Regulation 38 – Occasional joint procurement

Commentary

Regulation 38 of the PCR2015 concentrates on an alternative method of centralisation of procurement based on occasional joint procurement and transposes the rules of Article 38 of Directive 2014/24. Strictly speaking, this is not a novelty of the 2014 rules, since joint procurement was not prohibited in the 2004 legal framework; it simply was not regulated. However, Regulation 38 provides contracting authorities with a simple set of rules to determine responsibility in case they decide to do some joint procurement.

Indeed, regulation 38 PCR2015 establishes rules aimed at delimiting the responsibility (and liability) of contracting authorities that decide to cooperate for the joint procurement of specific works, supplies or services which, as indicated in Recital (71) of Directive 2014/24/EU can take many different forms, ranging from coordinated procurement through the preparation of common technical specifications for works, supplies or services that will be procured by a number of contracting authorities, each conducting a separate procurement procedure, to situations where the contracting authorities concerned jointly conduct one procurement procedure either by acting together or by entrusting one contracting authority with the management of the procurement procedure on behalf of all contracting authorities. 

The general rules concerning the split of responsibility/liability between the cooperating contracting authorities is also summed up in Recital (71) Directive 2014/24/EU: Where several contracting authorities are jointly conducting a procurement procedure, they should be jointly responsible for fulfilling their obligations under this Directive. However, where only parts of the procurement procedure are jointly conducted by the contracting authorities, joint responsibility should apply only to those parts of the procedure that have been carried out together. Each contracting authority should be solely responsible in respect of procedures or parts of procedures it conducts on its own, such as the awarding of a contract, the conclusion of a framework agreement, the operation of a dynamic purchasing system, the reopening of competition under a framework agreement or the determination of which of the economic operators party to a framework agreement shall perform a given task.

What Regulation 38 tries to achieve is the creation of joint responsibility (liability might have been a more appropriate choice here?) for joint procurement. As all the talks about joint responsibility or liability tend to end, the crucial element is to define exactly where the border for that joint responsibility lies. We suspect this is an area where there is no interest in harmonising at EU level, thus leaving for the national legal systems the work of solving the issues associated. This is fleshed out in the rules of Regulation 38 PCR2015, which starts from a general recognition that two or more contracting authorities may agree to perform certain specific procurements jointly (Regulation 38(1) PCR2015) and determines that, in that case, two scenarios need to be distinguished.

First, shared responsibility scenarios whereby all participating contracting authorities are jointly responsible for fulfilling their obligations under Part 2 of the PCR2015. These scenarios cover both (i) cases where the conduct of a procurement procedure is carried out in its entirety jointly in the name and on behalf of all the contracting authorities concerned; and (ii) cases where one contracting authority manages the procedure, acting on its own behalf and on the behalf of the other contracting authorities concerned (Regulation 38(2) & (3) PCR2015). Paragraph 2 states that where the procurement is done “in the name and on behalf of” another contracting authority or authorities, then there is joint responsibility by all authorities for resulting obligations. This main rule warrants two comments. First, all elements need to be present for the responsibility to be joint (unless general national laws would establish otherwise, we suppose), leading thus to potential scenarios such as what happens when the procurement is done in the name and behalf of someone else but the supplier is not aware of that? Is it a requirement for the joint liability for the name of the other participating authorities to be disclosed or is it simply an internal requirement (that is all participating authorities are aware of the procurement) irrespective of the supplier being informed? We can definitely see a “pass the buck” game going on between the various contracting authorities if something goes wrong, leaving aggrieved bidders or suppliers without knowing exactly who to sue or complain to.

Second, mixed responsibility scenarios where the conduct of a procurement procedure is not in its entirety carried out in the name and on behalf of the contracting authorities concerned, in which case they will be jointly responsible only for those parts carried out jointly, and each contracting authority shall have sole responsibility for the parts it conducts in its own name and on its own behalf (Regulation 38(4) PCR2015).

Interestingly, these rules partially deviate from those applicable to contracting authorities that resort to centralised purchasing bodies, in which case they do not assume liability/responsibility for the activity of the centralised purchasing body (Regulation 37(4) PCR2015), but exclusively for the activities they carry out directly, such as direct call-offs or awards under framework agreements or dynamic purchasing systems operated by the central purchasing body (Regulation 37(6) PCR2015). This is bound to limit significantly the attractiveness of occasional joint procurement if the contracting authorities have the “liability-free” alternative of resorting to the central purchasing bodies without assuming any direct intervention in the procurement process.

In any case, it is worth stressing that the rules in Regulation 38 PCR2015 are quite intuitive and seem to strive for “institutional fairness” in the allocation of responsibility for the conduct of occasional joint procurement. However, they cannot be applied without difficulty. One problematic aspect will be to determine exactly which contracting authority is responsible for which part(s) of a specific tender procedure, both internally and externally. Internally, the issue may not be too problematic beyond an operational level, as the contracting authorities will actually have to determine which one does what, at least on a step by step process. 

However, externally, the distinction needs to be particularly clear in order to avoid eroding procedural rights and legitimate expectations of tenderers (particularly if damages are susceptible of arising and being claimed against the contracting authorities). Having a situation where tenderers need to claim against both (or all) contracting authorities in order to avoid being left unsatisfied because the review court/authority determines that the specific procedural or substantive error (conveniently?) fell under the scope of obligations of the other contracting authority would simply deactivate the rules under Regulation 38(4) PCR2015 and any expected benefits.

Another problematic area will be the need to develop rules on allocation of liability between contracting authorities, particularly if it is insurable or insured, since the final allocation of liability will not be neutral from the perspective of the internal coverage by the contracting authorities (or their insurers). Hence, this is an area where public law solutions to issues of intra-public sector liability will be needed in the near future. From our perspective and with limited knowledge of the common law approach, this sounds like contracting authorities potentially exercising (directly, or by their insurers through surrogation) private(?) liability claims against each other. 

In our view, it would have been positive for Regulation 38 PCR2015 to set some solutions to these difficulties. The limitation to the transposition of Article 38 of Directive 2014/24/EU leaves these gaps unfilled and may result in a de facto extension of the joint and several responsibility/liability to all cases, ie also in Regulation 38(4) PCR2015 scenarios), without necessarily implying the following re-allocation through public-to-public liability claims. That could significantly limit the incentive for joint occasional procurement.

Overall, Regulation 38 may appear to be a simple framework to help Member States, but it could have been preferable either not to have it at all, leaving the issues associated squarely with national law or else to actually establish a proper liability regime for joint procurement. As things stand, it’s neither here nor there and contracting authorities need to think carefully about the potential pitfalls before embarking into joint procurement.

Proposed citation: Albert Sanchez-Graells & Pedro Telles, (2016) Commentary to the Public Contracts Regulations 2015, available at: www.pcr2015.uk.

Last modified: September 5, 2016 by Pedro Telles

38.—(1) Two or more contracting authorities may agree to perform certain specific procurements jointly.

(2) Where the conduct of a procurement procedure in its entirety is carried out jointly in the name and on behalf of all the contracting authorities concerned, they shall be jointly responsible for fulfilling their obligations under this Part.

(3) Such joint responsibility applies also in cases where one contracting authority manages the procedure, acting on its own behalf and on the behalf of the other contracting authorities concerned.

(4) Where the conduct of a procurement procedure is not in its entirety carried out in the name and on behalf of the contracting authorities concerned—

(a) they shall be jointly responsible only for those parts carried out jointly, and

(b) each contracting authority shall have sole responsibility for fulfilling its obligations under this Part in respect of the parts it conducts in its own name and on its own behalf.