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WG Independence-Efficiency > Meetings > Bucharest 2011 > The procurement of public contracts in EU law : general framework

The procurement of public contracts in EU law : general framework

(i) Introduction - [Paragraph 1]

(ii) Relevant General Provisions of Community Law - [Paragraphs 2-4]

(iii) Core Provisions of the EU Procurement Regime - [Paragraphs 5-9]

(iv) The EU Constitutional Structure : A Brief Overview
[Paragraphs 10-12]

The Honourable Mr. Justice Bernard McCloskey

Court of Judicature of Northern Ireland

Chairman, Northern Ireland Law Commission


Historically, the execution of public services contracts was governed exclusively by the relevant rules and provisions of national law. However, in the sphere of the procurement and execution of public contracts, the impact of EU law has altered this radically. This subject is now governed by a set of European legal rules – extensive, detailed, intricate and moderately complex – binding on all Member States.


The detailed rules contained in the relevant EU Directives must always be viewed in the context of the relevant EU Treaty provisions and the related principles of EU law. These links are normally articulated expressly in the Directive recitals. In Directive 2004/18/EC (“the 2004 Directive”). The second recital refers expressly to –

…the principle of freedom of movement of goods, the principle of freedom of establishment and the principle of freedom to provide services and to the principles deriving therefrom, such as the principle of equal treatment, the principle of non-discrimination, the principle of mutual recognition, the principle of proportionality and the principle of transparency”.

In addition, the values of fair, free and effective competition are readily identifiable in the series of Directives belonging to this field. Recital No. 46 is also noteworthy :

"Whereas … contracts should be awarded on the basis of objective criteria which ensure compliance with the principles of transparency, non-discrimination and equal treatment and which guarantee that tenders are assessed in conditions of effective competition. As a result, it is appropriate to allow the application of two award criteria only : ’the lowest price’ and ’the most economically advantageous tender’. …
To ensure compliance with the principle of equal treatment in the award of contracts, it is appropriate to lay down an obligation – established by case law – to ensure the necessary transparency to enable all tenderers to be reasonably informed of the criteria and arrangements which will be applied to identify the most economically advantageous tender. It is therefore the responsibility of contracting authorities to indicate the criteria for the award of the contract and the relative weighting given to each of those criteria in sufficient time for tenderers to be aware of them when preparing their tenders".

As the remainder of this recital makes clear, there is an inextricable link between the formulation of public contract award criteria and the principle of equal treatment for all tendering parties.

"In order to guarantee equal treatment, the criteria for the award of the contract should enable tenders to be compared and assessed objectively".

Article 10 EC is also important :

Member States shall take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising out of this Treaty or resulting from action taken by the institutions of the Community. They shall facilitate the achievement of the Community’s tasks. They shall abstain from any measure which could jeopardise the attainment of the objectives of this Treaty.

Article 10 sometimes features when questions arise about the role and duties of the court in the realm of public procurement. The duty imposed by Article 10 can also be linked with the overarching principle of the supremacy of Community law. [1]

The underlying rationale of the EU procurement rules, as expressed in the governing Directives, can be traced to the aims of eliminating barriers to trade in goods and the movement of business, labour and capital between Member States. The basic premise is that the elimination of such obstacles will improve the economic welfare and growth of Member States. Historically, one of these perceived barriers was the existence of unfair and/or discriminatory public contract procurement practices and laws. Throughout all Member States governments and public authorities are major operators in the procurement of goods and services. The ECJ has stated :

The principal objective of the Community rules in the field of public procurement …[is] the free movement of services and the opening up to undistorted competition in all the Member States. That involves an obligation on all contracting authorities to apply the relevant Community rules where the conditions for such application are satisfied”. [2]

Broadly, the object of the EU procurement rules is to ensure that public bodies award certain contracts above a minimum value only after fair competition and to the economic operator either offering the lowest price or making the most economically advantageous offer.

Within the Treaties, there are no specific provisions relating to public procurement. This subject is, rather, regulated by the general internal market provisions of the Treaties, particularly :

Article 28 EC (Free Movement of Goods).

Article 48 EC (The Right of Establishment).

Article 49 EC (Freedom to Provide Services).

Articles 87-89 EC (The General Prohibition on State Aids Distorting or Threatening to Distort Competition).

As noted above, certain fundamental principles of EU law also have effect in this sphere. Foremost amongst these are the principles of non-discrimination, equal treatment), proportionality, efficacy and transparency. These principles are readily associated with the main substantive provisions of EU law in play.


As regards specific rules and regulations, the relevant sources are :

(a) The “Public Sector” Directive [2004/18/EC].

(b) The “Utilities” Directive [2004/17/EC].

(c) The “Remedies” Directive [89/665/EEC].

(d) The “Amended Remedies” Directive [2007/66/EC], a joint European Parliament and Council measure.

The procurement Directives have certain cornerstone provisions. Their scope and operation are shaped, fundamentally, by the following key definitions :

Public Contracts

“Contracts for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities and having as their object the execution of works, the supply of products or the provision of services within the meaning of this Directive.

Public Works Contracts

Public contracts having as their object either the execution, or both the design and execution, of works related to one of the activities within the meaning of Annex I or a work, or the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority. A "work" means the outcome of building or civil engineering works taken as a whole which is sufficient of itself to fulfil an economic or technical function.

Public Supply Contracts

“Public contracts other than those referred to in (b) having as their object the purchase, lease, rental or hire purchase, with or without option to buy, of products.
A public contract having as its object the supply of products and which also covers, as an incidental matter, siting and installation operations shall be considered to be a ‘public supply contract’”.

Public Service Contracts

“Public contracts other than public works or supply contracts having as their object the provision of services referred to in Annex II.
A public contract having as its object both products and services within the meaning of Annex II shall be considered to be a ‘public service contract’ if the value of the services in question exceeds that of the products covered by the contract.
A public contract having as its object services within the meaning of Annex II and including activities within the meaning of Annex I that are only incidental to the principal object of the contract shall be considered to be a public service contract.

‘Contractor’, ‘Supplier’ and ‘Service Provider’

“Any natural or legal person or public entity or group of such persons and/or bodies which offers on the market, respectively, the execution of works and/or a work, products or services.
The term "economic operator" shall cover equally the concepts of contractor, supplier and service provider. It is used merely in the interest of simplification.
An economic operator who has submitted a tender shall be designated a "tenderer". One which has sought an invitation to take part in a restricted or negotiated procedure or a competitive dialogue shall be designated a ‘candidate’.”

Contracting Authorities

The State, regional or local authorities, bodies governed by public law, associations formed by one or several of such authorities or one or several of such bodies governed by public law.
A "body governed by public law" means any body :
(a) established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character ;
(b) having legal personality ; and
(c) financed, for the most part, by the State, regional or local authorities, or other bodies governed by public law ; or subject to management supervision by those bodies ; or having an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law.
Non-exhaustive lists of bodies and categories of bodies governed by public law which fulfil the criteria referred to in (a), (b) and (c) of the second subparagraph are set out in Annex III. Member States shall periodically notify the Commission of any changes to their lists of bodies and categories of bodies.

Central Purchasing Body

A contracting authority which :
- acquires supplies and/or services intended for contracting authorities, or

 awards public contracts or concludes framework agreements for works, supplies or services intended for contracting authorities

All of these definitions are contained in Article 1/2 of Directive 2004/18.

In Directive 2004/17 (the Utilities Directive), the equivalent terms and definitions are contained in Article 21/2 also. In the Utilities Directive, the cornerstone provisions are the definitions of “contracting authorities” and “public undertaking”. Article 2 provides :

“1. For the purposes of this Directive,
(a) ‘Contracting authorities’ are State, regional or local authorities, bodies governed by public law, associations
formed by one or several such authorities or one or
several of such bodies governed by public law.
‘A body governed by public law’ means any body :
— established for the specific purpose of meeting needs
in the general interest, not having an industrial or
commercial character,— having legal personality and
— financed, for the most part, by the State, regional or
local authorities, or other bodies governed by public
law ; or subject to management supervision by those
bodies ; or having an administrative, managerial or
supervisory board, more than half of whose members
are appointed by the State, regional or local authorities,
or by other bodies governed by public law ;
(b) a ‘public undertaking’ is any undertaking over which the contracting authorities may exercise directly or indirectly a dominant influence by virtue of their ownership of it, their financial participation therein, or the rules which govern it. A dominant influence on the part of the contracting authorities shall be presumed when these authorities, directly or indirectly, in relation to an undertaking : — hold the majority of the undertaking’s subscribed capital, or
— control the majority of the votes attaching to shares
issued by the undertaking, or — can appoint more than half of the undertaking’s administrative, management or supervisory body.
2. This Directive shall apply to contracting entities :
(a) which are contracting authorities or public undertakings and which pursue one of the activities referred to in Articles 3 to 7 ;
(b) which, when they are not contracting authorities or public undertakings, have as one of their activities any of the activities referred to in Articles 3 to 7, or any combination thereof and operate on the basis of special or exclusive rights granted by a competent authority of a Member State.
3. For the purposes of this Directive, ‘special or exclusive
rights’ mean rights granted by a competent authority of a
Member State by way of any legislative, regulatory or administrative provision the effect of which is to limit the exercise of activities defined in Articles 3 to 7 to one or more entities, and which substantially affects the ability of other entities to carry out such activity.

Next, one must refer to the “activities referred to in Articles 3 to 7”. These are gas, heat, electricity, water, transport services, postal services and the exploration for, or extraction of, oil, gas, coal, or other solid fuels, as well as ports and airports.

Under both Directives, Member States are obliged to furnish the Commission with a list of contracting entities within the scope of the two instruments and to notify the Commission periodically of any changes therein. This mechanism facilitates the exercise of the Commission’s enforcement and supervisory powers under the Directives. Notably, in the national United Kingdom legislation transposing the Directives, there is an extremely detailed definition of “contracting authority”. [3]

There is one particular general principle which may be emphasized. In the Stadt Halle [4], the ECJ stated :

A public authority which is a contracting authority has the possibility of performing the tasks conferred on it in the public interest by using its own administrative, technical and other resources, without being obliged to call on outside entities not forming part of its own departments. In such a case, there can be no question of a contract for pecuniary interest concluded with an entity legally distinct from the contracting authority. There is therefore no need to apply the Community rules in the field of public procurement.

Thus the EU procurement rules are not intended to compel public authorities to obtain the services which they require from the private/commercial sector. Rather, they are at liberty to obtain such services “in-house” e.g. from architects, engineers, surveyors, lawyers and other professionals. In summary, the basic vocubalury of the EU procurement rules is :

Public Works Contracts”.
Public Supply Contracts”.
Public Service Contracts”.
Public Contracts”.
Contracting Authority”.

In short, the EU procurement rules are directed to the award of contracts by public authorities. The rules do not apply where the public authority concerned, in the language of the ECJ –

… exercises over the person concerned a control which is similar to that which it exercises over its own departments and, at the same time, that person carries out the essential part of its activities with the controlling local authority or authorities”. [5]

These two tests have been described, in shorthand, as “the control test” and “the function test”. In the most recent case law of the ECJ, there is an emphasis on the philosophy that EU public procurement rules do not inhibit public authorities from co-operating with other public authorities for the purpose of carrying out some of their public services tasks. See Commission –v- Federal Republic of Germany . [6] In particular, the contract under scrutiny in that case – executed among four local authorities and the Cleansing Department of the City of Hamburg to enable the latter to construct a waste treatment facility – was held to establish co-operation between the contracting parties with the aim of ensuring that a public task which they all had to perform was duly carried out. Moreover, it did not directly affect any private entity and had no impact on any contracts which might be necessary to construct and operate the facility in question. Finally, public authorities were entitled to employ their own resources internally, without recourse to private operators and in co-operation with other public authorities. [7]


The basic landmarks are :

The EEC Treaty (or “Treaty of Rome”) was signed on 25th March 1957 and came into operation on 1st January 1958. Now it is much amended and extended, but continues to provide the core framework for the process of European integration.

The single European Act came into operation on 1st July 1987. This (inter alia) amended the EEC Treaty introducing provisions re co-operation in the intergovernmental sphere of foreign policy, a newly enhanced role for the European Parliament and an attempt to complete the EEC internal market by the end of 1992. This also introduced provisions concerning economic and social cohesion, research and technological development and the protection of the environment.

The Treaty on European Union (“the EU Treaty”) or (“Maastricht Treaty”) came into operation on 1st November 1993. It established the European Union, a new legal and political entity and, in terms, amalgamated the three extant European Communities (viz. the ECSC, Euratom and the newly renamed EC). This treaty introduced extensive reforms.

Next, the Treaty of Amsterdam entered into force on 1st May 1999. This reformed the Community’s legislative process and the treatment of third country nationals in a series of new rules concerning visas, asylum, immigration and other policies all related to the free movement of persons. Furthermore, cross-border judicial co-operation in civil matters was introduced. Similarly, police and judicial co-operation in criminal matters. The concept of “closer co-operation” was also adopted.

The Treaty of Nice was signed on 26th February 2001, reforming the institutional functioning of the EU to respond to the challenges of further enlargement. This was followed by enlargement of the EU from 15 to 27 Member States. The acceding countries were mainly Central and Eastern European States (Romania and others) : see in particular the Treaty of Accession signed on 25th April 2005 (re Romania and Bulgaria), operative from 1st January 2007. At present, other candidate acceding states include Croatia, Turkey, Macedonia and several western Balkan States.

The “Treaty Establishing a Constitution for Europe” (sometimes labelled the “CT”) was developed between 2002 and 2004. Following its signature, adverse referenda results in certain Member States culminated in its eventual burial by the European Council in June 2007, succeeded by an initiative for yet another amending Treaty.

This process resulted in the Lisbon Treaty, signed by Member States on 13th December 2007. This substantially amended the EU Treaty (“the TEU”). It also substantially amended the EC Treaty, which was recast as the “Treaty on the Functioning of the European Union” (the “TFEU”). The European Community, as a distinct legal entity, was extinguished. It is succeeded by a unitary European Union, possessed of its own legal personality.

The net result : With effect from 1st December 2009, the TEU and the TFEU constitute the fundamental legal framework for the institutions and activities of the European Union.

Each of the two governing Treaties (TEU and TFEU) states that the EU is founded on both, which shall have the same legal value : see Article 1(3) and Article 1(2) respectively. The effect is that the primary sources of EU law today are the TEU ; the TFEU ; the various Protocols and Annexes to each treaty ; and the Charter of Fundamental Rights.

Enter the Charter on Fundamental Rights (“the Charter”). Article 6(1) TEU provides that the Charter shall have the same legal value as the Treaties. It is thus incorporated in the EU’s primary law by reference, rather than direct adoption in the text of the Treaties. It is designed, fundamentally, to operate as a legally binding EU Bill of Rights.

Article 6(1) TEU provides :

The Union recognises the rights, freedoms and principles set out in the Charter of Fundamental Rights of the European Union of 7th December 2000 … which shall have the same legal value as the Treaties ”. [8]

The United Kingdom and Poland negotiated a Protocol designed to limit the application of the Charter in certain respects. The precise construction and impact of this Protocol are debatable and litigation has ensued. By Article 6(2) TEU, the Union shall accede to the ECHR and, per Article 6(3), the ECHR fundamental rights shall constitute general principles of EU law. Title VI of the Charter is concerned with the administration of Justice. It draws primarily on the ECHR, the constitutional traditions common to Member States and the case law of the ECJ. Article 47 is especially noteworthy :

Everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal in compliance with the conditions laid down in this Article …

Everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal previously established by law …

Everyone shall have the possibility of being advised, defended and represented.

Article 47 can be readily linked to Articles 6 and 13 ECHR. Previously, the ECJ was required, especially in competition law proceedings, to adjudicate on the compatibility of the EU system of judicial protection with the principles of a fair trial. [9] Article 47 has the potential to influence, for example, the procedure whereby the Commission administers heavy fines for breaches of competitional law and the absence of any right to respond to the Advocate General’s Opinion in direct proceedings. Also to be noted is Article 47(3) which provides that –

…legal aid shall be made available for those who lack sufficient resources insofar as such aid is necessary to ensure effective access to justice”.

Leading writers and experts in this field [10] have opined that the Charter is likely to have a major impact on judicial review within the EU legal order, having the potential to significantly increase the number of rights based challenges to the legality of EU or Member State action. This, in turn, will present courts increasingly frequently with cases raising complex issues concerning rights and values of a kind conventionally determined by national constitutional courts. However, the precise legal status of the Charter is not entirely clear. [11] Thus it has been suggested :

The result is far from satisfactory, highlighting a degree of political schizophrenia in relation to fundamental rights policy which results in a dichotomy in the sources of fundamental rights : when the Member States implement Union law, the applicable standard is that set by the Charter ; however, when the Member States act within the field of Union law, the applicable standard is that set through the case law on the general principles. It is too early to say whether this distinction will be respected by the Court ; and whether it will amount to much more than a broader margin of discretion being left to the Member States when they are acting within the scope of Union law rather than implementing it. [12]

When one examines the history of the Charter and the TFEU, this less than satisfactory outcome is far from surprising. The underlying aims appear to be twofold. The first is that the Charter should not operate as a vehicle to expand the competences of the EU. The second is that it should not operate to confer a general human rights jurisdiction on the ECJ. The truism that political compromise (a recurring and dominant feature of the EU legal order) can give rise to resulting incongruity and artificiality seems unassailable.

In passing, the construction and impact of the UK and Polish Protocol await the outcome of a reference to the ECJ. [13] The uncertainty generated by both the wording of the Chapter and the UK/Poland Protocol is underlined by the consideration that, before the Court of Appeal, the Secretary of State did not seek to support the finding of the trial judge that none of the Charter rights is directly enforceable against the United Kingdom Government. The official Government stance before the court now is that the Protocol is designed to explain the effect of the Charter, rather than to prevent its application to the United Kingdom : explanatory , rather than evasive. [En passant, one wonders whether the Polish agree !]. On 12th July 2010, the Court of Appeal ordered a reference to the ECJ. One readily understands the following observation :

The significance (and the meaning) of the Protocol are far from clear ; from a strictly formal legal perspective it has the same value as EU primary legislation i.e., the same value as the Treaties and the Charter. However, the wording is so carefully drafted as to be nebulous …”. [14]


[1] See paragraph [6] infra.

[2] Stadt Halle [2005] ECR I-1, 46, paragraph 44.

[3] The Public Contract Regulations 2006 [SI 2006 No. 5], Regulation 3. See further separate seminar paper [No 2] on

The Remedies Directive.

[4] Supra, paragraph [48].

[5] The Teckal decision – [1999] ECR I-8121, paragraph [41]. Case – 107/98.

[6] [2009] ECR I-4747. Case C-480/06.

[7] See paragraphs 37, 44-45 and 48-49.

[8] Emphasis added.

[9] For example Baustahlgewede –v- Commission [1998] ECR I-8417, Case C-185/95.

[10] Such as Professor Craig.

[11] See the discussion in European Union Law (Wyatt and Dashwood), 6th Edition, pp. 382-386.

[12] Op. Cit. p. 382.

[13] R (NS) –v- Secretary of State for the Home Department [2010] EWCA 990. The ECJ reference is Case C – 411/10 ; conjoined with the Irish case of ME, Case C-493/10

[14Wyatt and Dashwood, op. cit. p. 386.