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

EU Treaty of Lisbon: equality and citizenship

The Laeken declaration (2001) expressed the ambition to bring the European institutions closer to the citizens of the Union. The Union needed to become more democratic, more transparent and more efficient. It also had to resolve three basic challenges: how to bring citizens, primarily the young, closer to the European design and the European institutions, how to organise politics and the European political area in an enlarged Union and how to develop the Union into a stabilising factor and model in the new, multipolar world.

The Laeken declaration led to the Convention on the future of Europe, which drafted the Constitutional Treaty, approved by the intergovernmental conference (IGC 2004) with modifications and signed by all member state governments on 29 October 2004.

Equality and citizenship are two of the cornerstones of the relationship between the Europeans and the European Union.

The Treaty of Maastricht (1992) established the citizenship of the European Union.


Equality

The existing Article 12 TEC prohibits discrimination on the grounds of nationality: Within the scope of application of this Treaty, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited.

Article 13(1) TEC offers the legal basis for “appropriate action to combat discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation”.

The Lisbon Treaty broadens the scope of these prohibitions on discrimination by adding positive obligations to observe equality and equal treatment in all Union action.

In the draft Constitution, the Convention proposed a new Article I-44, which became the basis for the wording of the Constitutional Treaty. The Treaty establishing a Constitution for Europe (OJ 16.12.2004, C 310), Title VI , The democratic life of the Union, Article I-45, The principle of democratic equality: In all its activities, the Union shall observe the principle of equality of its citizens, who shall receive equal attention from its institutions, bodies, offices and agencies.

This sentence was taken over by the intergovernmental conference (IGC 2007) and inserted into the new article 8 TEU.


Citizenship

More than half a century since the beginning of European integration, we are still in the middle of a process of transforming economic communities into a Union of people, with full rights for its citizens.

The so called Spinelli project of the European Parliament (1984), the draft Treaty establishing the European Union, would have established the EU and introduced a citizenship of the Union. These reforms had to wait until 1992, when the European leaders were ready to introduce them in the Treaty on European Union (Treaty of Maastricht).

Article 17(1) of the present Treaty on establishing the European Community (TEC): Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union. Citizenship of the Union shall complement and not replace national citizenship.

There seem to be people out there, horrified by the prospect of becoming citizens and acquiring fundamental rights in the European Union. Let it therefore be said:

In the new Article 8 TEU there is no need to establish the citizenship of the European Union, because it exists since the Treaty of Maastricht, which entered into force in November 1993.

Then to the wording:

“Every person” becomes “every national” in the amending Lisbon Treaty, but the meaning of the second sentence is the same as in Article 17(1) TEC.

The third sentence alters the wording slightly. Citizenship of the Union shall “complement” national citizenship becomes shall be “additional to” in the new Article 8 TEU, without altering the meaning.

In the draft Constitutional Treaty the corresponding clause was Article I-8(1). In the Constitutional Treaty the wording of Article I-10(1) was already the same as the second and third sentences of Article 8 TEU in the Lisbon Treaty.


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My consolidated version: The Treaty of Lisbon (OJ 17.12.2007, C 306/1) amending the Treaty on European Union (latest consolidation OJ 29.12.2006, C 321 E), new Title II, Provisions on democratic principles, with new Article 8:

Article 8

In all its activities, the Union shall observe the principle of the equality of its citizens, who shall receive equal attention from its institutions, bodies, offices and agencies. Every national of a Member State shall be a citizen of the Union. Citizenship of the Union shall be additional to national citizenship and shall not replace it.


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My next Lisbon Treaty instalment is going to look at the democratic principles of the European Union.


Ralf Grahn