The Public Contracts (Scotland) Regulations 2015 (the 2015 Regulations) came into force on 18 April 2016 and codified a number of key principles arising from EU case law.
Kelly Sleight
Although many authorities will be concerned about falling foul of the new procurement regime under both the 2015 Regulations and the Procurement Reform (Scotland) Act 2014, this codification should not be feared.
In many respects, the statutory provisions allow authorities more flexibility and set out clear conditions for authorities to follow when considering whether or not they are exempt from procurement rules.
This article considers three exemptions from EU case law which are now contained within the 2015 Regulations, namely: the Teckal exemption; the Hamburg Waste exemption; and the Pressetext exemption.
Teckal – in house arrangements not subject to rules
The ‘Teckal exemption’ applied where an authority contracted with a legally distinct entity (for example, a company set up by an authority) to provide services. Where the conditions set out in the judgment were met, the arrangement was considered to be an in-house administrative arrangement and not subject to the procurement rules.
Regulation 13 of the 2015 Regulations provides that an authority can award a contract to a ‘controlled person’ without applying the procurement rules. The definition of ‘controlled person’ in Regulation 13(2) is based on the Teckal exemption, with some minor changes:
- the authority exercises over that person control similar to that which it exercises over its own departments;
- the person carries out more than 80% of its activities in the performance of tasks entrusted to it by the authority or by other persons controlled by that authority; and
- no other person has direct private capital participation in the person.
Regulations 13(1)(b) and 13(1)(c) also codify the exemptions previously known as ‘reverse Teckal’ and ‘horizontal Teckal’ respectively. Accordingly, the statutory provisions are now clear that the procurement rules do not apply to contracts awarded by a controlled person to an authority which controls that person and by a controlled person to another controlled person where they are both controlled by the same authority.
This codification should be quite welcome to contracting authorities within group structures, particularly local authorities with a family of arm’s length external organisations.
(Teckal is case C-107/98.)
Hamburg Waste – public interest in cooperation between authorities
The Hamburg principles, set out in Commission v Germany, relate to the provision of services between authorities. The Hamburg principles provided that the procurement rules did not apply where an authority provided services to another authority at cost in the pursuit of a shared community interest, utilising its own resources and not receiving any remuneration or benefit in return.
Regulation 13(8) of the 2015 Regulations sets out the exemption where: a contract implements cooperation between authorities on the basis of common objectives; is governed solely in pursuit of the public interest; and no more than 20% of the cooperative activities can be performed on the open market. Authorities must meet the conditions of Regulation 13(8) to ensure that there is genuine cooperation between the authorities, which is in the public interest. The 20% level is also in line with the limit in Regulation 13(2) for the Teckal exemption.
(Hamburg is case C-480/06.)
Pressetext – modification of contracts once awarded
This case set out grounds for amendments to a contract awarded under a procurement procedure without the need to re-advertise in OJEU. Changes to a contract after it has been procured resulting in a change to the economic balance in favour of the supplier or any change which, had it been part of the initial tender process, would have allowed for different suppliers to have been selected or accepted, are considered to be “substantial changes” and required a new tender exercise.
The 2015 Regulations now expressly provide for the modification of contracts during their term under Regulation 72. Regulation 72(1) sets out a number of circumstances where a contract may be modified withoHut a new procurement procedure, which allow more flexibility for authorities in respect of unforeseen changes and insolvency of contractors (amongst others).
(Pressetext is case C-454/06.)
Kelly is a Solicitor with Harper Macleod LLP and can be contacted at kelly.sleight@harpermacleod.co.uk
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