Outsourcing Is Not Always Insourcing
Over the past years there seems to be a tendency that
contracting authorities and even private parties are obliged more
and more often - and for ever "smaller" contracts - to
meet procedural rules of procurement law when placing contracts.
The exceptions to this obligation to tender must be explained more
and more restrictively, as has followed once again from a recent
judgment of the European Court of Justice (ECJ) in the
"Acoset judgment" of 15 October 2009, regarding
the "quasi insourcing" of contracts.
It is not surprising that contracts awarded by a contracting
authority to their own department, whereby principal and contractor
are parts of one and the same legal person, are exempted from the
obligation to tender. This is called "insourcing". This
concerns, for example, the awarding of a collection contract by a
municipality to its own waste-disposal service, which does not have
legal personality.
Also in the event of "quasi insourcing", a contracting
authority may be exempted from the obligation to tender. In that
case a contracting authority will outsource services or work to an
affiliated institution that is another legal person (public or
private). Often, this legal person, for instance a cooperative, was
incorporated by one or more contracting authorities that hold all
shares in this cooperative or are the only members, for the
specific purpose of performing certain services, work or deliveries
for the contracting authority/authorities concerned. A number of
criteria have been developed in case law by means of which it can
be assessed whether or not there is an obligation to tender.
In a number of judgments of the ECJ (of 11 January and 13
October 2005, "Stadt Halle" and
"Parking Brixen", respectively, 11 May 2006,
"Carbotermo" and 19 April 2007,
"Tragsa") it has been decided that contracting
authorities awarding contracts to a legal person that has been
incorporated (also) by themselves, do not have to put these
contracts out to tender when they "..exercise a control
over" this legal person "similar to that which
they exercise over their own departments".
It is decisive whether the legal person concerned is under such
supervision that the contracting authority awarding the contracts
may influence the decisions of the legal person performing these
contracts. There has to be a decisive influence on the strategic
objectives as well as the important decisions of the legal person.
It does not explicitly follow from case law when there is such
decisive influence. It is clear, however, that the more
independence and related powers directors or supervisory directors
of the legal person have, the more unlikely it is that the
contracting authority awarding the contract will be able to
supervise at the level required.
Indications that the required "decisive influence"
exists are the following:
- the contracting authority/authorities holding all the
shares/ the full capital in the legal person. However, this is
not decisive as such, as follows, inter alia, from a recent
judgment of the Court in preliminary relief proceedings of the
Dutch Trade and Industry Appeals Tribunal of 12 December 2008
("Connexion/Rotterdam"), most certainly not
when the board or supervisory directors enjoy (too) broad
powers;
- having special powers of control or special voting rights,
with which the contracting authority can limit the freedom to
act of the directors or supervisory directors;
- withholding the legal person (and therefore the directors
and supervisory directors) the freedom to refuse contracts of
the contracting authorities, or to determine the rates for its
services itself;
- the absence of a contractual relationship between the legal
person and the contracting authority (as a basis for the
services to be rendered).
Indications that there is no required decisive influence are the
following:
- exercising the supervision of the legal person by means of
a holding company or other "intermediary". Such an
intermediary may lead to a weakening of the supervision;
- the existence of "considerable powers" of
directors or supervisory directors, of which the management of
the legal person by the contracting authority is barely
monitored;
- the development of activities by the legal person within a
(too) wide geographical territory;
- including a (too) broad social objective in the articles of
association and developing, on the basis thereof, a too wide
variety of activities by the legal person;
- connected with the above-mentioned indication: being a
"market-oriented" undertaking. It seems logical to
assume that this will even more be the case as the legal person
is going to perform more work, services or deliveries for other
parties than its affiliated contracting
authority/authorities.
A question that has been posed various times in practice is
whether there is still exempted insourcing if (private) parties
other than the contracting authority/authorities for which the
legal person will perform contracts can also participate in the
legal person. It has been established in case law several times
that this is not allowed. The ECJ ruled, for instance, on 21 July
2005 ("CoNaMe"), in the above-mentioned "Stadt
Halle" judgment and in a judgment of 13 November 2008
("Coditel") that ".. where a private undertaking
holds a share of the capital of a concessionaire, this precludes
the possibility for a concession-granting public authority to
exercise over that concessionaire a control similar to that which
it exercises over its own departments" and that
"..By contrast, the participation, even as a minority, of
a private undertaking in the capital of a company in which the
contracting authority in question is also a participant excludes in
any event the possibility of that contracting authority exercising
over that company a control similar to that which it exercises over
its own departments. Any private capital investment in an
undertaking, on the other hand, follows considerations proper to
private interests and pursues objectives of a different
kind".
Apparently in deviation of this line of case law the ECJ ruled,
however, in the "Tragsa" judgment and later in
the "Coditel" judgment that ".. in
certain circumstances the condition relating to the control
exercised by the public authority concerned could be satisfied
where such an authority held only 0.25% of the capital in a public
undertaking.". Although the circumstances in the
Tragsa judgment were very specific as a result of which
the public authority referred to was able to impose on the
incorporated legal person, despite its limited share of (only)
0.25%, that, when and at which rate they should perform a contract
(so that the required supervision could actually be made
plausible), this judgment still seemed to offer room for exempted
insourcing to a legal person with private
participants.
Therefore, the ECJ has provided little clarity regarding this
very relevant item. This was also the view of AG Ruiz-Jarabo
Colomer in his opinion of 2 June 2009 in the
"Acoset" case. The AG observed in this case that
it ".. it would nevertheless be most helpful if the Court
were to clarify its position in that regard..." about the
question which percentage of participation in a company must be at
least in the hands of the supervisory contracting
authority/authorities.
In its judgment of 15 October 2009 in the same case, the ECJ
seems to do this by setting that percentage at 0. The Court
observed unimpaired that "..participation, even a minority
participation, of a private undertaking in the capital of a company
in which the contracting authority in question also participates in
any event precludes the possibility of the contracting authority
exercising control over that company which is comparable to that
which it exercises over its own departments". By using
such general terms to consider the required supervision impossible
in the event that there is any private participation (read: however
small), the door seems to have been permanently shut to exempted
insourcing to a legal person in which a private party
participates.
Contracting authorities and private parties who are considering
to join forces when providing certain services, for instance to
this contracting authority, must therefore keep in mind that
contracts of the contracting authority concerned to an instrument
incorporated for that matter will be subject to an obligation to
tender when the private party is participating therein. The
question is whether this has (once again) closed the door a bit
further to public-private cooperation initiatives in general.