Cross border procurement via centralised purchasing bodies

In light of a general shortage of budget funds in the public sector, contracting authorities intend to bundle and pool their purchasing quantities to gain positive efficiency and pricing effects. According to Austrian procurement law (not having implemented procurement Directives 2014) contracting authorities have different tools allowing them to bundle their purchasing volume by cooperating with other purchasing bodies, such as the establishment of centralised purchasing bodies ("CPB") which acquire supplies or services for (other) contracting authorities, or award public contracts intended for contracting authorities. CPBs can either act as wholesaler/reseller by conducting a procurement procedure in order to buy supplies or services and subsequently resell the services / products to other contracting authorities or acting as intermediaries. The legal consequences are significantly different when acting as a "reseller" or as an "intermediary". While resellers act using their own names and on their own behalf, "intermediaries" act in the name and on behalf of the contracting authorities; CPBs act as agent for the contracting authorities, which become the principal parties of the contract. Therefore CPBs who act as intermediaries have to follow the respective material and procedural rules applying to the respective contacting authorities.

Even if the Austrian procurement law expressly provides for the possibility to rely on purchasing activities of CPBs in different Member States, the law does not - contrary to the 2014 Directive – provide for 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 CPBs conduct a procurement procedure on behalf of several contracting authorities from various Member States (in their function as intermediary), the identification of the applicable procurement regime becomes a core issue.

The ruling of the Administrative Court of Vienna

In its decision of 9 February 2016, the Administrative Court of Vienna ("Court") found itself in a situation where it had to rule on a contestation against a tender procedure conducted by a German CPB under German (public procurement) law.

In the case at hand, a German (hospital) purchasing group initiated a tender procedure 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 Austria (lot 1) and the supply of medical devices to Germany (lot 2). The volume of the German lot exceeded the volume and value of the Austrian lot significantly. 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 shall be the court of jurisdiction. A potential bidder filed an appeal against the tender and took the case to the Administrative Court of Vienna in Austria ("Viennese Court") by claiming - besides the illegality of the choice of a negotiated procedure - that 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 / Vienna.

At first the Viennese Court confirmed that according to the tender documents an Austrian hospital operator (instead of the German CPB) qualifies as contracting authority in relation to the devices to be supplied to Austria (lot 1). Following the tender documentation the hospital operators should become the principal partners of the supply contracts being subject of the tender. According to the appeal mechanism and the respective procedural law the Viennese Court is competent to rule on procurements of contracting authorities seated in the region of Vienna, the Court further confirmed its competence to rule on the case at hand.

The Court further concluded that even if the German purchasing body would qualify as CPB (which was not sufficiently clear at that stage), the complaints mechanism of Austria would be applicable as the purchasing activities in relation to the Austrian lot are attributable to the Viennese contracting authority.

However, so far Austrian contracting authorities only openly considered relying on this possibility to cooperate with foreign CPBs (especially in the field of medical devices), but left this opportunity all in all unused. This situation changed most recently.

Consequences

Even if the Court did not provide a decision on the merits of the case (since the German CPB immediately withdrew the procedure once the procedure had been challenged), the case raises some interesting questions in relation to the competence of national authorities to rule over tender procedures conducted by CPBs as agent for contracting authorities seated in different member states:

  • The jurisdiction of Austrian procurement review authorities depends – in a simplified scheme - on the control over the respective contracting authorities. Contracting authorities under the control of the city of Vienna are subject of the review competence of the Viennese Court. If the tender procedure is conducted in the name of several contracting authorities being controlled of different states (such as Tirol and Vienna) the share of contract value shall be decisive. However, the Austrian law does not provide for a conflict resolution rule for situations where contracting authorities of different Member States involved in a procurement procedure. In the case at hand the German CPB acted as agent and combined the procurement needs of contracting authorities seated in Austria and Germany by simply dividing the tender into two lots. As the relevant procedural law does not provide any explicit rule for such a situation the Viennese Court simply referred to the "Austrian" lot when establishing its jurisdiction. In fact the issue seems to be more complex than that since the German Courts could also have established their jurisdiction in relation to the "German" lot by solely referring to the respective lot: this raises the questions whether two separate lots of a single tender procedure can be subject of different jurisdictions? In order to avoid such a conflict of national laws it seems necessary to apply certain "assignment" rules for the designation of the applicable procurement legislation and the legislation on remedies when it comes to joint procurements of CPBs. The application of the Austrian "main value" rule per analogism in the case at hand would have caused most likely a final jurisdiction of the responsible court in Germany.
  • Directive 2014/27/EU provides some clarification in relation to the applicable procurement law in case of cross border activities of CPBs. According to Art 39 (3) the national (procurement) law at the seat of the CPB shall apply for the provision of centralised purchasing activities of CPBs. Hence, under Directive 2014/27/EU ("Directive") the choice of German procurement law for conducting the public procurement procedure would have been appropriate for the procedure conducted be 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 CPBs seated in other Member States. In this context Art 39 (1) clearly provides for an anti-circumvention provision when it comes to use CPBs to avoid the application of mandatory provision of the national law which the contracting authorities are subject to. However, the Directive lacks on any express rule on the applicable legislation on remedies. As it may be feared that even after implementation of Directive 2014 contracting authorities and bidders will still face certain risks and legal uncertainties in relation to procurement procedures conducted by CPBs the adoption of a new and precise remedies Directive seems to be solely a question of time.

This article was edited by and first appeared on www.internationallawoffice.com.