As the public sector comes under increasing pressure to operate more efficiently, the ability for bodies to share services becomes ever more attractive. In certain circumstances this can be done without going through a procurement procedure, however with private sector suppliers not too keen on being kept out of the loop, public bodies need to be vigilant. A recent Advocate General's Opinion gives more guidance on the application of the 'co-operation with other public authorities' exception.
Contracts to provide IT and software services to the public sector can be very lucrative and are of great interest to private sector suppliers. This was illustrated recently when one German IT supplier took court action when a public body (in this case a university) directly contracted with another entity for IT services without following any procurement procedure. The litigation made its way to the European Court of Justice and Advocate-Genearl Mengozzi recently gave his Opinion. Although Opinions of Advocates General are not legally binding, subsequent judgments of the European Court will often reflect the Opinions.
The entity in this case to whom the contract was awarded was a non-profit making limited company, 100% owned by the German national and federal governments. Unsurprisingly, the Advocate General thought that the Teckal exception did not apply. The Teckal exception applies where the contracting authority (in this case, the university) exercises control over a distinct entity (in this case, the limited company) that is similar to the control which it exercises over its own departments and that distinct entity carries out the essential part of its activities with the contracting authority.
In the Advocate General's view, however, the "co-operation with other public authorities" exception was applicable. This exception applies to contracts between public entities with the aim of ensuring that a public task which all of them have to perform is carried out. The conditions for application of this exception include that the contracts are concluded exclusively by public entities, no private provider of services is placed in a position of advantage in relation to its competitors and implementation of that co-operation is governed solely by considerations and requirements relating to the pursuit of objectives in the public interest.
This Opinion adds to the growing set of judgments and opinions which have established and developed the "co-operation with other public authorities" exception to the procurement rules. The exception will in fact be explicitly recognised in the new EU procurement directives which will be adopted imminently.
As the public sector comes under increasing pressure to share services in order to operate more efficiently, the ever-increasing recognition and awareness of the exception is useful. Care must be taken, however, to ensure that reliance on the exception is appropriate and that all the conditions are met. Otherwise, aggrieved suppliers will have grounds to challenge the arrangements, leading to considerable costs and delays to important public sector projects.
Jill Fryer is an associate with Harper Macleod LLP and can be contacted at [email protected].