Relying on Recital 4
Can contracting authorities rely on Recital 4 of the Directive 2014/24 to award contracts without running a procurement exercise? Mannah Begum examines the issues.
Recital 4 of the preamble to the EU Directive 2014/24 states:
“The increasingly diverse forms of public action have made it necessary to define more clearly the notion of procurement itself; that clarification should not however broaden the scope of this Directive compared to that of Directive 2004/18/EC. The Union rules on public procurement are not intended to cover all forms of disbursement of public funds, but only those aimed at the acquisition of works, supplies or services for consideration by means of a public contract. It should be clarified that such acquisitions of works, supplies or services should be subject to this Directive whether they are implemented through purchase, leasing or other contractual forms.
The notion of acquisition should be understood broadly in the sense of obtaining the benefits of the works, supplies or services in question, not necessarily requiring a transfer of ownership to the contracting authorities. Furthermore, the mere financing, in particular through grants, of an activity, which is frequently linked to the obligation to reimburse the amounts received where they are not used for the purposes intended, does not usually fall within the scope of the public procurement rules. Similarly, situations where all operators fulfilling certain conditions are entitled to perform a given task, without any selectivity, such as customer choice and service voucher systems, should not be understood as being procurement but simple authorisation schemes for instance licences for medicines or medical services.”
Can contracting authorities rely on Recital 4 to award contracts under an authorisation procedure that which falls outside the scope of procurement law rules? If so, what are the conditions to be met to rely on Recital 4?
Recital 4 may apply to instances where a contracting authority sets up an accreditation system for service providers and a service user chooses which provider, if any, they wish to source services from directly. However this is rather a grey area.
The case of C-410/14, Falk Pharma – objecting to a contract supplying a public body reduced-price medicine – dealt with the issue of whether a contracting authority carried out an authorisation procedure in which it awarded the contract without selecting one or more economic operator (‘the open house model’). The case discusses the position under the old Directive 2004/17 but also considers the wording of Recital 4 of the new Directive 2014/24.
Whilst it is worth reading the facts of this case, the key points to note:
1. It is possible for a contracting authority to argue that it did not make a choice between providers (i.e. no selectivity) therefore would not be subject procurement rules;
2. A contracting authority may legitimately decline to make a choice between one or more firms by virtue of the fact that it had organised an authorisation procedure and had stipulated various conditions in the notice providing that the contracting authority’s authorisation procedure complied with EU’s legal principles of transparency, nondiscrimination and equal treatment;
3. It is possible to conclude no companies must be excluded and the contracting authority could conclude a contract with any company;
4. Selecting one or more economic operator by way of an authorisation procedure only if the following conditions are satisfied:
a) the carrying out of an authorisation procedure is published at European level;
b) clear rules concerning the conclusion of the contract and acceding to the contract are set;
c) the terms of the contract are set in advance in such a way that no economic operator is able to influence the content of the contract;
d) economic operators are granted the right to accede to the contract at any time; and
e) the contracts concluded are published at European level.
This case indicates what ‘fulfilling certain conditions’ may require and it is also clear that the no economic operators can be excluded and the advertisement should be extended to include any interested company.
Conclusion
The waters are yet to be tested in this area and contracting authorities should take care when relying on Recital 4 to make a direct award.
Alternatively, it is likely that most services that may fall under Recital 4 are likely to be covered under Schedule 3 of the Public Contract Regulations 2015 (as a health service or community health service) therefore it will be covered by the light touch regime (‘LTR’). Subject to the value of the contract, if this falls below EU threshold, contracting authorities may not be obliged to follow any particular procedure, as long as the process is compliant with regulation 76 of the Public Contract Regulations 2015.
Mannah Begum is a solicitor in the Commercial Contract & Capital Team at Leicester City Council. You can contact Mannah on 0116 454 1423 or This email address is being protected from spambots. You need JavaScript enabled to view it..
Nothing in this article shall be taken to constitute legal advice. The author does not assume any liability for timeliness, correctness, completeness or quality of the provided information.
