is that Central Government decided to trade certainty in practice for lawmaking simplicity. It can be argued that the new way is the correct one to ensure sterling values do not deviate from the original euro ones ... but the price to pay is to force every single public procedure close to those values to be manually checked by the contracting authority before tender. Furthermore, for really close call cases it is not clear what is the correct approach to determine the exchange rate applicable: is it the mid-market value? The end of day? Is it the value from the day before launching the procedure or when the decision of launching a procedure is being taken? (emphasis added).
Pedro has spotted the issue of the difficulty in valuing framework agreements or innovation partnerships and has raised the issue of "a perverse incentive for contracting authorities to establish framework agreements with procurement values below thresholds to avoid any sort of transparency. Now let's marry this idea with a short initial term of the framework (say, one year) which [coincidentally] justifies a below-threshold calculation value and that the framework then gets extended to the maximum 4 year period afterwards." I agree with the existence of the risk, however, I think that this is the sort of issue clearly covered by the anti-circumvention prohibition in art 5(3) Dir 2014/24 and reg.6(5) and 6(6) PCR2015, which clearly set out that "The choice of the method used to calculate the estimated value of a procurement shall not be made with the intention of excluding it from the scope of this Directive [Part]. A procurement shall not be subdivided with the effect of preventing it from falling within the scope of this Directive, unless justified by objective reasons."
The following are my comments on this issue, as they will be soon published in A Sanchez Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015) 261-63.
Specific rules have been developed to deter such strategic use of public procurement thresholds, or the unjustified resort to ‘unregulated’ public procurement activities. As regards the strategic conduct of public procurement below the thresholds set by the EU directives on public procurement, article 5(3) of Directive 2014/24 expressly states that the object of public contracts may not be subdivided to prevent its coming within the scope of the directive. More specifically, it establishes that the choice of the method used to calculate the estimated value of a procurement shall not be made with the intention of excluding it from the scope of this Directive, and that a procurement shall not be subdivided with the effect of preventing it from falling within the scope of this Directive, unless justified by objective reasons.
The latter caveat allowing for the objective justification of a subdivision of a contract that makes it fall below the relevant thresholds was not present in the equivalent rule of art 9(3) dir 2004/18 (‘No works project or proposed purchase of a certain quantity of supplies and/or services may be subdivided to prevent its coming within the scope of this Directive’). It is submitted that this new caveat is prone to create significant litigation, particularly if the European Commission identifies numerous instances of recourse to ‘objective reasons’ on the part of the Member States and the latter argue for a broad interpretation of the exception—which should be rejected. However, given the additional explanation provided in recital (20) of Directive 2014/24, it is submitted that the addition of the caveat is largely irrelevant and only aimed at a further prevention of the artificial split of contracts in the framework of centralised procurement. In that regard, it is important to take into account that, according to the recital, the rationale for the ‘objective reasons’ caveat is that
Generally, though, the anti-split or anti-circumvention rule is clear and establishes a prohibition of strategic use of public procurement thresholds. To be sure, these rules do not prevent contracting authorities from splitting or dividing the contracts into as many lots as they deem fit or objectively justified (on issues regarding the division of contracts in lots and the aggregation of lots, see below §II.A.xviii), but rather focus on their obligation to take the aggregate value of those lots into consideration when determining whether the relevant thresholds are met—and, hence, whether their award should be conducted pursuant to the rules of the EU directives on public procurement (see art 5(8) and 5(9) dir 2014/24). Consequently, the prohibition on circumventing the application of the directives is not violated per se by dividing the contracts in lots, but only by failing to treat those lots as a single economic and technical unit and, consequently, by failing to award them in compliance with public procurement rules.
This prohibition has also been clearly interpreted by the EU judicature, which has provided guidance as to what constitutes an ‘artificial’ division of the object of a contract to circumvent public procurement rules—by putting emphasis on the criterion of the economic and technical unity of the object of the various contracts whose award should have been conducted jointly. Therefore, a public buyer that artificially divided into separate contracts or purchases certain of its requirements that should objectively be considered to constitute a single economic and technical unit would be found in breach of the EU directives on public procurement. A different dimension is that of the temporal compatibility between the spread of the needs and the periodicity of the contracts or purchases conducted by the public buyer. Where a significant mismatch can be identified—ie, when purchases below the thresholds occur too often—the public buyer should equally be found in breach of the EU public procurement rules, since the conduct of an excessive number of purchases or the conclusion of an excessive number of contracts should equally be considered an artificial split of the object of the contract in circumvention of the EU rules.
From a competition perspective, the rule against the artificial division of the contract to exclude it from public procurement rules seems to be sound and, in general, should prevent the exercise of strategic public procurement below the thresholds. Nonetheless, it is suggested that, when exercising their discretion as regards the need to group their requirements into a single or few contracts—rectius, when assessing the extent of the obligation not to split them—contracting authorities should not only bear in mind a criterion of strict proportionality (between the inconveniencies and costs of running a procurement process and the unity or separability of its requirements), but also the principle of competition. In cases where the application of the proportionality principle might be neutral towards the aggregation or not of contracts, competition considerations might become relevant. In those cases, if recourse to public procurement rules can generate increased competition for the contract—or, put otherwise, if the conduct of ‘unregulated’ procurement activities might generate a negative impact on market dynamics—the contracting authority should opt for the aggregation of its requirements and the conduct of the corresponding tender. The same criteria apply to both the conduct of procurement below EU and national thresholds, since the competition element is equally important in both cases. In the end, it is submitted that public buyers should not divide their requirements to avoid compliance with public procurement rules not only when it is unwarranted or disproportionate, but also when it could result in a negative impact on market competitive dynamics.
(*) The text of the foonote indicates that the appeals are pending due to the fact that I closed the 2nd edition of the bookin the fall of 2014. Both cases have now been decided by the CJUE: C-429/13 and C-513/13. I am grateful to Jonn Sannes Ramsvik for having raised this issue to my attention.