Regulation 63 – Reliance on the capacities of other entities

Commentary

Regulation 63 PCR2015 determines the requirements applicable to economic agents willing to rely on the capacities of other entities in order to participate in tenders for public contracts, and transposes the equivalent rules under Article 63 of Directive 2014/24/EU. In general, the reliance is possible irrespective of the nature of the legal links between the economic operator taking part in the procedure, but this general rule is subject to a number of exceptions or specific rules.

Reliance on the capacities of other entities is an issue recently discussed by the CJEU in Swm Costruzioni 2 and Mannocchi Luigino (C-94/12, EU:C:2013:646), where the CJEU clearly stressed that the EU regime ‘permits the combining of the capacities of more than one economic operator for the purpose of satisfying the minimum capacity requirements set by the contracting authority, provided that the candidate or tenderer relying on the capacities of one or more other entities proves to that authority that it will actually have at its disposal the resources of those entities necessary for the execution of the contract’ (para 33). It was also discussed in PARTNER Apelski Dariusz (C-324/14, EU:C:2016:214), where the CJEU further emphasised that ‘although it is free to establish links with the entities on whose resources it relies, and to choose the legal nature of those links, the tenderer is nonetheless required to produce evidence that it actually has available to it the resources of those entities or undertakings, which it does not itself own, and which are necessary for the performance of the contract (see to that effect, judgment in Holst Italia, C-176/98, EU:C:1999:593, paragraph 29 and the case-law cited) (para 37).

This resonates with Regulation 63(1) PCR2015, according to which an economic operator may, where appropriate and for a particular contract, rely on the economic and financial standing and technical and professional ability of other entities, regardless of the legal nature of the links which it has with them. Consequently, this facilitative approach needs to inform the interpretation of Regulation 63 PCR2015 / Article 63 of Directive 2014/24/EU.

Additionally, we can say that Regulation 63 maintains a functional approach similar to that of Article 63 Directive 2014/24/EU and Directive 2004/18/EC. As such, any economic operator can rely on the capacity of other entities as long as it is appropriate for a particular contract.

As with Article 63 of Directive 2014/24/EU, Regulation 63 imposes some restrictions in four situations. First, when dealing with educational, professional qualifications or relevant professional experience, economic operators may only rely on the capacity of other entities if these will undertake the services or works if awarded the contract (as supported by the CJEU in PARTNER above, paras 40 and 41). Contracting authorities willing to request tenderers or third parties on which they rely to carry out certain activities directly, are advised to make this particularly clear in the tender documentation, particularly if they want to complement this substantive requirement with additional rules on liability, as foreseen in Article 63(2) of Directive 2014/24/EU.

Second, the contracting authority shall verify if the additional entities fulfill the selection criteria or are caught by any grounds for their exclusion. If so, then such additional entities may be not be relied upon by the economic operator.

Third, the contracting authority may require the economic operator/group member to perform itself certain critical tasks in works, services or siting/installation in a supply contract. This effectively forecloses the possibility of said tasks to be performed by the other entity.

Finally, with regards to economic and financial standing of other entities, the contracting authority may require the economic operator to be jointly liable for the performance of the contract. This risk should be taken into consideration by any entity considering the possibility of lending its financial capacity to an economic operator.

Whereas we agree that the first two restrictions are sensible and welcome, we have our reservations about the final two. There is no good reason to demand the economic operator to perform the critical tasks if it is already taking full liability for them. In our view, this requirement may lead to the non-participation of economic tenderers which could have relied on the capacity of third parties to undertake such tasks. It also runs contrary to the terms of Article 19 of Directive 2014/24/EU and existing case law from the CJEU on teaming and joint bidding.

As for the joint liability requirement, this may also impact subcontracting arrangements or situations where an entity is only performing a very minor part of the contract, as well as increasing the legal complexity in the arrangements between various parties.

For a more detailed discussion of these issues within the context of Directive 2014/24/EU see,A Sanchez Graells, ‘Exclusion, Qualitative Selection and Short-listing‘, in F Lichère, R Caranta & S Treumer (eds),Modernising Public Procurement. The New Directive, vol. 6 European Procurement Law Series (Copenhagen, DJØF, 2014) 97-129.

Proposed citation: Albert Sanchez-Graells & Pedro Telles, (2016) Commentary to the Public Contracts Regulations 2015, available at: www.prc2015.uk.

Last modified: September 5, 2016 by Pedro Telles

63.—(1) With regard to—

(a) criteria relating to economic and financial standing as set out under regulation 58(7) to (14), and

(b) criteria relating to technical and professional ability as set out under regulation 58(15) to (18),

an economic operator may, where appropriate and for a particular contract, rely on the capacities of other entities, regardless of the legal nature of the links which it has with them, subject to the following provisions of this regulation.

(2) With regard to criteria relating to the educational and professional qualifications mentioned in regulation 60(9)(f), or to relevant professional experience, economic operators may however only rely on the capacities of other entities where those entities will perform the works or services for which these capacities are required.

(3) Where an economic operator wants to rely on the capacities of other entities, it shall prove to the contracting authority that it will have at its disposal the resources necessary, for example by producing a commitment by those entities to that effect.

(4) The contracting authority shall, in accordance with regulations 59 to 61, verify whether the entities on whose capacity the economic operator intends to rely fulfil the relevant selection criteria and whether there are grounds for exclusion under regulation 57, and—

(a) the contracting authority shall require that the economic operator replaces an entity which does not meet a relevant selection criterion, or in respect of which there are compulsory grounds for exclusion; and

(b) the contracting authority may require that the economic operator substitutes an entity in respect of which there are non-compulsory grounds for exclusion.

(5) Where an economic operator relies on the capacities of other entities with regard to criteria relating to economic and financial standing, the contracting authority may require that the economic operator and those entities be jointly liable for the execution of the contract.

(6) A group of economic operators within the meaning of regulation 19(3) may rely on the capacities of participants in the group or of other entities, and paragraphs (1) to (5) apply in relation to such a group in the same way that they apply in relation to an economic operator.

(7) In the case of works contracts, service contracts and siting or installation operations in the context of a supply contract, contracting authorities may require that certain critical tasks be performed directly by the tenderer itself or, where the tender is submitted by a group of economic operators within the meaning of regulation 19(3), by a participant in that group.