Source: http://www.howtocrackanut.com/blog/2015/03/public-contracts-between-entities.html
Timestamp: 2019-04-20 01:25:31+00:00

Document:
The in-house revolution created by Art 12 of Directive 2014/24 has been transposed by a (not so) simple 'copy-out' in reg. 12 of the Public Contracts Regulations 2015 (PCR2015) on public contracts between entities within the public sector. These provisions consolidate both the public-public cooperation exception (Hamburg) and the in-house providing exception (Teckal) to the EU public procurement rules, but also include significant deviations from the previous case law of the CJEU aimed at creating very ample flexibility for Member States to resort to non-market (?) alternatives to procurement (for critical remarks, see here, here & here; Pedro's comments are here).
More detailed comments on the novelties at the EU level exceed this blog post and will soon be available in the second edition of my book. In terms of the UK transposition strictly considered, it is worth stressing that reg.12 PCR2015 deviates in two significant ways from art 12 Dir 2014/24, apart from the standard re-ordering and re-numbering of its content.
Firstly, reg.12(1) PCR2015 establishes the conditions under which a contract awarded by a public authority to a controlled (in-house) entity exclude the procurement from compliance with its Part 2 rules. This provision only mentions contracts "awarded by a contracting authority to a legal person" and suppresses the further specification in art 12(1) Dir 2014/24 that such legal person can be "governed by private or public law". In my view, the suppression does not alter the content of the provision and this deserves no further analysis.
Secondly, reg.12(2) in fine PCR2015 deviates from art 12(2) Dir 2014/24 in a way that could be more relevant. Art 12(2) Dir 2014/24 establishes a new "public-house" extension of the in-house doctrine that covers "inverted" and "horizontal" in-house situations whereby a controlled legal entity awards contracts to its controlling contracting authority, or to another legal person controlled by the same contracting authority. These situations are subject to an alternative condition: either i) that there is no direct private capital participation in the legal person being awarded the public contract; or, as an exception, ii) that the only private capital participation is limited to non-controlling and non-blocking forms of participation required by national legislative provisions, in conformity with the Treaties, and that private capital does not exert a decisive influence.
The difference comes in the wording of this final condition. Whereas art 12(2) Dir 2014/24 requires that "private capital participation ... [does] not exert a decisive influence on the controlled legal person" (emphasis added), reg.12(2) in fine PCR2015 indicates that the requirement is instead for "private capital participation ... [not to] exert a decisive influence on the legal person being awarded the contract", that is, the controlling contracting authority, or another legal person controlled by the same contracting authority.
The divergence in wording creates some doubts, as it seems to set a control-test applicable to different legal entities depending on whether the "controlled legal person" in the final reference of art 12(2) Dir 2014/24 is understood to be either i) the awarding downstream contracting authority (which would be justified because the provision starts in that way), or ii) the contracting authority to which the contract is awarded and which is the one which private capital participation is being assessed (which is the reading that makes sense from a functional perspective).
In my view, the fact that reg.12(2) in fine clearly opts for this second, functional reading does not result in any significant deviation in the legal test applicable to the new 'public-house' exception where there is legally-mandated private capital participation. The wording of art 12(2) Dir 2014/24 is clearly defective and the wording under reg.12(2) in fine clarifies that both alternative conditions apply to the contracting authority being awarded the contract. Hence, despite the different wording, the transposition seems to remain clearly within the (expanded) limits of the public-public and in-house exceptions as recast in Dir 2014/24.

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