Thursday, 1 January 2009

EU procurement: Subsidised contracts

The EC (EU) Procurement Directive 2004/18/EC covers the award of building contracts concerning hospitals, facilities intended for sports, recreation and leisure, school and university buildings and buildings used for administrative purposes, even if the awarding entity is private, if the contract is subsidised by more than 50 per cent by contracting authorities (public bodies) and the value of the contract is equal to or greater than EUR 5 150 000.

Related service contracts of at least EUR 206 000 fall within the scope of the Procurement Directive.


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Article 8

Article 8 of the Procurement Directive (Classic Directive) sets out the scope in more detail:


Article 8
Contracts subsidised by more than 50 % by contracting authorities

This Directive shall apply to the awarding of:

(a) contracts which are subsidised directly by contracting authorities by more than 50 % and the estimated value of which, net of VAT, is equal to or greater than EUR 5 150 000,

— where those contracts involve civil engineering activities within the meaning of Annex I,

— where those contracts involve building work for hospitals, facilities intended for sports, recreation and leisure, school and university buildings and buildings used for administrative purposes;

(b) service contracts which are subsidised directly by contracting authorities by more than 50 % and the estimated value of which, net of VAT, is equal to or greater than EUR 206 000 and which are connected with a works contract within the meaning of point (a).

Member States shall take the necessary measures to ensure that the contracting authorities awarding such subsidies ensure compliance with this Directive where that contract is awarded by one or more entities other than themselves or comply with this Directive where they themselves award that contract for and on behalf of those other entities.


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Subsidy level

The Procurement Directive applies if a number of cumulative conditions are met. The contract awarded by a private entity is subsidised by more than 50 per cent by one or more contracting authorities (public bodies).

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Thresholds

The estimated value of the contract, net of VAT, is equal to or greater than EUR 5 150 000.

The estimated value of the related service contract, net of VAT, is equal to or greater than EUR 206 000.


The sums were amended from the beginning of 2008 by Commission Regulation (EC) No 1422/2007. For EU member states outside the eurozone, the corresponding amounts in national currencies are found in the Commission’s information, published in OJEU 13.12.2007 C 301/, taking into account the corrigendum published OJEU 20.12.2007 C 310/37.


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Civil engineering activities


The contract involves civil engineering (building) activities within the meaning of Annex I.



New Annex I

In the consolidated version (of 15 September 2008) of the Procurement directive 2004/18/EC, Annex I stands as amended by Commission Regulation (EC) No 213/2008 (OJEU 15.3.2008 L 74/1), which replaced the old Annex I with a new one. The Regulation applies from 15 September 2008.


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Type of building (intended purpose)



In addition, the contract involves building work for one of the following: hospitals, facilities intended for sports, recreation and leisure, school and university buildings and buildings used for administrative purposes.




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Related service contracts

Article 8 point (b) covers related service contracts, which are subsidised directly by contracting authorities by more than 50 % and the estimated value of which, net of VAT, is equal to or greater than EUR 206 000 and which are connected with a works contract within the meaning of point (a).


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Compliance

The second paragraph of Article 8 entails an obligation for the Member States to take the necessary measures to ensure that the contracting authorities awarding such subsidies ensure compliance with this Directive where that contract is awarded by one or more entities other than themselves or comply with this Directive where they themselves award that contract for and on behalf of those other entities.


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Commission guidance

The Commission’s Guide to the Community rules on public works contracts (based on the old Directive 93/37/EEC) offers the following explanations (page 12 to 13):


1.5 Contracts subsidized to more than 50% by contracting authorities

The Directive requires Member States to take the necessary measures to ensure that contracting authorities comply or ensure compliance with its provisions where they subsidize directly by more than 50% a works contract awarded by an entity other than themselves, whether that entity is public or private.

This requirement applies, however, only to contracts concerning civil engineering works (covered by Class 50, Group 502, of the NACE nomenclature) and to contracts relating to building work for hospitals, facilities intended for sports, recreation and leisure, school and university buildings and buildings used for administrative purposes.

The subsidies to be taken into consideration are all the different forms of assistance, including that provided by the Community, which are directly intended for the works contracts in question.

In view of the subsidy it is granting and its experience in awarding contracts, a contracting authority could itself choose the contractor, even if the outcome of the works is not intended for its own use. In such cases, it must itself comply with the provisions of the Directive.

If, on the other hand, the choice of contractor is left to the recipient of the subsidy, the contracting authority must require the recipient to comply with the Directive, for example by including such compliance among the general conditions to be met in order to obtain certain grants or among the specific conditions laid down in the instrument granting the subsidy.

The list of the types of works concerned given in the relevant article of the Directive is exhaustive. However, the list of premises, namely hospitals, facilities intended for sports, recreation and leisure, school and university buildings and buildings used for administrative purposes, is a generic list of categories of premises. These categories should not be construed narrowly, since a restrictive interpretation would undermine the aim of the Directive, which is to ensure greater transparency in the award of public works contracts.

Homes for retired people or the physically disabled should thus, for example, be treated in the same way as hospitals where their purpose is to provide medical or surgical care for sick people, whether elderly or disabled, rather than assisting the elderly or disabled and only occasionally administering minor treatment.



Ralf Grahn