Service contracts awarded on the basis of an exclusive right under Reg.11 Public Contracts Regulations 2015

Reg.11 of the Public Contracts Regulations 2015 (PCR2015) creates the first carve-out for (pseudo) public-public cooperation (more to follow under reg.12 PCR2015) and excludes from the rules of Part 2 PCR2015 'public service contracts awarded by a contracting authority to another contracting authority on the basis of an exclusive right which the latter enjoys pursuant to a law, regulation or published administrative provision which is compatible with TFEU.' This is an instance of quasi self-supply, which has been regulated in Art 18 of Directive 2004/18 and is now maintained in Art 11 of Directive 2014/24. The reference to compatibility with the TFEU is primarily to Art 106 and public undertakings (however, see Pedro's expanded view on this).

The rule in Art 11 Dir 2014/24 is fundamentally the same, but reg.11 PCR2015 deviates from the EU provision in that the latter also excludes public services contracts awarded to 'an association of contracting authorities' and, consequently, reg. 11 PCR2015 seems to reduce the flexibility of public-public cooperation rules after their transposition. However, the PCR2015 Explanatory Memorandum offers no justification for such a restriction of the scope of application of this exclusion.

The purpose of the exclusion in reg.11 PCR2015 may seem superficial because both Art 32(2)(b)(iii) Dir 2014/24 and reg.32(2)(b)(iii) PCR2015 allow for the use of a negotiated procedure without prior publication (which is functionally equivalent to an exclusion from compliance with the rules, except for some very limited transparency obligations) where the works, supplies or services can be supplied only by a particular economic operator protected by an exclusive right, including intellectual property rights. However, the specific exclusion in reg.11 PCR2015 may not be considered (completely) superficial or unnecessary if two details are taken into consideration.

Firstly, a literal interpretation (or a natural reading) of reg/art 32(2)(b)(iii) could seem to exclude 'contracting authorities (or associations of contracting authorities' from their scope of application if they were not considered 'economic operators'. However, once this is checked against the definitions in art 2(1)(10) Dir 2014/24 / reg.2(1) PCR2015, it is clear that 'contracting authorities (or associations of contracting authorities' would be covered, as economic operators are defined as 'any natural or legal person or public entity or group of such persons and/or entities, including any temporary association of undertakings, which offers the execution of works and/or a work, the supply of products or the provision of services on the market'. Hence, from this perspective, the specific exclusion in reg.11 PCR2015 seems unnecessary.

Secondly, however, it is worth stressing that the special rule under art/reg 32(2)(b)(iii) 'shall only apply when no reasonable alternative or substitute exists and the absence of competition is not the result of an artificial narrowing down of the parameters of the procurement'. Hence, the specific (quasi) public-public cooperation exception in reg/art 11 seems to be oriented at suppressing the requirement for an assessment of availability of alternative or substitute works, products or services that could be procured. Under this light, this exception seems to now acquire a specific purpose.

In my view, however, if the goal of art/reg 11 is to deactivate the additional requirements of absence of alternative/substitute supplies or artificial narrowing down of the procurement, then these rules are bound to fail and become ineffective. Indeed, it should be stressed here that art/reg 18 include the principle of competition amongst the general principles of procurement and, as a general requirement, impose an obligation for contracting authorities to design the procurement in a way that does not artificially narrow competition. Consequently, a systematic interpretation of art/reg 11 does not allow for an interpretation that is functionally any different than art/reg 32(2)(b)(iii). Thus, ultimately, reg/art 11 is an unnecessary rule and could have been avoided in view of the (proper) public-public and in-house provision rules in Dir 2014/24 and the PCR2015 (commented next).