Full enjoyment of property ownership includes being able to invest and develop in the property as the owner wishes, with suitable constraints under the planning system, doesn't it? Well, not entirely - a private sector owner may not always be free to choose its contractor for a major development.

The public procurement rules are designed to open up opportunities to carry out public works contracts to contractors, broadly speaking where public funding is used to deliver specified public sector requirements. The 2004 EC Procurement Directive and the Public Contracts (Scotland) Regulations 2006 govern procedures for awarding public contracts.

OK, before awarding a public works contract there should be a public procurement competition to select the contractor. But what about those private developments?

First, a European Court of Justice (ECJ) judgment from 2007. The case of Jean Auroux v Commune de Roanne (Auroux) concerned the public procurement rules and a contract which the French municipal authority of Roanne awarded to SEDL, a semi-public French entity, without first going out to procurement. The contract was to implement a town planning scheme aimed at regeneration. A leisure centre was to be built and partly sold off to third parties and a car park and other elements were to be provided for the town. Building costs were to be met partly by Roanne and partly by sale on to third parties. Roanne would receive land and buildings which were not disposed and take over SEDLs residual liabilities. The ECJ were asked:

1. was the contract a public works contract within the meaning of the Procurement Directive?

2. how to determine the financial value of the contract for establishing if it exceeded the threshold, above which public procurement rules apply?; and

3. did the public procurement rules apply given that under French law, such a contract could only be agreed with certain types of entity?

Very briefly, the ECJ held that a contract could be a public works contract for procurement purposes whether or not the contracting authority was to own all or part of the work. As for contract value, the ECJ took into account who was to pay for the works and held that all consideration paid must be taken into account when determining the total value of the contract for public procurement purposes. The ECJ also held that a contracting authority is not exempt from procurement procedures simply because a national law provides that contract may only be awarded to certain legal persons.

Following Auroux, there was a concern that the public procurement rules apply to planning agreements containing land development obligations - those where the detail of the buildings and infrastructure to be constructed amounts to the carrying out of a 'work corresponding to specified requirements'. If so, and even if the buildings are never intended to be used by the public sector, a public procurement competition may be needed before contract award.

And the European Commission has raised proceedings against some member states for infringements in this area. In June 2009 it sent the UK a reasoned opinion, concerning the York Council's award of a public works concession for the Osbaldwick development.

As that private developer will surely argue, public procurement shouldn't be required for most private developments but cannot simply be ignored. It is as well to be aware of the issue, especially if a sizeable element of a development is separable and resembles a public sector works requirement. This is particularly worth bearing in mind for some land regeneration and economic recovery schemes.

This article featured in the November 2009 issue of Project Scotland.