Summary and implications
The European Court has delivered its much awaited judgement in the Valencia case. The case relates to the Commission's challenge against Spain that "integrated action programmes" are public works contracts and ought to be subject to public procurement. The Court dismissed the Commission's arguments, stating that it had failed to demonstrate that the main object of the contract is a public works contract.
The Court reiterated that a contract will be a public works contract (and subject to the public procurement rules) only where the subject matter of the contract falls within the relevant definition in the Directive. The Court said "works which are incidental to, and not the subject-matter of, the contract do not justify the contract's qualification as a public works contract". Here, the issue was whether the predominant purpose was works or a service concession.
The judgement confirms the tests relating to "direct economic benefit" and "pecuniary interest" to the public authority, as laid down in Roanne and summarised in the OGC Policy Note. However, unlike the Advocate-General's opinion which preceded the judgement, the Court did not take the opportunity to give any further guidance on how these tests are to be applied in practice. The circumstances of the Valencia case are unusual, arising out of complaints from Spanish landowners that they were having to pay for developments they didn't want. Nevertheless, the case confirms the move away from a strict interpretation of Roanne , with the Court recognising that procurement does not always apply, in this instance where the works are not the main object. The same principle applies where the works are merely ancillary to a land transaction, which the Court did not comment on here.
- The judgement provides comfort that not all schemes are subject to public procurement rules – direct negotiations between public authorities and developers may sometimes be permissible.
- If public procurement does apply, careful consideration should be given to which procurement procedure is most appropriate.
- Even where a scheme falls outside the public procurement rules, this does not obviate the need for public bodies to demonstrate best value/continuous improvement and, in the case of land disposals, best consideration.