Regulation 16 – Mixed procurement involving defence or security aspects

Commentary

Regulation 16 is concerned with mixed procurement involving defence or security aspects, raising again issues concerning the divisibility or indivisibility of mixed contracts. Some of these issues were raised on our comments to Regulation 4, but Regulation 16 brings new interpretative issues of its own due to the change in drafting style in comparison with Article 16 of Directive 2014/24/EU (not that Article 16 is much better…)

One of the points to note is that Regulation 4(3) expressly excluded the application of the rules in that regulation “where part of a given contract is covered by Article 346 of TFEU or the Defence and Security Regulations“, in which case Regulation 16 applies instead. The justification for that exclusion is that, despite the fact that the criteria on how to determine the subjection of mixed contracts to a specific set of rules are broadly common under both Regulations 4 and 16 (ie both are based on whether the different elements of a procurement are separable), Regulation 16 is apparently more permissive in excluding the applicability of the general rules to the entirety of the procurement.

Objectively separable contracts

Regulation 16 is simpler and less prescriptive than Regulation 4. In a situation of a mixed procurement covered, if the contract is “objectively separable” the contracting authority may decide to separate the contract into different procurements (applying the appropriate rules to each part) or alternatively award a single contract instead. However, the decision to award a single contract needs to be “justifiable” and the procurement will follow the (negative) rules of Article 346 TFEU or the Directive 2009/81/EC as appropriate.

What about contracts that are not objectively separable?

A first reading of paragraph (8) of Regulation 16 seems to indicate it is redundant in face of paragraph (5). This is due to the drafting style adopted by the law maker, as paragraphs 3-7 in terms of content and context are really sub-paragraphs of paragraph (2) since all of them contain rules applicable to objectively separable contracts. Paragraph (8) however, deals with contracts which are not objectively separable instead. For these contracts, they may be awarded in accordance with the rules of Article 346 TFEU or the Directive 2009/81/EC, just like paragraph (5). As the lawmaker uses may instead of shall, this should be taken as an optional approach, thus allowing contracting authorities to apply Part 2 of the Regulations if they so wish to do so.

Last modified: July 4, 2016 by Pedro Telles

16.—(1) This regulation applies in the case of mixed contracts which have as their subject-matter procurement covered by this Part and procurement covered by Article 346 of TFEU or the Defence and Security Regulations.

(2) Where the different parts of a given public contract are objectively separable, contracting authorities may choose to award separate contracts for the separate parts or to award a single contract.

(3) The decision to award a single contract shall not, however, be taken for the purpose of excluding contracts from the application of either this Part or the Defence and Security Regulations.

(4) Where contracting authorities choose to award separate contracts for separate parts, the decision of which legal regime applies to any one of such separate contracts shall be taken on the basis of the characteristics of the separate part concerned.

(5) Where contracting authorities choose to award a single contract, the following criteria shall apply to determine the applicable legal regime:—

(a) where part of a given contract is covered by Article 346 of TFEU, the contract may be awarded without applying this Part, provided that the award of a single contract is justified by objective reasons;

(b) where part of a given contract is covered by the Defence and Security Regulations, the contract may be awarded in accordance with those Regulations, provided that the award of a single contract is justified by objective reasons.

(6) Paragraph (5)(b) is without prejudice to the thresholds and exclusions for which the Defence and Security Regulations provide.

(7) Paragraph (5)(a) applies to mixed contracts to which both paragraph (5)(a) and (b) could otherwise apply.

(8) Where the different parts of a given contract are objectively not separable, the contract may be awarded without applying this Part where it includes elements to which Article 346 of TFEU applies; otherwise it may be awarded in accordance with the Defence and Security Regulations.