Cross-border procurement via centralised purchasing bodies

In light of a general shortage of budget funds in the public sector, contracting authorities are seeking to bundle and pool their purchasing quantities to gain efficiency and positive pricing effects. According to Austrian procurement law (which has not yet implemented the EU Procurement Directive (2014/24/EU)), contracting authorities have different tools which allow them to bundle their purchasing volume by cooperating with other purchasing bodies – for example, by establishing centralised purchasing bodies which acquire supplies or services for other contracting authorities or award public contracts intended for contracting authorities. Centralised purchasing bodies can either act as wholesalers or resellers by conducting a procurement procedure in order to buy supplies or services and subsequently resell them to other contracting authorities, or as intermediaries.

The legal consequences are significantly different when acting as a reseller or an intermediary. While resellers act using only their own names and on their own behalf, intermediaries act in the name and on the behalf of contracting authorities. Centralised purchasing bodies acting as agents for contracting authorities will become the principal parties to the contract. Therefore, centralised purchasing bodies that act as intermediaries must follow the respective material and procedural rules applicable to the respective contacting authorities.

Even though Austrian procurement law expressly provides for the possibility to rely on the purchasing activities of centralised purchasing bodies in different member states, the law does not – contrary to the 2014 directive – contain more specific rules in relation to the applicable national provisions in case of a joint award of contract by authorities from different member states. Hence, in situations where centralised purchasing bodies conduct a procurement procedure on behalf of several contracting authorities from various member states (in their function as intermediaries), the identification of the applicable procurement regime becomes a core issue.

Thus far, Austrian contracting authorities have openly considered relying on this possibility only to cooperate with foreign centralised purchasing bodies (especially in the field of medical devices), but generally this opportunity has remained unexplored – until now.

Facts

In its February 9 2016 decision, the Vienna Administrative Court had to rule on a challenge to a tender conducted by a German centralised purchasing body under German public procurement law.

In the case at hand, a German hospital purchasing group initiated a tender for the supply of medical devices to its member hospitals. Since at least one member of the purchasing group was an Austrian hospital operator, the tender covered the supply of medical devices to both Austria (lot 1) and Germany (lot 2). The German lot significantly exceeded the volume and value of the Austrian lot. The hospital purchasing group expressly stipulated in the tender documentation that the procedure would be conducted under German public procurement law and the competent court in Germany would be the court of jurisdiction.

A potential bidder appealed against the tender before the Vienna Administrative Court, claiming that – apart from the illegality of the choice of a negotiated procedure – the tender was discriminatory and would lead to a circumvention of the Austrian appeal mechanism. The claimant argued that the Viennese court had jurisdiction (irrespective of the controversial specification in the tender documentations), as the contracting authority (at least in relation to the Austrian lot) was an Austrian hospital operator seated in Austria.

Decision

The Viennese court confirmed that according to the tender documents, the Austrian hospital operator (instead of the German centralised purchasing body) qualified as the contracting authority in relation to the devices being supplied to Austria. Under the tender documents, the hospital operators should have become the principal partners of the supply contracts under the tender. According to the appeal mechanism and respective procedural law, the Viennese court was competent to rule on the procurements seated in Vienna. The court further confirmed its competence to rule on the case at hand.

The court concluded that even if the German purchasing body was qualified as a centralised purchasing body (which was not sufficiently clear at that stage), the Austrian complaints mechanism would apply, as the purchasing activities in relation to the Austrian lot were attributable to the Viennese contracting authority.

Consequences

Even if the court did not provide a decision on the merits of the case (since the German centralised purchasing body immediately withdrew the tender once it was challenged), the case raises some interesting questions in relation to the competence of national authorities to rule over tenders conducted by centralised purchasing bodies as an agent for contracting authorities seated in different member states.

In a simplified scheme, the jurisdiction of Austrian procurement review authorities depends on their control over the respective contracting authorities. Contracting authorities under the Viennese control are subject to the review competence of the courts therein. If the tender is conducted in the name of several contracting authorities which are controlled by different states (eg, Tirol and Vienna), the share of the contract value will be decisive. However, Austrian law contains no conflict resolution rule for situations where contracting authorities of different member states are involved in a procurement.

In the case at hand, the German centralised purchasing body acted as an agent and combined the procurement needs of the contracting authorities seated in Austria and Germany by dividing the tender into two lots. As the relevant procedural law provides no explicit rule for such situations, the Viennese court simply referred to the Austrian lot when establishing its jurisdiction. However, the issue is more complex than that, since the German courts could also have established their jurisdiction in relation to the German lot by referring only to that lot. This raises the question of whether two separate lots of a single tender can fall under different jurisdictions. In order to avoid a conflict of national laws, it seems necessary to apply certain assignment rules in order to designate the applicable procurement legislation and remedies legislation in relation to joint procurements. The application of the Austrian main value rule per analogism in the case at hand would have most likely have found the applicable German court to have final jurisdiction.

EU Directive 2014/24/EC provides some clarification in relation to the applicable procurement law for the cross-border activities of centralised purchasing bodies. According to Article 39(3), the national procurement law of the seat of the centralised purchasing body applies to the activities of that body. Hence, under the directive, the choice of German procurement law was appropriate for the procedure conducted by the hospital purchasing group in Germany. It goes without saying that such rules of assignment of jurisdiction might encourage contracting authorities to try to circumvent stricter review mechanisms by engaging centralised purchasing bodies seated in other member states. In this context, Article 39(1) clearly provides for an anti-circumvention provision when it comes to using centralised purchasing bodies in order to avoid the application of mandatory provisions of national law. However, the directive lacks any express rule on the applicable legislation for remedies. As such, there is concern regarding whether, even after the implementation of the 2014 directive, contracting authorities and bidders will still face certain risks and legal uncertainties in relation to procurements conducted by centralised purchasing bodies. In light of these concerns, the adoption of a new and precise remedies directive seems to be only a matter of time.

For further information on this topic please contact Johannes Stalzer at Schoenherr by telephone (+43 1 53 43 70) or email (j.stalzer@schoenherr.eu). The Schoenherr website can be accessed at www.schoenherr.eu.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.