With a little help from my friends: A flexible and competition-oriented interpretation of rules on reliance on third party capabilities in public procurement (Opinion in C-94/12)

Albert%20Sanchez%20Graells_mDr Albert Sanchez Graells

[This is an extended version of the comment previously posted on Albert’s personal blog http://howtocrackanut.blogspot.co.uk/2013/03/with-little-help-from-my-friends-ag.html].

According to the current rules on public procurement (mainly, Directive 2004/18) undertakings interested in tendering for a given contract may be subjected to certain personal, financial, professional and technical selection requirements. In order to ensure maximum possible participation in a given tender, the rules in articles 47(2) and 48(3) of Directive 2004/18 expressly indicate that ‘An economic operator may, where appropriate and for a particular contract, rely on the capacities of other entities, regardless of the legal nature of the links which it has with them’ (emphasis added).

The Italian rules transposing Directive 2004/18 [ie Article 49(6) of Legislative Decree No 163/2006] provided that

‘[f]or works contracts, the tenderer may rely on the capacities of only one auxiliary undertaking for each qualification category. The invitation to tender may permit reliance on the capacity of more than one auxiliary undertaking on account of the value of the contract or the special nature of the services to be provided, subject to the prohibition on the shared use by the tenderer of the individual economic, financial, technical and organisation capacities […]’ (emphasis added).

A challenge was brought against the Italian provisions on the basis that the default rule that restricted the number of ‘auxiliary undertakings’ to one, save in exceptional circumstances, unduly limited the freedom of undertakings to rely on third parties when deciding to tender for public contracts. The competent Italian court submitted a reference for a preliminary ruling to the CJEU in order to clarify the compatibility of the domestic rules with those of the public procurement directive.

In his Opinion of 28 February 2013 in case C-94/12 Raggruppamento Temporaneo Imprese (‘RTI’), Advocate General Jääskinen has clearly indicated that the rules of arts 47(2) and 48(3) of Directive 2004/18 preclude national legislation which prohibits, except in special circumstances, reliance on the capacities of more than one auxiliary undertaking in order to fulfil the selection criteria concerning the economic and financial standing and/or technical and/or professional ability of an economic operator tendering for a contract as main contractor.

 After a literal interpretation of the rules in Directive 2004/18, which are all drafted in the plural (and, hence, at odds with the specific wording of the Italian provision), and trying to find additional support for his Opinion, AG Jääskinen engaged in more complex legal assessments. The approach followed by the AG must be welcome and, in my opinion, his teleological interpretation in view of the ‘ultimate’ objectives of the Directives deserves particular praise. As indicated in his Opinion,

 31. This argument [of incompatibility of the Italian rules with the EU instrument] is further supported by analysis of the objectives of Articles 47(2) and 48(3) of Directive 2004/18. According to the Court, one of the primary objectives of the public procurement rules of the European Union is to attain the widest possible opening-up to competition, and that it is the concern of European Union law to ensure the widest possible participation by tenderers in a call for tenders.

32. The objective of widest possible opening-up to competition is regarded not only from the interest in the free movement of goods and services, but also in regard to the interest of contracting authorities, who will thus have greater choice as to the most advantageous tender. Exclusion of tenderers based on the number of other entities participating in the execution of the contract such as allowing only one auxiliary undertaking per qualitative criteria category does not allow for a case by case evaluation, thus actually reducing the choices of the contracting authority and affecting effective competition.

33. Another objective of the public procurement rules is to open up the public procurement market for all economic operators, regardless of their size. The inclusion of small and medium-sized enterprises (SMEs) is especially to be encouraged as SMEs are considered to form the backbone of European Union economy. The chances of SMEs to participate in tendering procedures and to be awarded public works contracts are hindered, among other factors, by the size of the contracts. Because of this, the possibility for bidders to participate in groups relying on the capacities of auxiliary undertakings is particularly important in facilitating the access to markets of SMEs. (AG in C-94/12 at paras 31 to 33, emphasis added).

 These considerations rely on a conception of public procurement as a ‘competition-enhancing’ tool, which I personally very much favour [A Sanchez Graells, Public Procurement and the EU Competition Rules, Oxford: Hart Publishing, 2011]. In my view, public procurement rules are based on the paradigm of a pro-competitive system and, as one of their primary functions, pursue a competition goal that materialises in the competition principle that constitutes the legal basis for the development of a more competition-oriented set of public procurement rules (or, at least, for a more competition-oriented interpretation and construction of current procurement rules, both at the EU and Member States’ level). Indeed, following to the principle of competition, public procurement rules have to be interpreted and applied in a pro-competitive way, so that they do not hinder, limit, or distort competition; and contracting entities must refrain from implementing any procurement practices that prevent, restrict or distort competition.

 However, relevant commentators such as Professor Arrowsmith continue to oppose this generally pro-competitive approach, considering that ‘while competition law principles must be taken into account in interpretation, and some current provisions address this area, the directives do not in general regulate procedures to secure the award to the best tenderer or otherwise to replicate the private market. Rather, their concept of «competition» is limited […] removing discrimination and barriers to entry into the competitive market, and implementation of competitive procedures for transparency reasons. Suggestions of a broader function are based on a misunderstanding of the core rules’ [S Arrowsmith, “The Purpose of the EU Procurement Directives: Ends, Means and the Implications for National Regulatory Space for Commercial and Horizontal Procurement Policies”, in C. Barnard, M. Gehring and I. Solanke (eds.), Cambridge Yearbook of European Legal Studies (Hart Publishing, Oxford, 2011-2012), Vol. 14, pp.1-48].

 Therefore, the doctrinal debate that the RTI Opinion brings to the spotlight deserves some attention. Along these lines, I think that it will be interesting to see if the CJEU follows its prior hints towards a full and express recognition of the principle of competition [as indicated in its Judgment of 27 November 2001, in joined cases C-285/99 and C-286/99 – Lombardini and Mantovani, at para 76] and expressly adopts the reasoning of AG Jääskinen in the final Judgment in the RTI case. If so, the path towards the express and full recognition of the principle of competition in public procurement will continue to be paved, and there will be opportunities for further developments in what I see as the right direction.

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