Green Paper on public-private partnerships and Community law on public contracts and concessions
Date: 2004-04-30
Institutions: European Commission
Subjects: private sector, public contract, public sector, restrictive trade practice, service concession

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 30.4.2004 
COM(2004) 327 final 

GREEN PAPER 

ON PUBLIC-PRIVATE PARTNERSHIPS AND COMMUNITY LAW ON PUBLIC 
CONTRACTS AND CONCESSIONS 

(presented by the Commission) 

EN 

   EN 

 
 
 
  
TABLE OF CONTENTS 

1. 

The development of the public-private partnership: findings and challenges............. 3 

1.1. 

The “public-private partnership” phenomenon............................................................ 3 

1.2 

The challenge for the Internal Market: to facilitate the development of PPPs under 
conditions of effective competition and legal clarity................................................... 5 

1.3. 

Specific aim and plan of this Green Paper ................................................................... 7 

2. 

Purely contractual PPPs and Community law on public contracts and concessions.. 8 

2.1. 

Phase of selection of the private partner ...................................................................... 9 

2.1.1.  Purely contractual partnership: act of award designated a a”public contract”............. 9 

2.1.2.  Purely contractual partnership: act of award designated as a “concession” .............. 11 

2.2. 

Specific questions relating to the selection of an economic operator in the framework 
of a private initiative PPP........................................................................................... 13 

2.3. 

The phase following the selection of the private partner ........................................... 14 

2.3.1.  The contractual framework of the project.................................................................. 14 

2.3.2.  Sub-contracting of certain tasks ................................................................................. 17 

3. 

3.1. 

Institutionalised PPPs and the community law on public contracts and concessions
.................................................................................................................................... 18 

Partnership involving the creation of an ad hoc entity held jointly by the public sector 
and the private sector. ................................................................................................ 18 

3.2. 

Control of a public entity by a private operator ......................................................... 20 

4. 

Final remarks ............................................................................................................. 22 

2 

 
 
  
 
1. 

DEVELOPMENT OF THE PUBLIC-PRIVATE PARTNERSHIP: FACTS AND CHALLENGES 

1.1. 

The “public-private partnership” phenomenon 

1. 

The  term  public-private  partnership  ("PPP")  is  not  defined  at  Community  level.  In 
general,  the  term  refers  to  forms  of  cooperation  between  public  authorities  and  the 
world  of  business  which  aim  to  ensure  the  funding,  construction,  renovation, 
management or maintenance of an infrastructure or the provision of a service. 

2. 

The following elements normally characterise PPPs: 

•  The relatively long duration of the relationship, involving cooperation between the 
public partner and the private partner on different aspects of a planned project.  

•  The method of funding the project, in part from the private sector, sometimes by 
means of complex arrangements between the various players. Nonetheless, public 
funds - in some cases rather substantial - may be added to the private funds. 

•  The important role of the economic operator, who participates at different stages 
in  the  project  (design,  completion,  implementation,  funding).  The  public  partner 
concentrates primarily on defining the objectives to be attained in terms of public 
interest, quality of services provided and pricing policy, and it takes responsibility 
for monitoring compliance with these objectives. 

•  The  distribution  of  risks  between  the  public  partner  and  the  private  partner,  to 
whom the risks  generally  borne by the public  sector are transferred.  However, a 
PPP  does  not  necessarily  mean  that  the  private  partner  assumes  all  the  risks,  or 
even the major share of the risks linked to the project. The precise distribution of 
risk is determined case by case, according to the respective ability of the parties 
concerned to assess, control and cope with this risk. 

During the last decade, the PPP phenomenon developed in many fields falling within 
the scope of the public sector. Various factors explain the increased recourse to PPPs. 
In  view  of  the  budget  constraints  confronting  Member  States,  it  meets  a  need  for 
private  funding  for  the  public  sector.  Another  explanation  is  the  desire  to  benefit 
more in public life from the know-how  and  working methods of the private sector. 
The development of the PPP is also part of the more general change in the role of the 
State  in  the  economy,  moving  from  a  role  of  direct  operator  to  one  of  organiser, 
regulator and controller. 

The public authorities of Member States often have recourse to PPP arrangements to 
undertake  infrastructure  projects,  in  particular  in  sectors  such  as  transport,  public 
health,  education  and  national  security.  At  European  level,  it  was  recognised  that 
recourse to PPPs could help to put in place trans-European transport networks, which 
had fallen very much behind schedule, mainly owing to a lack of funding.1 As part of 
the Initiative for Growth, the Council has approved a series of measures designed to 

See Communication from the Commission of 23 April 2003 "Developing the trans-European transport 
network:  innovative  funding  solutions  -  interoperability  of  electronic  toll  collection  systems",  COM 
(2003) 132, and the Report of the high-level group on the trans-European transport network of 27 June 
2003. 

3 

3. 

4. 

1 

 
 
  
 
                                                 
5. 

6. 

7. 

2 
3 

4 

5 

6 

increase investment in the infrastructure of the trans-European transport network and 
also in the fields of innovation, research and development, mainly through forms of 
PPPs.2 

However, while it is true that cooperation between the public and private sectors can 
offer micro-economic benefits permitting execution of a project that provides value 
for money and meets public interest objectives, recourse to PPPs cannot be presented 
as a miracle solution for a public sector facing budget constraints.3 Experience shows 
that, for each project, it is necessary to assess whether the partnership option offers 
real  value  added  compared  with  other  options,  such  as  the  conclusion  of  a  more 
traditional contract.4 

The  Commission  also  notes  with  interest  that  some  Member  States  and  accession 
countries  have  created  tools  to  coordinate  and  promote  PPPs,  aimed,  inter  alia,  at 
disseminating “good practice” for PPPs at national or at European level. These tools 
aim to make related expertise mutually available (for example the Tasks forces in the 
United Kingdom or in Italy) and thus advise users about the different forms of PPP 
and their stages, such as initial conception, how to choose a private partner, the best 
allocation  of  risks,  the  choice  of  contractual  clauses  or  even  the  integration  of 
community financing. 

Public  authorities  have  also  set  up  partnership  structures  with  the  private  sector  to 
administer public services, particularly at local level. Public services concerned with 
waste  management  or  water  or  energy  distribution  are  thus  increasingly  being 
entrusted to businesses, which can be public, private, or a combination thereof. The 
Green  Paper  on  services  of  general  interest  points  out  in  this  context  that  when  a 
public authority decides to award the management of a service to a third party, it is 
bound  to  comply  with  the  rules  on  public  contracts  and  concessions,  even  if  this 
service  is  deemed  to  be  of  general  interest.5  The  European  Parliament  also 
recognised  that  compliance  with  these  rules  can  be  “an  effective  instrument  for 
preventing  restrictions  of  competition,  while  at  the  same  time  permitting  State 
authorities  themselves  to  define  and  monitor  the  conditions  regarding  quality, 
availability and environmental requirements.”6 

Conclusions of the Presidency, Brussels European Council, 12 December 2003. 
Eurostat,  the  Statistical  Office  of  the  European  Communities,  has  on  the  11th  of  February  2004  (cf. 
press  release  STAT/04/18)  taken  a  decision  on  the  accounting  treatment  in  national  accounts  of 
contracts undertaken by government units in the framework of partnerships with non-government units. 
The decision specifies the impact on government deficit/surplus and debt. Eurostat recommends that the 
assets  involved  in  a  public-private  partnership  should  be  classified  as  non-government  assets,  and 
therefore recorded off balance sheet for government, if both of the following conditions are met: 1. the 
private  partner  bears  the  construction  risk,  and  2.  the  private  partner  bears  at  least  one  of  either 
availability or demand risk. 
See  Communication  from  the  Commission  to  the  Council  and  to  the  Parliament  “ Public  finances  in 
EMU 2003”, published in the European Economy No 3/2003 (COM (2003) 283 final). 
the 
for 
COM 
http://europa.eu.int/comm.secretariat_general/services_general_interest. 
Resolution of the European Parliament on the Green Paper on services of general interest, adopted on 
14 January 2004. 

the  Green  Paper  and 

the  contributions, 

final.  See, 

(2003)270 

text  of 

4 

 
 
  
 
                                                 
1.2 

8. 

The  challenge  for  the  Internal  Market:  to  facilitate  the  development  of  PPPs 
under conditions of effective competition and legal clarity. 

This  Green  Paper  discusses  the  phenomenon  of  PPPs  from  the  perspective  of 
Community  legislation  on  public  contracts  and  concessions.  Community  law  does 
not  lay  down  any  special  rules  covering  the  phenomenon  of  PPPs.  It  nonetheless 
remains  true  that  any  act,  whether  it  be  contractual  or  unilateral,  whereby  a  public 
entity  entrusts  the  provision  of  an  economic  activity  to  a  third  party  must  be 
examined  in  the  light  of  the  rules  and  principles  resulting  from  the  Treaty, 
particularly  as  regards  the  principles  of  freedom  of  establishment  and  freedom  to 
provide  services  (Articles  43  and  49  of  the  EC  Treaty)7,  which  encompass  in 
particular  the  principles  of  transparency,  equality  of  treatment,  proportionality  and 
mutual recognition.8 Moreover, detailed provisions apply in the cases covered by the 
Directives  relating  to  the  coordination  of  procedures  for  the  award  of  public 
contracts.9  10 These Directives are thus “essentially aimed at protecting the interests 
of  traders  established  in  a  Member  State  who  wish  to  offer  goods  or  services  to 
contracting authorities established in another Member State and, to that end, to avoid 
both the risk of preference being given to national tenderers or applicants whenever a 
contract  is  awarded  by  the  contracting  authorities  and  the  possibility  that  a  body 
governed  by  public  law  may  choose  to  be  guided  by  considerations  other  than 
economic  ones.”11  However,  the  application  of  the  detailed  provisions  of  these 
Directives is circumscribed by certain assumptions and mainly concerns the award of 
contracts. 

9. 

The  rules  applicable  to  the  selection  of  a  private  partner  derive  firstly  from  the 
definition  of  the  contractual  relationship  which  that  party  enters  into  with  a 

7 

8 

9 

10 

11 

The  rules  on  the  internal  market,  including  the  rules  and  principles  governing  public  contracts  and 
concessions,  apply  to  any  economic  activity,  i.e.  any  activity  which  consists  in  providing  services, 
goods, or carrying out works in a market, even if these services, goods or works are intended to provide 
a "public service', as defined by a Member State.  
See Interpretive Communication of the Commission on concessions in Community law, OJ C 121, 29 
April 2000. 
i.e.  Directives  92/50/EEC,  93/36/EEC,  93/37/EEC,  93/38/EEC,  relating  to  the  coordination  of 
procedures for the award respectively of public service contracts, public supply contracts, public works 
contracts,  and  contracts  in  the  water,  energy,  transport  and  telecommunications  sectors.  These 
Directives  will  be  replaced  by  Directive  2004/18/EC  of  the  European  Parliament  and  of  Council  of 
31 March  2004  relating  to  the  coordination  of  procedures  for  the  award  of  public  works,  supply  and 
services  contracts,  and  Directive  2004/17/EC  of  the  European  Parliament  and  of  the  Council  of  of 
31 March  2004  relating  to  the  coordination  of  procedures  for  the  award  of  contracts  in  the  water, 
energy, transport and postal services sectors, which will be published in the near future in the OJ. The 
[provisional] 
the  website 
new  Directives  may 
http://www.europarl.eu.int/code/concluded/default_2003_en.htm. 
Moreover,  in  certain  sectors,  and  particularly  the  transport  sector,  the  organisation  of  a  PPP  may  be 
subject to specific sectoral legislation. See Regulation (EEC) No 2408/92 of the Council on access of 
Community air carriers to intra-Community air routes, Council Regulation (EEC) No 3577/92 applying 
the  principle  of  freedom  to  provide  services  to  maritime  transport  within  Member  States,  Council 
Regulation (EEC) No 1191/69 on action by Member States concerning the obligations inherent in the 
concept of a public service in transport by rail, road and inland waterway, as amended by Regulation 
(EEC) No 1893/91, and the amended proposal for a Regulation of the European Parliament and of the 
Council  on  action by  Member  States  concerning public  service requirements  and  the  award of public 
service contracts in passenger transport by rail, road and inland waterway (COM(2002) 107 final). 
Joint  cases  C-285/99  and  C-286/99,  Impresa  Lombardini  v.  ANAS,  Judgment  of  27  November  2001, 
paragraph 36 and, to that effect case C-380/98, University of Cambridge, ECR I-8035 and case C-19/00, 
SIAC construction, ECR I-7725. 

consulted 

version 

the 

be 

of 

at 

5 

 
 
  
 
                                                 
10. 

11. 

12. 

13. 

contracting  body.12  Under  Community  secondary  legislation,  any  contract  for 
pecuniary interest concluded in writing between a contracting body and an operator, 
which  have  as  their  object  the  execution  of  works,  the  execution  of  a  work  or 
provision of a service, is designated as a “public works or public services contract”. 
The  concept  of  “concession”  is  defined  as  a  contract  of  the  same  type  as  a  public 
contract except for the fact that the consideration for the works to be carried out or 
the  services  to  be  provided  consists  either  solely  in  the  right  to  exploit  the 
construction or service, or in this right together with payment. 

The assessment of the elements in these definitions must, in the view of the Court, be 
made  in  such  a  way  as  to  ensure  that  the  Directive  is  not  deprived  of  practical 
effect.13  For  example,  the  formalism  attached  to  the  concept  of  contract  under 
national  law  cannot  be  advanced  to  deprive  the  Directives  of  their  practical  effect. 
Similarly, the pecuniary nature of the contract in question does not necessarily imply 
the  direct  payment  of  a  price  by  the  public  partner,  but may  derive  from  any  other 
form of economic consideration received by the private partner. 

The contracts denoted as public works or public services contracts, defined as having 
priority,14  are  subject  to  the  detailed  provisions  of  Community  Directives.  The 
concessions  of  so-called  “non-priority”  works  and  public  services  contracts  are 
governed  only  by  some  sparse  provisions  of  secondary  legislation.  Lastly,  some 
projects, and in particular services concessions, fall completely outside the scope of 
secondary legislation. The same is true of any assignment awarded in the form of a 
unilateral act. 

The legislative framework governing the choice of private partner has thus been the 
subject of Community coordination at several levels and degrees of intensity, with a 
wide  variety  of  approaches  persisting  at  national  level,  even  though  any  project 
involving  the  award  of  tasks  to  a  third  party  is  governed  by  a  minimum  base  of 
principles deriving from Articles 43 to 49 of the EC Treaty. 

The Commission has already taken initiatives under public procurement law to deal 
with the PPP phenomenon.  In  2000  it published  an Interpretive Communication  on 
concessions  and  Community  public  procurement  law,15  in  which  it  defined,  on  the 
basis  of  the  rules  and  principles  derived  from  the  Treaty  and  applicable  secondary 
legislation,  the  outlines  of  the  concept  of  concession  in  Community  law  and  the 
obligations  incumbent  on  the  public  authorities  when  selecting  the  economic 
operators to whom the concessions are granted. In addition, the new Directives of the 
European  Parliament  and  the  Council  designed  to  modernise  and  simplify  the 
Community  legislative  framework,  establish  an  innovative  award  procedure, 
designed  principally  to  meet  the  specific  features  of  the  award  of  “particularly 

12 

13 

14 
15 

In  PPPs,  the  public  partners  are  primarily  national,  regional  or  local  authorities.  They  may  also  be 
public law bodies created to fulfil general interest tasks under State control, or certain network system 
operators. To simplify matters, the term “contracting body” will be used in this document to designate 
all of these agencies. Thus this term covers “contracting authorities” within the meaning of Directives 
92/50/EEC,  93/36/EEC,  93/37/EEC  and  2004/18/EC  and  the  contracting  entities  of  the  type  “public 
authorities” and “public undertakings” within the meaning of Directives 93/38/EEC and 2004/17/EC. 
Judgment of the Court of 12 July 2001, Case C-399/98, Scala, ECR I-5409, see in particular points 53 
to 55. 
i.e. those listed in Annex IA of Directive 92/50/EEC or Annex XVIA of Directive 93/38/EEC. 
Interpretative Communication on concessions under Community law, OJ C 121, 29 April 2000. 

6 

 
 
  
 
                                                 
14. 

15. 

16. 

complex  contracts”,  and  thereby  certain  forms  of  PPPs.  This  new  procedure, 
designated  as  “competitive  dialogue”,  allows  the  public  authorities  to  hold 
discussions with the applicant businesses in order to identify the solutions best suited 
to their needs. 

The  fact  remains  that  many  representatives  of  interested  groups  consider  that  the 
Community rules applicable to the choice of businesses called on to cooperate with a 
public  authority  under  of  a  PPP,  and  their  impact  on  the  contractual  relationships 
governing  the  execution  of  the  partnership,  are  insufficiently  clear  and  lack 
homogeneity  between  the  different  Member  States.  Such  a  situation  can  create  a 
degree  of  uncertainty  for  Community  players  that  is  likely  to  represent  a  genuine 
obstacle to the creation or success of PPPs, to the detriment of the financing of major 
infrastructure projects and the development of quality public services. 

The  European  Parliament  invited  the  Commission  to  examine  the  possibility  of 
adopting a draft Directive aimed at introducing homogeneous rules for the sector of 
concessions  and  other  forms  of  PPPs.16  The  Economic  and  Social  Committee  also 
considered that such a legislative initiative was called for.17 

In  the  context  of  its  Strategy  for  the  internal  market  2003-2006,18  the  Commission 
announced  that  it  would  publish  a  Green  Paper  on  PPPs  and  Community  law  on 
public procurement and concessions, in order to launch a debate on the best way to 
ensure that PPPs can develop in a context of effective competition and legal clarity. 
The  publication  of  a  Green  Paper  is  also  one  of  the  actions  planned  under  the 
European Initiative for Growth.19 Lastly, it responds to certain requests made in the 
course of the public consultation on the Green Paper on services of general interest.20 

1.3. 

Specific aim and plan of this Green Paper 

17. 

The aim of this Green Paper is to launch a debate on the application of Community 
law  on  public  contracts  and  concessions  to  the  PPP  phenomenon.  Once  underway 
such  a  debate  will  concentrate  on  the  rules  that  should  be  applied  when  taking  a 
decision to entrust a mission or task to a third party. This takes place downstream of 
the  economic  and  organisational  choice  made  by  a  local  or  national  authority,  and 
can in no way be perceived as attempting to make a value judgement regarding the 
decision  to  externalise  the  management  of  public  services  or  not;  this  decision 
remains  squarely  within  the  competence  of  public  authorities.  Indeed,  Community 
law on public contracts and concessions is neutral as regards the choice exercised by 
Member States to provide a public service themselves or to entrust it to a third party. 

18. 

Put  more  clearly,  this  Green  Paper  aims  to  show  the  extent  to  which  Community 
rules  apply  to  the  phase  of  selection  of  the  private  partner  and  to  the  subsequent 

16 

17 

18 
19 

20 

Opinion  of  the  European  Parliament  (first  reading)  on  the  proposal  of  the  Commission,  COM  (2000) 
275, 10.05.2002. 
Opinion, ESC, OJ C 14, 16.1.2001, rapporteur Mr Levaux, point 4.1.3 and Opinion, ESC, OJ C 193, 
10.07.2001, rapporteur Mr Bo Green, point 3.5. 
Strategy for the internal market, Priorities 2003-2006, COM (2003) 238 final. 
Communication  from  the  Commission  "A  European  initiative  for  growth:  Investing  in  networks  and 
knowledge for growth and jobs", COM (2003) 690 final, 11 November 2003. This report was approved 
by the Brussels European Council on 12 December 2003. 
See Report on the results of the consultation on the Green Paper on general interest services. See above, 
footnote 5. 

7 

 
 
  
 
                                                 
phase,  with  a  view  to  identifying  any  uncertainties,  and  to  analyse  the  extent  to 
which  the  Community  framework  is  suited  to  the  imperatives  and  specific 
characteristics  of  PPPs.  Avenues  of  consideration  for  possible  Community 
intervention  will  be  outlined.  Since  the  aim  of  this  Green  Paper  is  to  launch  a 
consultation, no option for Community intervention has been decided on in advance. 
Indeed,  a  wide  variety  of  instruments  are  available  to  make  PPPs  more  open  to 
competition  in  a  transparent  legal  environment,  i.e.  legislative  instruments, 
interpretative  communications,  actions  to  improve  the  coordination  of  national 
practice or the exchange of good practice between Member States. 

19. 

Thus, while this Paper focuses on issues covered by the law on public contracts and 
concessions, it should be noted that the Commission has already adopted measures, 
in certain fields, designed to remove barriers to PPPs. Thus, there has already been 
clarification of the rules on the treatment in the national accounts of contracts entered 
into  by  public  entities  under  partnerships  with  private  entities.21  Note  also  that  the 
adoption of the statute for a European company will facilitate trans-European PPPs.22 

20. 

As  part  of  the  analysis  of  this  Green  Paper,  it  is  proposed  to  make  a  distinction 
between: 

•  PPPs of a purely contractual nature, in which the partnership between the public 

and the private sector is based solely on contractual links, and 

•  PPPs of an institutional nature, involving cooperation between the public and the 

private sector within a distinct entity. 

This  distinction  is  based  on  the  observation  that  the  diversity  of  PPP  practices 
encountered in the Member States can be traced to two major models. Each of these 
raise  specific  questions  regarding  the  application  of  Community  law  on  public 
contracts and concessions, and merit separate study, as undertaken in the following 
chapters.23 

PURELY  CONTRACTUAL PPPS  AND COMMUNITY  LAW  ON  PUBLIC  CONTRACTS  AND 
CONCESSIONS 

The term “purely contractual PPP” refers to a partnership based solely on contractual 
links between the different players. It covers a variety of set-ups where one or more 
tasks of a greater or lesser magnitude are assigned to the private partner, and which 
can  include  the  design,  funding,  execution,  renovation  or  exploitation  of  a  work  or 
service. 

See above, footnote 3. 
Council Regulation (EC) No 2157/2001, 8 October 2001. 
The  distinction  thus  made  does  not  take  account  of  the  legal  interpretations  made  under  national  law 
and in no way prejudges the interpretation in Community law of these types of set-ups or contracts. The 
sole purpose of the analysis which follows is to make a distinction between the set-ups generally termed 
PPPs,  in  order  to  decide,  in  a  second  phase,  which  rules  of  Community  law  on  public  contracts  and 
concessions should apply to them. 

8 

2. 

21. 

21 
22 
23 

 
 
  
 
                                                 
22. 

23. 

In  this  context,  one  of  the  best-known  models,  often  referred  to  as  the  “concessive 
model”,24  is  characterised  by  the  direct  link  that  exists  between  the  private  partner 
and the final user: the private partner provides a service to the public, “in place of”, 
though  under  the  control  of,  the  public  partner.  Another  feature  is  the  method  of 
remuneration for the joint contractor, which consists of charges levied on the users of 
the service, if necessary supplemented by subsidies from the public authorities. 

In other types of set-up, the private partner is called on to carry out and administer an 
infrastructure for the public authority (for example, a school, a hospital, a penitential 
centre, a transport infrastructure). The most typical example of this model is the PFI 
set-up.25  In  this  model,  the  remuneration  for  the  private  partner  does  not  take  the 
form  of  charges  paid  by  the  users  of  the  works  or  of  the  service,  but  of  regular 
payments  by  the  public  partner.  These  payments  may  be  fixed,  but  may  also  be 
calculated in a variable manner, on the basis, for example, of the availability of the 
works or the related services, or even the level of use of the works. 26 

1.  What types of purely contractual PPP set-ups do you know of? Are these set-ups subject 

to specific supervision (legislative or other) in your country? 

2.1. 

Phase of selection of the private partner 

2.1.1.  Purely contractual partnership: act of award designated as a “public contract” 

24. 

The  arrangements  applicable  to  the  award  of  public  works  contracts  or  public 
services  contracts  defined  as  having  priority27  result  from  the  provisions  of  the 
Community Directives laying down detailed rules particularly relating to advertising 
and participation.  When the public authority is a contracting authority acting under 
the “classical” Directives,28 it must normally have recourse to the open or restricted 
procedure  to  choose  its  private  partner.  By  way  of  exception,  and  under  certain 
conditions,  recourse  to  the  negotiated  procedure  is  sometimes  possible.  In  this 
context, the Commission wishes to point out that the derogation under Article 7(2) of 
Directive  93/37/EEC,  which  provides  for  recourse  to  negotiated  procedure  in  the 
case of a contract when “the nature of the works or the risks attaching thereto do not 
permit prior overall pricing”, is of limited scope. This derogation is to cover solely 
the exceptional situations in which there is uncertainty a priori regarding the nature 
or  scope  of  the  work  to  be  carried  out,  but  is  not  to  cover  situations  in  which  the 
uncertainties result from other causes, such as the difficulty of prior pricing owing to 
the complexity of the legal and financial package put in place.29 

24 

25 

26 

27 
28 
29 

It should be noted that the interpretation given by national law or by the parties has no impact on the 
legal interpretation of these contracts for the purposes of the application of a Community law on public 
contracts and concessions. 
The term PFI refers to “Private Finance Initiative", a programme of the British Government permitting 
the modernisation of the public infrastructure through recourse to private funding. The same model is 
used in other Member States, sometimes with major variants. For example, the PFI model inspired the 
development of the “Betreibermodell” in Germany. 
See  the  case  of  “virtual  tolls”,  used  in  the  context  of  motorway  projects,  particularly  in  the  United 
Kingdom, Portugal, Spain and Finland. 
i.e. those listed in Annex IA of Directive 92/50/EEC and Annex XVIA of Directive 93/38/EEC. 
i.e. Directives 93/37/EEC, 92/50/EEC and 2004/18/EC. 
For  example,  it  may  apply  when  the  works  are  to  be  carried  out  in  a  geologically  unstable  or 
archaeological terrain and for this reason the extent of the necessary work is not known when launching 

9 

 
 
  
 
                                                 
25. 

26. 

27. 

Since the adoption of Directive 2004/18/EC, a new procedure known as “competitive 
dialogue”  may  apply  when  awarding  particularly  complex  contracts.30  The 
competitive  dialogue  procedure  is  launched  in  cases  where  the  contracting  body  is 
objectively unable to define the technical means that would best satisfy its needs and 
objectives,  or  in  cases  where  it  is  objectively  unable  to  define  the  legal  and/or 
financial form of a project. This new procedure will allow the contracting bodies to 
open a dialogue with the candidates for the purpose of identifying solutions capable 
of meeting these needs. At the end of this dialogue, the candidates will be invited to 
submit  their  final  tender  on  the  basis  of  the  solution  or  solutions  identified  in  the 
course  of  the  dialogue.  These  tenders  must  contain  all  the  elements  required  and 
necessary for the performance of the project. The contracting authorities must assess 
the  tenders  on  the  basis  of  the  pre-stated  award  criteria.  The  tenderer  who  has 
submitted  the  most  economically  advantageous  tender  may  be  asked  to  clarify 
aspects of it or confirm commitments featuring therein, provided this will  not have 
the  effect  of  altering  fundamental  elements  in  the  tender  or  invitation  to  tender,  of 
falsifying competition or of leading to discrimination.  

The  competitive  dialogue  procedure  should  provide  the  necessary  flexibility  in  the 
discussions with the candidates on all aspects of the contract during the set-up phase, 
while ensuring that these discussions are conducted in compliance with the principles 
of transparency and equality of treatment, and do not endanger the rights which the 
Treaty confers on economic operators. It is underpinned by the belief that structured 
selection methods should be protected in all circumstances, as these contribute to the 
objectivity and integrity of the procedure leading to the selection of an operator. This 
in  turn  guarantees  the  sound  use  of  public  funds,  reduces  the  risk  of  practices  that 
lack transparency and strengthens the legal certainty necessary for such projects. 

In  addition,  note  that  the  new  Directives  emphasise  the  benefit  to  the  contracting 
bodies of formulating the technical specifications in terms of either performance or 
functional requirements. New provisions will thus give the contracting bodies more 
scope to take account of innovative solutions during the award phase, irrespective of 
the procedure adopted.31 

2.  In the Commission’s view, in the context of a purely contractual PPP, the transposition 
of  the  competitive  dialogue  procedure  into  national  law  will  provide  interested  parties 
with a procedure which is particularly well adapted to the award of contracts designated 
as  public  contracts,  while  at  the  same  time  safeguarding  the  fundamental  rights  of 
economic operators. Do you share this point of view? If not, why not? 

3.  In the case of such contracts, do you consider that there are other points, apart from those 
concerning the selection of the tendering procedure, which may pose a problem in terms 
of Community law on public contracts? If so, what are these? Please elaborate. 

the tender procedure. A similar derogation is provided for in Article 11(2) of Directive 92/50, and in 
Article 30(1)(b) of Directive 2004/18/EC. 
Article 29 of Directive 2004/18/EC. 
Article 23 of Directive 2004/18/EC and Article 34 of Directive 2004/17/EC. 

30 
31 

10 

 
 
  
 
                                                                                                                                                         
2.1.2.  Purely contractual partnership: act of award designated as a “concession” 

28. 

29. 

30. 

31. 

There  are  few  provisions  of  secondary  legislation  which  coordinate  the  procedures 
for the award of contracts designated as concession contracts in Community law. In 
the  case  of  works  concessions,  there  are  only  certain  advertising  obligations, 
intended  to  ensure  prior  competition  by  interested  operators,  and  an  obligation 
regarding  the  minimum  time-limit  for  the  receipt  of  applications.32  The  contracting 
bodies are then free to decide how to select the private partner, although in so doing 
they  must  nonetheless  guarantee  full  compliance  with  the  principles  and  rules 
resulting from the Treaty. 

For their part, the rules governing the award  of  services concessions  apply  only  by 
reference  to  the  principles  resulting  from  Articles  43  and  49  of  the  Treaty,  in 
particular  the  principles  of  transparency,  equality  of  treatment,  proportionality  and 
mutual recognition.33 In its Telaustria Judgment, the Court stated in this respect that 
“[the]  obligation  of  transparency  which  is  imposed  on  the  contracting  authority 
consists in ensuring, for the benefit of any potential tenderer, a degree of advertising 
sufficient  to  enable  the  services  market  to  be  opened  up  to  competition  and  the 
impartiality of procurement procedures to be reviewed”.34 

The Commission considers that the rules resulting from the relevant provisions of the 
Treaty can be summed up in the following obligations: fixing of the rules applicable 
to the selection of the private partner, adequate advertising of the intention to award a 
concession  and  of  the  rules  governing  the  selection  in  order  to  be  able  to  monitor 
impartiality throughout the procedure, introduction of genuine competition between 
operators with a potential interest and/or who can guarantee completion of the tasks 
in question, compliance with the principle of equality of treatment of all participants 
throughout  the  procedure,  selection  on  the  basis  of  objective,  non-discriminatory 
criteria. 

Thus the Community law applicable to the award of concessions is derived primarily 
from general obligations which involve no coordination of the legislation of Member 
States. In addition, and although the Member States are free to do so, very few have 
opted  to  adopt  national  laws  to  lay  down  general  and  detailed  rules  governing  the 
award of works or services concessions.35 Thus, the rules applicable to the selection 
of  a  concessionaire  by  a  contracting  body  are,  for  the  most  part,  drawn  up  on  a 
case-by-case basis.  

32. 

This  situation  may  present  problems  for  Community  operators.  The  lack  of 
coordination  of  national  legislation  could  in  fact  be  an  obstacle  to  the  genuine 

32 
33 

34 

35 

See Article 3(1) of Directive 93/37/EEC, and Articles 56 to 59 of Directive 2004/18/EC. 
Although the Commission had proposed that services concessions be included in Directive 92/50/EEC, 
in  the  course  of  the  legislative  process  the  Council  decided  to  exclude  them  from  the  scope  of  that 
Directive. 
Case  C-324/98.  See  also  ruling  of  30  May  2002,  Case  C-358/00,  Deutsche  Bibliothek,  ECR.  I-4685. 
These principles are also applicable to other State acts entrusting an economic service to a third party, 
as for example the contracts excluded from the scope of the Directives owing to the fact that they have a 
value  below  the  threshold  values  laid  down  in  the  secondary  legislation  (Order  of  the  Court  of  3 
December 2001, Case C-59/00, Vestergaard, ECR. I-9505), or so-called non-priority services. 
Spain (law of 23 May 2003 on works concessions), Italy (Merloni law of 1994, as amended) and France 
(Sapin law of 1993) have nonetheless adopted such legislation. 

11 

 
 
  
 
                                                 
33. 

34. 

35. 

36. 

opening up of such projects in the Community, particularly when they are organised 
at  transnational  level.  The  legal  uncertainty  linked  to  the  absence  of  clear  and 
coordinated rules might in addition lead to an increase in the costs of organising such 
projects. 

Moreover,  some  persons  have  claimed  that  the  objectives  of  the  internal  market 
might not be achieved in certain situations, owing to a lack of effective competition 
on  the  market.  In  this  context  the  Commission  wishes  to  recall  that  the  “public 
contracts” Directives aim not only to ensure transparency of procedures and equality 
of  treatment  for  economic  operators,  but  also  require  that  a  minimum  number  of 
candidates  be  invited  to  participate  in  the  procedures,  whether  these  be  open, 
restricted, negotiated, or competitive dialogue procedures.36 There is a need to assess 
whether  the  effective  application  of  these  provisions  is  sufficient,  or  whether  other 
measures are needed to facilitate the emergence of a more competitive environment. 

The  Commission  has  also  observed,  in  the  context  of  infringement  procedures 
already  investigated,  that  it  is  not  always  easy  to  determine  from  the  outset  if  the 
contract  which  is  the  subject-matter  of  the  procedure  is  a  public  contract  or  a 
concession.  Indeed,  in  the  case  of  contracts  designated  as  concessions  when  the 
procedure  is  launched,  the  distribution  of  risks  and  benefits  may  be  the  subject  of 
negotiations 
these 
the  procedure.  It  may  occur 
negotiations,  the  contract  in  question  must  in  the  end  by  redefined  as  a  “public 
contract”,  resulting  often  in  a  calling  into  question  of  the  legality  of  the  award 
procedure selected by the contracting body. According to the views expressed by the 
parties  concerned,  this  situation  creates  a  degree  of  legal  uncertainty  which  is  very 
damaging to the development of such projects. 

that,  following 

throughout 

In this context, the Commission could envisage proposing legislative action designed 
to  coordinate  the  procedures  for  the  award  of  concessions  in  the  European  Union, 
such  new  legislation  being  added  to  the  existing  texts  on  the  award  of  public 
contracts.  In  that  case  it  would  be  necessary  to  lay  down  the  detailed  provisions 
applicable to the award of concessions. 

Also,  there  are  grounds  to  examine  if  there  are  objective  reasons  for  making  the 
award  of  concessions  and  the  award  of  other  contractual  PPPs  subject  to  different 
sets of provisions. In this context, it should be noted that it is the criterion of the right 
of exploitation and its corollary, the transfer of the risks inherent in the exploitation, 
which  distinguish  public  contracts  from  concessions.  If  it  is  confirmed  that  legal 
uncertainty, linked to the difficulty of identifying a priori the distribution of the risks 
of exploitation between the partners, arises frequently when awarding certain purely 
contractual  PPPs,  the  Commission  might  consider  making  the  award  of  all 
contractual  PPPs,  whether  designated  as  public  contracts  or  concessions,  subject  to 
identical award rules. 

36 

Article  19  of  Directive  93/36/EEC,  Article  22  of  Directive  93/37/EEC,  Article  27  of  Directive 
92/50/EEC  and  Article  31  of  Directive  93/38/EEC.  See  also  Article  44  of  Directive  2004/18/EC  and 
Article 54 of Directive 2004/17/EC. 

12 

 
 
  
 
                                                 
4.  Have  you  already  organised,  participated  in,  or  wished  to  organise  or  participate  in,  a 
procedure for the award of a concession within the Union? What was your experience of 
this? 

5.  Do  you  consider  that  the  current  Community  legal  framework  is  sufficiently  detailed  to 
allow the concrete and effective participation of non-national companies or groups in the 
procedures for the award of concessions? In your opinion is genuine competition normally 
guaranteed in this framework? 

6.  In your view, is a Community legislative initiative, designed to regulate the procedure for 

the award of concessions, desirable? 

7.  More  generally,  if  you  consider  that  the  Commission  needs  to  propose  new  legislative 
action, in your opinion are there objective grounds for such an act to cover all contractual 
PPPs,  irrespective  of  whether  these  are  designated  as  contracts  or  concessions,  to  make 
them subject to identical award arrangements? 

2.2. 

37. 

38. 

39. 

40. 

Specific  questions  relating  to  the  selection  of  an  economic  operator  in  the 
framework of a private initiative PPP 

Certain practices where the private sector has the opportunity to take the initiative in 
a  PPP  project  have  recently  been  developed  in  some  Member  States.37  In 
arrangements of this type, the economic operators formulate a detailed proposal for a 
project, generally in the field of construction and infrastructure management, in some 
cases at the invitation of the public authority. 

Such  practices  make  it  possible  to  sound  out  at  an  early  stage  the  willingness  of 
economic  operators  to  invest  in  certain  projects.  They  also  encourage  them  to 
develop  or  apply  innovate  technical  solutions,  suited  to  the  particular  needs  of  the 
contracting body. 

The fact that a public utility project originates in a private initiative does not change 
the  nature  of  the  contracts  concluded  between  the  contracting  bodies  and  the 
economic  operators.  Where  these  contracts  concern  services  covered  by  secondary 
legislation and are concluded for pecuniary interest, they must be designated either as 
a contract or a concession and adhere to the resulting award rules. 

It is therefore necessary to ensure that the procedures applied in this context do not 
end  up  depriving  European  economic  operators  of  the  rights  to  which  the 
Community  legislation  on  public  contracts  and  concessions  entitles  them.  In 
particular,  and  at  the  very  least,  the  Commission  is  of  the  view  that  all  European 
operators  must  be  guaranteed  access  to  such  projects,  primarily  through  adequate 
advertising  of  the  invitation  to  formulate  a  project.  Subsequently,  if  the  public 
authority wishes to implement a given project, it must organise a call for competition 
addressed to all the economic operators who are potentially interested in developing 
the  selected  project,  providing  full  guarantees  of  the  impartiality  of  the  selection 
process.  

37 

In  certain  Member  States,  the  private  initiative  is  subject  to  specific  supervision  (see  in  Italy  the 
Merloni law of 18 November 1998 and, in Spain, the regulation on local authority services of 1955 and 
the law 13/2003 on works concessions of 23 May 2003). In other Member States, the private initiative 
PPP is also emerging in practice. 

13 

 
 
  
 
                                                 
41. 

To make the system attractive, the Member States have sometimes  tried  to provide 
certain  incentives  for  first  movers.  The  option  of  compensating  the  initiator  of  the 
project – for example, paying him for his initiative outside of the subsequent call for 
competition  procedure  –  has  been  used.  The  possibility  was  also  envisaged  of 
awarding the first mover certain advantages in the context of the call for competition 
designed to develop the selected project. Such solutions merit close consideration, to 
ensure that these competitive advantages awarded to the project mover do not breach 
the equality of treatment of candidates. 

8.  In your experience, are non-national operators guaranteed access to private initiative PPP 
schemes?  In  particular,  when  contracting  authorities  issue  an  invitation  to  present  an 
initiative,  is  there  adequate  advertising  to  inform  all  the  interested  operators?  Is  the 
selection procedure organised to implement the selected project genuinely competitive? 
9.  In  your  view,  what  would  be  the  best  formula  to  ensure  the  development  of  private 
initiative PPPs in the European Union, while guaranteeing compliance with the principles 
of transparency, non-discrimination and equality of treatment? 

2.3. 

The phase following the selection of the private partner 

42. 

43. 

Community  secondary  legislation  on  public  contracts  and  concessions  mainly 
concerns  the  phase  of  award  of  a  contract.  Secondary  legislation  does  not  cover 
comprehensively the phase following selection of the private partner. However, and 
the principle of equality of treatment and the principle of transparency resulting from 
the Treaty generally rule out any intervention of the public partner after selection of a 
private  partner,  in  so  far  as  any  such  intervention  might  call  into  question  the 
principle of equality of treatment between economic operators.38 

The  often  complex  nature  of  the  arrangements  in  question,  the  time  which  may 
elapse between the selection of the private partner and the signing of the contract, the 
relatively  long  duration  of  the  projects  and,  lastly,  the  frequent  recourse  to  sub-
contracting  mechanisms,  sometimes  complicate  the  application  of  these  rules  and 
principles. Two aspects are covered below: the contractual framework of the PPP and 
sub-contracting. 

2.3.1.  The contractual framework of the project 

44. 

The  contractual  provisions  governing  the  phase  of  implementation  of  the  PPPs  are 
primarily those of national law. However, contractual clauses must also comply with 
the  relevant  Community  rules,  and  in  particular  the  principles  of  equality  of 
treatment and transparency. This implies in particular that the descriptive documents 
must  formulate  clearly  the  conditions  and  terms  for  performance  of  the  contract  so 
that the various candidates for the partnership can interpret them in the same manner 
and take them into account when preparing their tenders. In addition, these terms and 
conditions of performance must not have any direct or indirect discriminatory impact 
or serve as an unjustifiable barrier to the freedom to provide services or freedom of 
establishment.39 

38 

39 

See Case C-87/94, Commission v. Belgique (Bus Wallons), Judgment of 25 April 1994, point 54. See 
also Case C-243/89, Commission v. Danemark (Bridge on the Storebaelt), Judgment of 22 June 1992. 
Case  C-19/00,  SIAC  Constructions,  Judgment  of  18  October  2001,  points  41-45;  Case  C-31/87, 
Gebroeders Beentjes v. Pays-Bas, Judgment of 20 September 1988, points 29-37. See also Article 26 of 
Directive 2000/18/EC and Article 38 of Directive 2000/17/EC. 

14 

 
 
  
 
                                                 
45. 

46. 

47. 

48. 

49. 

40 
41 
42 

The  success  of  a  PPP  depends  to  a  large  extent  on  a  comprehensive  contractual 
framework for the project, and on the optimum definition of the elements which will 
govern its implementation. In this context, the appropriate assessment and optimum 
distribution of the risks between the public and the private sectors, according to their 
respective ability to assume these risks, is crucial. Also important are mechanisms to 
evaluate the performance of the titular holder of the PPP on a regular basis. In this 
context, the principle of transparency requires that the elements employed to assess 
and  distribute  the  risks,  and  to  evaluate  the  performance,  be  communicated  in  the 
descriptive documents, so that tenderers can take them into account when preparing 
their tenders. 

In  addition,  the  period  during  which  the  private  partner  will  undertake  the 
performance of a work or a service must be fixed in terms of the need to guarantee 
the  economic  and  financial  stability  of  a  project.  In  particular,  the  duration  of  the 
partner  relationship  must  be  set  so  that  it  does  not  limit  open  competition  beyond 
what  is  required  to  ensure  that  the  investment  is  paid  off  and  there  is  a  reasonable 
return on invested capital. An excessive duration is likely to be censured on the basis 
of  the  principles  governing  the  internal  market40  or  the  provisions  of  the  Treaty 
governing  competition.41  Similarly,  the  principle  of  transparency  requires  that  the 
elements  employed  to  establish  the  duration  be  communicated  in  the  descriptive 
documents so that tenderers can take them into account when preparing their tenders. 

Since  they  concern  a  service  spread  out  in  time,  PPP  relationships  must  be  able  to 
evolve  in  line  with  changes  in  the  macro-economic  or  technological  environment, 
and in line with general interest requirements. In general, Community public contract 
law does not reject such a possibility, as long as this is done in compliance with the 
principles of equality of treatment and transparency. Thus, the descriptive documents 
transmitted to the tenderers or candidates during the selection procedure may provide 
for  automatic  adjustment  clauses,  such  as  price-indexing  clauses,  or  stipulate  the 
circumstances under which the rates charged may be revised. They can also stipulate 
review  clauses  on  condition  that  these  identify  precisely  the  circumstances  and 
conditions  under  which  adjustments  could  be  made  to  the  contractual  relationship. 
However,  such  clauses  must  always  be  sufficiently  clear  to  allow  the  economic 
operators to interpret them in the same manner during the partner-selection phase. 

In  certain  projects,  the  financial  institutions  reserve  the  right  to  replace  the  project 
manager, or to appoint a new manager, if the financial flows generated by the project 
fall below a certain level. The implementation of such clauses, which fall within the 
category of so-called "step-in" clauses, may result in changing the private partner of 
the contracting body without a call for competition. Consequently, to guarantee the 
compatibility  of  such  projects  with  Community  law  on  public  contracts  and 
concessions, special attention must be paid to this aspect.  

In general, changes made in the course of the execution of a PPP, if not covered in 
the contract documents, usually have the effect of calling into question the principle 
of equality of treatment of economic operators.42 Such unregulated modifications are 

See Interpretative Communication on concessions, in particular point 3.1.3. 
Articles 81, 82 and 86 (2) of the EC Treaty. 
See Case C-337/98, Commission v. France, Judgment of 5 October 2000, points 44 ff. Community law 
also rejects any changes made during the phase of drawing up the contract, after the final selection of 
the successful tenderer. In this respect the new provisions governing competitive dialogue stipulate that 

15 

 
 
  
 
                                                 
therefore acceptable only if they are made necessary by an unforeseen circumstance, 
or if they are justified on grounds of public policy, public security or public health.43 
In addition, any substantial modification relating to the actual subject-matter of  the 
contract must be considered equivalent to the conclusion of a new contract, requiring 
a new competition.44 

50. 

Lastly, it should be pointed out that secondary legislation lays down the exceptional 
situations in which additional works or services not included in the project initially 
considered  or  in  the  initial  contract  may  be  awarded  directly,  without  a  call  for 
competition.45  The  interpretation  of  these  exceptions  must  be  restrictive.  For 
example,  they  do  not  refer  to  the  extension  of  the  period  of  an  already  existing 
motorway concession, in order to cover the cost of works to complete a new section. 
Thus, the practice of combining "profitable" and "non-profitable" activities awarded 
to  a  single  concessionaire  must  not  lead  to  a  situation  where  a  new  activity  is 
awarded to an existing concessionaire without competition. 

10. In contractual PPPs, what is your experience of the phase which follows the selection of 

the private partner? 

11. Are  you  aware of cases in  which the  conditions of execution –  including the  clauses on 
adjustments over time – may have had a discriminatory effect or may have represented an 
unjustified barrier to the freedom to provide services or freedom of establishment? If so, 
can you describe the type of problems encountered? 

12. Are  you  aware  of  any  practices  or  mechanisms  for  evaluating  tenders  which  have  a 

discriminatory effect? 

13. Do  you  share  the  Commission’s  view  that  certain  “step-in”  type  arrangements  may 
present  a  problem  in  terms  of  transparency  and  equality  of  treatment.?  Do  you  know  of 
other “standard clauses” which are likely to present similar problems? 

14. Do  you  think  there  is  a  need  to  clarify  certain  aspects  of  the  contractual  framework  of 

PPPs at Community level? If so, which aspects should be clarified? 

43 
44 

45 

the successful tenderer may only "clarify aspects of the tender or confirm commitments contained in the 
tender, provided this does not have the effect of modifying substantial aspects of the tender or of the 
call for tender or does not risk distorting competition or causing discrimination". 
Article 46 of the Treaty. 
Case  C-337/98,  Commission  v.  France,  Judgment  of  5  October  2000,  points  44  ff.  The  Interpretative 
Communication  on  concessions  states  in  this  context  that  the  extension  of  an  existing  concession 
beyond the period originally laid down must be considered equivalent to granting a new concession to 
the same concessionaire. 
See Article 11 (3)(e) of Directive 92/50/EEC, Article 7 (3)(d) of Directive 93/37/EEC and Article 20 
(2)(f)  of  Directive  93/38/EEC.  The  new  Directive  2004/18/EC  provides  for  a  similar  exception  for 
works concessions, see Article 61. 

16 

 
 
  
 
                                                                                                                                                         
2.3.2. 

Sub-contracting of certain tasks 

51. 

52. 

It  is  the  Commission’s  experience  that  the  application  of  subcontracting  rules 
sometimes gives rise to uncertainties or queries in the context of PPP arrangements. 
Certain parties have claimed, for example, that the contractual relations between the 
project company, which becomes the holder of the contract or the concession, and its 
shareholders, raise a certain number of legal issues. In this respect, the Commission 
wishes to point out that when the project company is itself in the role of contracting 
body,  it  must  conclude  its  contracts  or  concession  contracts  in  the  context  of  a 
competition, whether or not these are concluded with its own shareholders. The only 
case where this does not apply is when the services entrusted by a project company 
to  its  shareholders  have  already  been  the  subject  of  a  competition  by  the  public 
partner  prior  to  the  formation  of  the  company  undertaking  the  project.46  However, 
when  this  company  is  not  in  the  role  of  contracting  body,  it  is  in  principle  free  to 
conclude contracts with third parties, whether these be its own shareholders or not. 
By way of exception, when the project company is a “works concessionaire”, certain 
publicity requirements apply to the award of works contracts exceeding a threshold 
of  EUR 5 million,  with  the  exception  of  contracts  concluded  with  businesses  that 
have formed a group in order to win the concession, or their affiliated companies.47 

In principle, private partners are free to subcontract part or all of a public contract or 
a  concession.  However,  it  should  be  pointed  out  that,  in  the  case  of  the  award  of 
public contracts, tenderers may be asked to indicate in their tenders the share of the 
contract  which  they  intend  to  subcontract  to  third  parties.48  In  the  case  of  public 
works  concessions  where  the  value  exceeds  EUR 5 million,  the  contracting  body 
may require the concessionaire to award contracts representing a  minimum of  30% 
of the total value of the work for which the concession contract is to be awarded to 
third parties.49 

15. In  the  context  of  PPPs,  are  you  aware  of  specific  problems  encountered  in  relation  to 

subcontracting? Please explain. 

16. In your opinion does the phenomenon of contractual PPPs, involving the transfer of a set 
of  tasks  to  a  single  private  partner,  justify  more  detailed  rules  and/or  a  wider  field 
application in the case of the phenomenon of subcontracting? 

17. In  general,  do  you  consider  that  there  is  a  need  for  a  supplementary  initiative  at 

Community level to clarify or adjust the rules on subcontracting? 

46 

47 

48 

49 

Article  13  of  Directive  93/38/EEC  provides  for  a  derogation  when  the  sub-contracting  contracts  for 
services  are  awarded  by  a  network  systems  operator  acting  as  contracting  entity  to  an  affiliated 
enterprise.  Article  23  of  Directive  2004/17/EC  extends  this  exception  to  sub-contracting  contracts 
covering supplies or works. 
Article 3 (4) of Directive 93/37/EEC and Articles 63 to 65 of Directive 2004/18/EC. In the latter articles 
the above-mentioned threshold is fixed at EUR 6 242 000. 
Article 17 of Directive 93/36/EEC, Article 20 of Directive 93/37/EEC, Article 25 of Directive 92/50, 
Article 27 of Directive 93/38. See also Article 25 of Directive 2004/18/EC and Article 37 of Directive 
2004/17/EC. 
Article 3(2) of Directive 93/37/EEC. See also Article 60 of Directive 2004/18/EC. 

17 

 
 
  
 
                                                 
3. 

53. 

54. 

55. 

56. 

3.1. 

57. 

INSTITUTIONALISED PPPS AND THE COMMUNITY LAW ON PUBLIC CONTRACTS AND 
CONCESSIONS 

Within  the  meaning  of  this  Green  Paper,  institutionalised  PPPs  involve  the 
establishment of an entity held jointly by the public partner and the private partner.50 
The joint entity thus has the task of ensuring the delivery of a work or service for the 
benefit  of  the  public.  In  the  Member  States,  public  authorities  sometimes  have 
recourse  to  such  structures,  in  particular  for  to  administer  public  services  at  local 
level (for example, for water supply services or waste collection services). 

Direct cooperation between the public partner and the private partner in a forum with 
a  legal  personality  allows  the  public  partner,  through  its  presence  in  the  body  of 
shareholders  and  in  the  decision-making  bodies  of  the  joint  entity,  to  retain  a 
relatively high degree of control over the development of the projects, which it can 
adapt  over  time  in  the  light  of  circumstances.  It  also  allows  the  public  partner  to 
develop its own experience of running the service in question, while having recourse 
to the support of a private partner. 

An institutionalised PPP can be put in place, either by creating an entity held jointly 
by  the  public  sector  and  the  private  sector  (3.1),  or  by  the  private  sector  taking 
control of an existing public undertaking (3.2). 

The discussion below focuses solely on issues concerning the law on public contracts 
and concessions applicable to institutionalised PPPs. For a more general discussion 
of the impact of this law when setting up and executing such PPPs, please refer to the 
preceding chapters. 

Partnership involving the creation of an ad hoc entity held jointly by the public 
sector and the private sector.51 

The  law  on  public  contracts  and  concessions  does  not  of  itself  apply  to  the 
transaction  creating  a  mixed-capital  entity.  However,  when  such  a  transaction  is 
accompanied  by  the  award  of  tasks  through  an  act  which  can  be  designated  as  a 
public contract, or even a concession, it is important that there be compliance with 
the rules and principles arising from this law (the general principles of the Treaty or, 
in certain cases, the provisions of the Directives).52 

58. 

The selection of a private partner called on to undertake such tasks while functioning 
as part of a mixed entity can therefore not be based exclusively on the quality of its 
capital  contribution  or  its  experience,  but  should  also  take  account  of  the 

50 

51 

52 

The  Member  States  use  different  terminology  and  schemes  in  this  context  (for  example,  the 
Kooperationsmodell, joint PPPs, Joint Ventures). 
The question being dealt with here is the creation of ex novo entities in the context of a specific legal 
arrangement.  However,  the  case  of  pre-existing  mixed  entities  participating  in  the  procedures  for  the 
award  of  public  contracts  or  concessions  will  not  be  dealt  with  specifically,  because  this  latter 
hypothesis does not give rise to much comment in terms of the applicable Community law. The mixed 
character  of  an  entity  participating  in  a  tendering  procedure  does  not  in  fact  involve  any  derogation 
from the rules applicable to the award of a public contract or a concession. Only in the case where the 
entity in question meets the characteristics of an 'in house' entity, within the meaning of the Teckal Case 
Law of the Court of Justice, is the contracting authority entitled not to apply the usual rules. 
Note that the principles governing the law on public contracts and concessions apply also when a task is 
awarded in the form of a unilateral act (e.g. a legislative or regulatory act). 

18 

 
 
  
 
                                                 
59. 

60. 

61. 

characteristics  of  its  offer  –  the  most  economically  advantageous  –  in  terms  of  the 
specific services to be provided. Thus, in the absence of clear and objective criteria 
allowing  the  contracting  authority  to  select  the  most  economically  advantageous 
offer, the capital transaction could constitute a breach of the law on public contracts 
and concessions.  

In  this  context,  the  transaction  involving  the  creation  of  such  an  entity  does  not 
generally  present  a  problem  in  terms  of  the  applicable  Community  law  when  it 
constitutes  a  means  of  executing  the  task  entrusted  under  a  contract  to  a  private 
partner. However, the conditions governing the creation of the entity must be clearly 
laid  down  when  issuing  the  call  for  competition  for  the  tasks  which  one  wishes  to 
entrust to the private partner.53 

However,  the  Commission  has  noted  that,  in  certain  Member  States,  national 
legislation allows the mixed entities, in which the participation by the public sector 
involves the contracting body, to participate in a procedure for the award of a public 
contract  or  concession  even  when  these  entities  are  only  in  the  course  of  being 
incorporated. In this hypothesis, the entity will be definitively incorporated only after 
the contract has actually been awarded to it. In other Member States, a practice has 
developed which tends to confuse the phase of incorporating the entity and the phase 
of  allocating  the  tasks.  Thus  the  purpose  of  the  procedure  launched  by  the 
contracting authority is to create a mixed entity to which certain tasks are entrusted. 

Such formulae do not appear to offer satisfactory solutions in terms of the provisions 
applicable to public contracts and concessions.54 In the first case, there is a risk that 
the  effective  competition  will  be  distorted  by  a  privileged  position  of  the  company 
being  incorporated,  and  consequently  of  the  private  partner  participating  in  this 
company. In the second case, the specific procedure for selecting the private partner 
also poses many problems. The contracting authorities encounter certain difficulties 
in defining the subject-matter of the contract or concession in a sufficiently clear and 
precise  manner  in  this  context,  as  they  are  obliged  to  do.  The  Commission  has 
frequently  noted  that  the  tasks  entrusted  to  the  partnership  structure  are  not  clearly 
defined and that, in certain cases, they even fall outside any contractual framework. 
This  raises  problems  not  only  with  regard  to  the  principles  of  transparency  and 
equality of treatment, but even risks prejudicing the general interest objectives which 
the public authority wishes to attain. It is also evident that the lifetime of the created 
entity  does  not  generally  coincide  with  the  duration  of  the  contract  or  concession 
awarded,  and  this  appears  to  encourage  the  extension  of  the  task  entrusted  to  this 
entity without a true competition at the time of this renewal. Sometimes this results 
in a situation where the tasks are awarded de facto for an unlimited period. 

62. 

In  addition,  it  should  be  pointed  out  that  the  joint  creation  of  such  entities  must 
respect the principle of non-discrimination in respect of nationality in general and the 

53 

54 

Also, these conditions must not discriminate against or constitute an unjustified barrier to the freedom 
to provide services or to freedom of establishment, or be disproportionate to the desired objective. 
When planning and arranging such transactions, the test involving the use of the standard forms - which 
include the elements indispensable for a well-informed competition, - also demonstrate how difficult it 
can  be  to  find  an  adequate  form  of  advertising  to  award  tasks  falling  within  the  scope  of  the  law  on 
public contracts or concessions. 

19 

 
 
  
 
                                                 
63. 

64. 

free  circulation  of  capital  in  particular.55  Thus,  for  example,  the  public  authorities 
cannot  normally  make  their  position  as  shareholder  in  such  an  entity  contingent  on 
excessive  privileges  which  do  not  derive  from  a  normal  application  of  company 
law.56 

The  Commission  also  wishes  to  point  out  that  the  participation  of  the  contracting 
body in the mixed entity, which becomes the joint holder of the contract at the end of 
the selection procedure, does not justify not applying the law on public contracts and 
concessions  when  selecting  the  private  partner.  The  application  of  Community  law 
on public contracts and concessions is not contingent on the public, private or mixed 
character  of  the  joint  contractor  of  the  contracting  body.  As  the  Court  of  Justice 
confirmed in the Teckal case, this law is applicable when a contracting body decides 
to entrust a task to a third party, i.e. a person legally distinct from it. The position can 
be  otherwise  only  in  the  case  where  the  local  authority  exercises  over  the  person 
concerned  a  control  which  is  similar  to  that  which  it  exercises  over  its  own 
departments  and,  at  the  same  time,  that  person  carries  out  the  essential  part  of  its 
activities with the controlling local authority or authorities.57 Only entities that fulfil 
these  two  conditions  at  the  same  time  may  be  treated  as  equivalent  to  "in-house" 
entities in relation to the contracting body and have tasks entrusted to them without a 
competitive procedure.58 

Lastly,  it  should  be  pointed  out  that  if  the  mixed  entity  has  the  quality  of  a 
contracting  body  this  quality  also  requires  it  to  comply  with  the  law  applicable  to 
public  contracts  and  concessions  when  it  is  awarding  tasks  to  the  private  partner 
which have not been the subject of a call for competition by the contracting authority 
ahead of the incorporation of the mixed entity. Thus, the private partner should not 
profit from its privileged position in the mixed entity to reserve for itself certain tasks 
without a prior call for competition. 

3.2. 

Control of a public entity by a private operator 

65. 

The establishment of an institutionalised PPP may also lead to a change in the body 
of shareholders of a public entity. In this context, it should first be emphasised that 
the  changeover  of  a  company  from  the  public  sector  to  the  private  sector  is  an 
economic and political decision which, as such, falls within the sole competence of 
the Member States.59 

55 

56 

57 
58 

59 

Participation in a new undertaking with a view to establishing lasting economic links is covered by the 
provisions of Article 56 relating to the free movement of capital. See Annex I of Directive 88/361/EEC, 
adopted  in  the  context  of  the  former  Article  67,  which  lists  the  types  of  operations  which  must  be 
considered as movements of capital. 
See Judgments of the Court of 4 June 2002, Case C-367/98, Commission v. Portugal, ECR I-4731; Case 
C-483/99,  Commission  v.  France,  ECR  I-4781;  and  Judgments  of  13  May  2003,  Case  C-463/00, 
Commission v. Spain, ECR. I-4581; Case C-98/01, Commission v. United Kingdom, Rec. I-4641. On the 
possible  justifications  in  this  framework,  see  Judgment  of  the  Court  of  4  June  2002,  Case  C-503/99, 
Commission v. Belgium, ECR I-4809. 
Case C-107/98, Teckal, Judgment of 18 November 1999, point 50. 
The Court of Justice has been asked to make three preliminary rulings (Cases C-26/03, C-231/03 and C-
458/03) designed to obtain additional clarification on the scope of the criteria which can establish the 
existence of an "in house" type relationship. 
This  follows  from  the  neutrality  principle  of  the  Treaty  in  relation  to  ownership  rules,  recognised  by 
Article 295 of the Treaty. 

20 

 
 
  
 
                                                 
66. 

67. 

68. 

69. 

It should also be pointed out that Community law on public contracts is not as such 
intended to apply to transactions involving simple capital injections by an investor in 
an  enterprise,  whether  this  latter  be  in  the  public  or  the  private  sector.  Such 
transactions  fall  under  the  scope  of  the  provisions  of  the  Treaty  on  the  free 
movement  of  capital60,  implying  in  particular  that  the  national  measures  regulating 
them must not constitute barriers to investment from other Member States.61 

On the other hand, the provisions on freedom of establishment within the meaning of 
Article 43 of the Treaty must be applied when a public authority decides, by means 
of  a  capital  transaction,  to  cede  to  a  third  party  a  holding  conferring  a  definite 
influence in a public entity providing economic services normally falling within the 
responsibility of the State.62 

In  particular,  when  the  public  authorities  grant  an  economic  operator  a  definite 
influence in a business under a transaction involving a capital transfer, and when this 
transaction has the effect of entrusting to this operator tasks falling within the scope 
of  the  law  on  public  contracts  which  had  been  previously  exercised,  directly  or 
indirectly,  by  the  public  authorities,  the  provisions  on  freedom  of  establishment 
require compliance with the principles of transparency and equality of treatment, in 
order  to  ensure  that  every  potential  operator  has  equal  access  to  performing  those 
activities which had hitherto been reserved.  

In addition, good practice recommends ensuring that such a capital transaction does 
not  in  reality  conceal  the  award  to  a  private  partner  of  contracts  which  might  be 
termed public contracts, even concessions. This is the case in particular when, before 
the  capital  transaction,  the  entity  in  question  is  awarded,  directly  and  without 
competition, specific tasks, with a view to making the capital transaction attractive. 

18. What experience do you have of arranging institutionalised PPPs and in particular, in the 
light  of  this  experience,  do  you  think  that  Community  law  on  public  contracts  and 
concessions is complied with in such cases. If not, why not ? 

19. Do you think that an initiative needs to be taken at Community level to clarify or define 
the  obligations  of  the  contracting  bodies  regarding  the  conditions  requiring  a  call  for 
competition between operators potentially interested in an institutionalised project? If so, 
on what particular points and in what form ? If not, why not? 
In general and independently of the questions raised in this document: 
20. In your view which measures or practices act as barriers to the introduction of PPPs within 

the European Union?  

21. Do you know of other forms of PPPs which have been developed in countries outside the 
Union? Do you have examples of “good practice” in this framework which could serve as 
a model for the Union? If so, please elaborate. 

22. More  generally,  given  the  considerable  investments  needed  in  certain  Member  States  in 
order  to  pursue  social  and  sustainable  economic  development,  do  you  think  a  collective 
consideration of these questions pursued at regular intervals among the actors concerned, 
which  would  also  allow  for  the  exchange  of  best  practice,  would  be  useful?  Do  you 
consider that the Commission should establish such a network? 

60 
61 

62 

Article 56 ff. of the EC Treaty. 
See Communication of the Commission on certain legal aspects concerning intra-EU investment OJ No 
C 220, 19 July 1997, p.15. 
See, on these lines, the Judgment of the Court of 13 April 2000, Case C-251/98, Baars, ECR I-2787 

21 

 
 
  
 
                                                 
4. 

70. 

FINAL REMARKS 

The  Commission  invites  all  interested  parties  to  send  their  comments  on  the 
questions set out in this Green Paper. The replies, comments and suggestions may be 
sent by mail to the following address:  

European Commission 
Consultation “Green Paper on PPPs and the Community law on public contracts and 
concessions” 
C 100 2/005 
B-1049 Brussels 

or by electronic mail to the following address: 

MARKT-D1-PPP@cec.eu.int 

Comments  should  reach  the  Commission  by  30  July  2004  at  the  latest.  For  the 
information of interested parties, contributions received by electronic mail, with the 
name 
site 
http://europa.eu.int/comm/internal_market,  provided  that  the  authors  in  question 
have not expressly objected to such publication. 

the  originators,  will  be  posted 

address  of 

and 

the 

at 

71. 

On the basis of the contributions received, inter alia, the Commission plans to draw 
conclusions and, where appropriate, to submit concrete follow-up initiatives. 

22