What is this about?
In certain circumstances contracts between public bodies are excluded from the PCR 2015 meaning they do not need to be advertised or awarded using EU procurement procedures.
Rules established in a number of well-known European Court cases on ‘in house' and ‘public-public' contracts (including Teckal and Hamburg Waste) have been incorporated into the new regulations.
On some points the regulations are more precise than the case law. This creates greater certainty for councils, for example when contracting with local authority companies and implementing shared services arrangements. Decisions about new service delivery models can be taken with greater confidence.
However, this is a complex area where legal advice is required. This section provides only a general outline of the rules which apply to the following three situations:
- Contracts with a controlled body.
- Contracts with a jointly controlled body.
- Contracts concerning cooperation between contracting authorities (i.e. where there is no separate controlled body).
What is new?
Contracts with a controlled body
Under PCR 2015 a contracting authority (such as a council) can award a contract to another body (such as a local authority company) outside of the EU rules if all of the following conditions are met:
- the contracting authority exercises control over that body which is similar to the control it exercises over its own departments.
- more than 80% of the activities of the controlled body are carried out performing tasks entrusted to it by the controlling contracting authority.
- there is no direct private capital participation in the controlled body (with certain limited exceptions).
'Similar' control means ‘decisive influence over both strategic objectives and significant decisions' of the controlled body.
Contracts with a jointly controlled body
The exclusion also applies where a body is jointly controlled. There are additional conditions in joint control situations all of which must be met:
- the decision-making bodies of the controlled body are made up of representatives of all participating contracting authorities.
- the contracting authorities jointly exert decisive influence over the strategic objectives and significant decisions of the controlled body.
- the controlled body does not pursue any interests which are contrary to those of the controlling contracting authorities.
Contracts concerning cooperation between contracting authorities (i.e. where there is no separate controlled body)
Contracts concerning cooperation between contracting authorities (i.e. where there is no separate controlled body) are also excluded in specific circumstances. Under the regulations all of the following conditions must be fulfilled:
- the contract establishes or implements cooperation between the participating contracting authorities with the aim of ensuring that public services they have to perform are provided with a view to achieving objectives they have in common.
- the implementation of that cooperation is governed solely by considerations relating to the public interest.
- the participating contracting authorities perform less than 20% of the activities concerned by the cooperation on the open market.
The regulations specify how the percentages are to be calculated in the three situations described above.
Note that a wide variety of bodies count as contracting authorities for this purpose including, for example, housing associations.