Regulation 14 – Research and development services

Commentary

Regulation 14 subjects certain R&D services to the application of Part 2 rules. These contracts have traditionally been excluded from public procurement.

The extension introduced by this Regulation is only applicable if three cumulative conditions are met:

i) Contracts need to classified under specific Common Procurement Vocabulary (CPV) codes;

ii) If the benefit accrues exclusively to the contracting authority; and

iii) The price is fully borne by the contracting authority.

According to the CPV database these are the R&D contracts which are classified as purely research and development. In fact, 73000000-2 is the CPV code for “Research and Experimental Services”. Any other R&D contract that is not covered by those CPVs (or one that is classified differently on purpose…) will not be subject to the rules of Part 2.

The second requirement imposes a need for the benefit of the contract to accrue exclusively to the contracting authority. In our view this is not logic as the importance of the contract for the Internal Market should not be dependent of the subsequent use. In fact, this requirement precludes the application of the Regulations to contracts where the benefits are extended to different organisations. It also allows central purchasing bodies to be used for procuring research and development services on the behalf of another contracting authority. In those cases, though, the rules on State aid established in the 2014 Framework for State Aid for research and development and innovation (OJ C 198 of 27.06.2014, p. 1) will be applicable, and in particular the public procurement requirements of para 2.3, which come to require that an open or restricted procedure is followed, unless the entity commissioning and supporting the R&D project is able to meet a long list of additional requirements aimed to ensure that there is no preferential treatment and no long-term economic advantage, particularly where the project takes place at the pre-commercial procurement stage.

A similar comment can be made about the third requirement: if the price is paid by two or more contracting authorities, it could be argued that there may be grounds to take such procurement outside the rules of Part 2, due to the reference to “contracting authority” in singular form only instead of “contracting authorities.” However, such a literal approach would be likely to trigger a challenge and, given its anti-functional orientation, there would be a risk of resulting in a finding of illegal avoidance of the rules.

Finally, the extension of Regulation 14 is only applicable to R&D contracts which comply with the general requirements for application of Part 2, such as the financial thresholds. Therefore, a £50,000 R&D contract classified with the 73000000-2 CPV code, paid in full by the contracting authority and for its exclusive benefit would not be subject to Part 2.

Last modified: July 4, 2016 by Pedro Telles

14.  This Part applies to public service contracts for research and development services which are covered by CPV codes 73000000-2 to 73120000-9, 73300000-5, 73420000-2 and 73430000-5 only if—

(a) the benefits accrue exclusively to the contracting authority for its use in the conduct of its own affairs, and

(b) the service provided is wholly remunerated by the contracting authority.