefit from such service provision (except reimbursement of costs). In the recent Azienda case (case C-159/11, judgment of 19 December 2012), the Court of Justice considered whether arrangements between a local health authority and a university satisfied the Hamburg Waste principles and determined that they did not. Although on the face of it this appears to restrict the scope of the Hamburg Waste principles, the facts of the case are very particular. The local health authority had commissioned the university to assess the vulnerability of the local health authority's buildings to earthquakes. Assessing the vulnerability of the local authority's buildings is clearly not implementation of a public task which the university was required to perform so there was no "shared community of interest". The judgment may have been different if the university was also assessing the vulnerability of its own buildings at the same time and such assessment was considered integral to the public interest objectives of the two entities.
The particular circumstances of a proposed shared services arrangement will always be crucial in determining its treatment under the public procurement regime and apparently minor differences in structure and or contractual terms can be extremely important....