Separate operational units within a contracting authority and the scope of Directive 2014/24

One of the reforms of EU public procurement rules in 2014 that may well have slipped under the radar concerns the treatment of procurement carried out by separate operational units within a contracting authority. For the purposes of calculating the estimated value of procurement to determine the applicability of the EU rules, Art 5(2) Dir 2014/24 now establishes that "Where a contracting authority is comprised of separate operational units, account shall be taken of the total estimated value for all the individual operational units. Notwithstanding [that] where a separate operational unit is independently responsible for its procurement or certain categories thereof, the values may be estimated at the level of the unit in question."

This seemingly simple rule raises an important number of issues and, most importantly, requires a determination of what is a "separate operational unit" for the purposes of Art 5(2) Dir 2014/24 and the associated anti-circumvention rule. These issues are the focus of the comparative report "Characteristics of Separate Operational Units – A Study on Aggregation Rules under Public Procurement Law", commissioned to Dr Kirsi-Maria Halonen by the Swedish Competition Authority.  

The study includes a comparative overview that is interesting in itself and, of more practical relevance, it also formulates a test for the assessment of whether units within a contracting authority meet the requirements for being considered operationally separate and, thus, able to trigger a differentiated calculation of value thresholds triggering (or most likely, not) the application of EU public procurement rules in Dir 2014/24. The test is presented as follows:

"In order to facilitate the evaluation of a unit’s status, this study identifies six key elements which can be of importance when determining, whether the contract value can be estimated at the level of a separate unit or, whether all purchases of units within the same contracting authority should be aggregated: 

  1. The unit has a separate budget line which is managed by the unit itself and from which the procured items are paid from
  2. The unit runs the tender procedure independently
  3. Competence to make buying decisions and to conclude contracts on behalf of the contracting authority
  4. Is any other part of contracting authority interfering or affecting the contract between the unit and its contractor?
  5. Will other units of the same contracting authority purchase through the contract awarded by the unit?
  6. Obligation to purchase through centralized framework agreements or contracts"

I find the test (which is further detailed in the study) well thought-through and the only addition I would suggest would concern a dimension of supply-side analysis, mainly to assess whether the seemingly separate operational units are supplied by different suppliers / under different terms. That would allow for a final check to be added in order to capture situations where looking only at the demand side (ie at the units within a contracting authority) may mask issues concerning the bigger picture of the procurement/supply relationship between specific suppliers and the contracting authority as a whole.

The report is well worth reading, in particular in countries where the existence of separate operational units has been taken for granted in the past (such as in Spain). This is an area where future empirical research could usefully provide good insights on the way in which the creation of the new rule in Art 5(2) Dir 2014/24 may result in different levels of stringency in the application of EU public procurement rules at domestic level--depending on the extent to which Member States adapt the internal organisation of their contracting authorities to maximise, minimise (or ignore) the new possibilities.