REUTERS | Lisi Niesner

Public procurement case digest (August – September 2013)

Practical Law Public Sector reports:

The most notable case in the last two months concerned a subsidy provided to a private company for a construction project, which the ECJ held to be in breach of the procurement rules. The ECJ also provided more clarity on how to determine whether an organisation that carries out a public service constitutes a contracting authority.

Please feel free to submit a comment below or contact us at: if you have any views on the cases covered or think that we have missed a case that should be brought to the attention of public procurement practitioners.

 Private construction projects that are more than 50% funded by a contracting authority are subject to the procurement rules (Case C-115/12- French Republic v European Commission, judgment of 26 September 2013)

This case concerned public aid to a company renovating and extending a holiday village in Martinique. The project benefited from approximately 38% funding in the form of tax breaks from the French government and 25% funding from the European Regional Development Fund (ERDP). The Commission annulled the ERDP funding for breach of the Article 2 of Directive 93/37. The General Court dismissed France’s appeal, finding that the tax breaks amounted to a subsidy that brought the overall project within the procurement rules.

On appeal, the ECJ agreed with the General Court that the concept of a “subsidy” for these purposes includes tax reduction measures. Further, the General Court had correctly linked the directness of the subsidy to the financing of the project and to the investments made for that purpose. The ECJ also held that the General Court had not erred in finding that the works contract at issue in this case fell within the scope of Article 2 of Directive 93/37.

ECJ rules that German medical council is not a contracting authority (Case C-526/11 IVD GmbH & Co. KG v Ärztekammer Westfalen-Lippe, judgment of 12 September)

This case concerned a challenge by an aggrieved bidder against a decision to procure certain services by a German medical council. The medical council satisfied the first two limbs of the test for contracting authorities as it was established for the specific purpose of meeting needs in the general interest, not having and industrial and commercial character, and it had legal personality. However, the question to be determined was whether it was financed by the state. The medical council was financed by contributions from its members. The level of contribution was determined by the medical council and approved by the German state.

As national law did not provide for the amount of the contribution, nor the way the medical council spent its budget, there was insufficient dependency between the German state and the medical council to render it a contracting authority. This case can be contrasted with previous cases relating to broadcasting companies and statutory sickness insurance funds, which were found to be contracting authorities as their financing by compulsory member contributions was determine by national law.

Advocate General suggests that utility company is not subject to utilities directive which had not been implemented into national law at the relevant time (Case C-425/12 Portgás Sociedade de Pordução e Distribuição de Gás SA v Ministério do Ambiente, do Ordenamento do Território e do Desenvolvimento Regional, Advocate General’s Opinion of 18 September 2013 (not yet available in English).

This case concerned a contract entered into by Portgas, a company active in the production and distribution of natural gas. The old Utilities Directive (93/98), which would have applied to the contract award procedures, had not been implemented into Portuguese law at the time Portgas entered into the relevant contract. Directives have direct effect on member states and bodies providing a public services under the contract of the state where such bodies have special powers conferred on them. The Advocate General stated that it was for national law to determine whether Portgas fulfilled this test but, in his view, it did not and therefore the Directive would not apply to it until it had been implemented.

European Ombudsman finds no maladministration by Parliament in handling of procurement complaint (European Ombudsman Decision 1157/2012/AN)

This case concerned a complaint by an employee of the European Parliament alleging that the Parliament had purchased telephones without conducting a competitive tendering exercise, and that the telephones in question were inappropriate.

The purchase of the telephones was made under a framework agreement with a “telecom integrator” that had been appointed to manage and procure telecommunications equipment and services. Products are chosen from among the manufacturers in the telecom integrator’s tender.  The Parliament placed a contract under the framework agreement that allowed for a pilot phase in which two different models were tested. The Parliament could then decide whether to purchase the remaining phones or specify an alternative phone.

As the framework agreement had been validly procured, and allowed for the purchase of equipment in this way, the Ombudsman found no maladministration.

European Ombudsman finds European Commission entitled to reject bid for IT services as non-compliant  (Decision of the European Ombudsman closing his inquiry into complaint 1639/2010/ANA against the European Commission)

This case concerned a challenge to the European Commission’s tender for IT and communications equipment.  The Ombudsman found that the:

  • Tender documents were sufficiently clear and, if it had any questions, the complainant could have sought clarification.
  • Complainant’s tender did not provide any reasons with its offer as to how it exceeded the technical specifications. The Commission was therefore entitled to assess it as non-compliant.
  • Commission was entitled not to consider the complainant’s bid price, as it had already assessed the bid as non-compliant.

European Ombudsman criticises Commission for handling of complaint (Decision of the European Ombudsman closing his inquiry into complaint 47/2012/AN against the European Commission)

In this decision, the European Ombudsman found that the European Commission’s handling of a complaint constituted maladministration due to the excessive delay and failure to keep the complainant informed. The Commission’s investigation took six and a half years before it concluded there had been no breach of EU law. According to its own 2002 communication, the Commission should either issue a formal notice, or close a case within one year.

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