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EU
UTILITIES
The European Network of Electricity System Operators (ENTSO-E) published its position on the revision of the Public Procurement Directives. It sets out 14 reforms focused on making grid procurement more strategic, improving flexibility for complex projects, and reducing administrative burden. For example, reform 8 suggests increasing flexibility to renegotiate ongoing contracts and framework agreements, given the long duration of contracts and the difficulty of defining all technical needs in advance.
DEFENCE
The European Commission endorsed the national defence plans of eight Member States and submitted a proposal to the Council to release long-term loans for the relevant countries to urgently scale up military readiness and acquire defence equipment.
EU case law
IN-HOUSE EXEMPTION
Dutch Case C-692/23 concerned the direct award of contracts in the waste sector under the in-house exemption at Article 12(3) of the Public Contracts Directive. This allows direct award of a contract to a legal person jointly controlled by contracting authorities if certain conditions are met, including the condition at Article 12(3)(b) that more than 80% of the legal person's activities are carried out in the performance of tasks entrusted to it by those authorities. Article 12(5) requires that, in determining this percentage, the average total turnover for the three years preceding the contract award must be taken into consideration.
In 1995, municipalities in Friesland established AF. Dutch municipalities from outside Friesland later became shareholders in AF, and AF is the parent company of a group of subsidiaries. Over subsequent years, other municipalities founded waste sector companies, Irado and BAR. Irado became a shareholder in AF and BAR became a shareholder in Irado.
The BAR municipalities previously had agreements with different waste processing companies under which AVR processed waste. In 2019, Irado and AF, and BAR and Idaho, concluded agreements relating to waste from the BAR municipalities. AVR sought annulment of these agreements and an open public procurement process.
The Dutch court says it is necessary to assess whether AF meets the condition in Article 12(3)(b). The defendants state that, since the provisions refer to the activities of the legal person to which the contract is awarded, the relevant turnover is that of that legal person itself. AVR argues that it is the turnover of the group to which that legal person belongs that must be taken into account.
The CJEU's preliminary ruling is that, where the controlled legal person is the parent company of a group, the turnover of the other entities belonging to that group must also be taken into account, where appropriate on the basis of the consolidated turnover that legal person is required to establish under Directive 2013/34/EU on annual financial statements, consolidated financial statements and related reports of certain types of undertakings.
INCLUSION OF SUBSIDIARY IN TENDER
Portuguese Case C-812/24 provides a preliminary ruling on the interpretation of Article 63(1) of the Public Contracts Directive which provides that, with regard to criteria relating to economic and financial standing and to technical and professional ability, an economic operator may rely on the capacities of other entities. Article 56(3) provides that, where information/documentation to be submitted by economic operators is incomplete or erroneous or where specific documents are missing, contracting authorities may request the economic operators to submit, supplement, clarify or complete the relevant information/documentation within an appropriate time limit, provided that such requests comply with the principles of equal treatment and transparency.
The proceedings concern a challenge to the award of a contract for the transport and disposal of waste. Part of the unsuccessful bidder's case was that the successful bidder failed to include a subcontracting declaration, a subcontractor commitment declaration, and a European Single Procurement Document ("ESPD") for an entity involved in its bid. Part of the awarding authority's case was that an entity wholly owned by the tenderer cannot be regarded as a subcontractor, so the requirements specific to subcontracting situations did not apply.
The CJEU ruled that:
- Article 63(1) means that a parent company relies on the capacities of other entities where it intends to use, for the performance of a public contract, the capacities of a subsidiary that is wholly owned by it, and
- Article 56(3) means that a parent company which intends to rely on the capacities of a subsidiary that is wholly owned by it, a director of which is also a director of the parent company, cannot be excluded from a tendering procedure on the sole ground that it has not attached to its tender the ESPD of that subsidiary, since such an omission may be rectified provided that no provision of national law precludes it and that that rectification is carried out in compliance with the principles of equal treatment and transparency.
FREEDOM TO ORGANISE THE PROCEDURE LEADING TO CHOICE OF CONCESSIONAIRE
In Italian Case C810/24, the municipality of Milan established guidelines for the implementation of "projects and initiatives aimed at the regeneration of public urban spaces by means of the identification of technical sponsors". The procedure involved publication of a notice (possibly after the submission of a proposal by a promoter). A call for tenders would be organised based on the notice, which would disclose the "characteristics of the proposal received and the services offered therein" and allow the party that had submitted the proposal to adjust it to match the best bid.
A consortium submitted a proposal in March 2021. In July 2021, the municipality published a notice describing the proposal and calling for "submission of proposals for improvement". The notice granted the original party (if unsuccessful) the right to adjust its proposal within 15 days to match the successful tender, in which case it would be awarded the contract if it undertook to comply with contractual obligations on the same terms as those offered by the successful tenderer and to reimburse the successful tenderer's bid costs, which could not exceed 2.5% of the value of the investment ("the pre-emption right").
In March 2023, the municipality awarded the contract to Urban Vision. The consortium exercised its pre-emption right and adjusted its tender to match that of Urban Vision. The municipality awarded the consortium the contract. Urban Vision challenged the award. The referring court raised a question around whether EU law prevents Italian national rules relating to pre-emption.
The CJEU ruled that Article 3(1) of the Concessions Directive, read with Article 49 TFEU and Articles 30 and 41 and Recital 68 of the Concessions Directive, prevents a Member State from granting the promoter of a project financing procedure a pre-emption right that allows that promoter (in the event that the contract in question was not initially awarded to it) to adjust its offer to match that of the initial successful tenderer and thus be awarded that contract subject to reimbursement of the costs incurred by the initial successful tenderer in preparing the bid, within the limit of 2.5% of the amount that the successful tenderer expected to invest.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
