Public procurement law is in calmer waters now that the dust of the amended Public Procurement Act has settled. This does not mean that there are no interesting developments. Tendering procedures in the healthcare sector are giving rise to noteworthy case law. Old themes, such as prohibited coordination of tenders and the position of housing corporations under public procurement law will also re-emerge in 2018.
Tendering procedures for youth mental healthcare
Municipalities have been responsible for providing mental health care to minors since the Youth Act entered into force in 2015. In practice, they purchase those services from mental healthcare institutions. Municipalities are likely to be bound by the public procurement rules when procuring those services (unless, for instance, an "open house" arrangement is applied). In the summer of 2017, we observed that tendering procedures in the healthcare sector were causing a commotion. These past few months that development has given rise to a large number of judgments passed in preliminary relief proceedings.
Several legal actions have been conducted in respect of procurement procedures for youth mental healthcare in the Rijnmond region, including proceedings on the assessment of a tender on the basis of certain award sub-criteria and on the eligibility requirements set. A number of legal actions have also been conducted on a procurement procedure related to the Social Support Act and youth services in the Nijmegen region, all of which had in common that the claimants objected to the application of an award criterion.
A number of legal actions were also conducted on the rates charged and on the available budget ceiling. It is noteworthy that these proceedings had a positive outcome for the claimants. In general, it is extremely difficult to successfully challenge contract conditions set by a tendering authority, but that does not appear to apply in the case of youth services. Section 2.12 of the Youth Act provides that municipalities must guarantee a sound price-quality ratio when procuring youth services. Municipalities must therefore charge rates that cover the costs. They must in any event arrange for the staffing level required to meet the demand for healthcare and the costs involved.
The last word has not yet been spoken on tendering procedures in the youth mental healthcare sector. One of the reasons for this is that some of the problems are due to the macro funding of youth mental healthcare. It would appear that, when youth mental healthcare was decentralised in 2015, insufficient funds were made available to allow municipalities to properly live up to their responsibility. This point is now also on the political agenda, but that does not mean it has been solved. In the coming period we therefore expect that litigation on the procurement of youth services will (unfortunately) continue.
Serious efforts are now also being made to ensure that tendering procedures in the social domain run as smoothly as possible. In January 2018, for instance, a guide was published on procurement under the Social Support Act and the Youth Act. In our healthcare and pharmaceuticals trend we describe the further developments (outside the procurement domain) in the field of care procurement.
ACM study of the tendering market
At the end of last year, a judgment in preliminary relief proceedings before the Court of The Hague referenced an ACM investigation of a tendering market. Shortly after that, ACM confirmed that an investigation was pending into a possible cartel on a tendering market. ACM apparently has reason to believe that public procurement processes in several sectors are still being manipulated. It is not yet publicly known what sectors are involved.
In 2017, the Trade and Industry Appeals Tribunal (“CBb”) upheld fines imposed by ACM on the grounds of cartel breaches in tendering procedures for home care and demolition works in the Rotterdam region. The latter judgment is of particular interest, because the CBb confirms in that judgment that cover pricing is not permitted in tendering procedures. Cover pricing concerns companies which are unwilling to submit a tender but do wish to remain in the picture at the tendering authority. Such a company is informed by a competitor (that does wish to submit a tender) of the amount of its tender and then tenders a higher price (and consequently does not win the tender but remains in the picture). The CBb confirmed that this practice is in breach of the cartel prohibition. This forms a reminder that companies must determine their policy in tendering proceedings entirely independent of each other.
Is a housing corporation a public institution?
Another interesting topic is the position of housing corporations under public procurement law. In short, tendering authorities are central, regional and local authorities, and public institutions. A public institution is an institution that (1) provides for a public interest, not being of an industrial or commercial nature; (2) that has legal personality; and (3) that is dependent to a certain extent on the authorities (due to financing, supervision or appointment rights on the board).
A recurring theme is the question whether housing corporations meet those criteria and must therefore be regarded as public institutions. It would obviously have drastic consequences if housing corporations were classified as contracting authorities. In that case they would have to put all their contracts (in excess of the threshold values) out to tender. Since the amendment of the Public Housing Act in 2015, the supervision of housing corporations has increased. This has implications for the question whether the government supervises housing corporations, which may justify the conclusion that housing corporations are (by now) public institutions.
On 8 December 2017, the European Commission sent a letter to the Dutch government to the effect that housing corporations must be classified as contracting authorities. In the Commission’s opinion, the Netherlands is infringing the Public Procurement Directive, because housing corporations are being excluded from the tendering rules. The Netherlands was given a period of two months in which to respond. The Standing Committee on Domestic Affairs urged the Minister to present a substantive defence against the position taken by the European Commission.
Threshold amounts
Another interesting subject is the change in the threshold amounts for European tendering procedures. If the amount involved in a public contract exceeds those values, the contract must be put out to tender under the Public Procurement Act. This is an extremely relevant issue in practice. Since 1 January 2018, the following threshold amounts apply in 2018-2019 to public contracts, concession agreements and special sector companies:
Public contracts
|
Works |
Supplies and services |
|
|
Central government |
EUR 5,548,000 |
EUR 144,000 |
|
Local/regional authorities |
EUR 5,548,000 |
EUR 221,000 |
|
Public contracts for social and other specific services |
- |
EUR 750,000 |
Concession agreements
|
Works |
Services |
|
|
Central government and local/regional authorities |
EUR 5,548,000 |
EUR 5,548,000 |
Special sector companies
|
Works |
Services |
|
|
Special sector companies |
EUR 5,548,000 |
EUR 443,000 |
|
Contracts for social and other specific services |
- |
EUR 1,000,000 |
Conclusion
Even though no drastic legislative changes are in the pipeline, 2018 promises to be an eventful year in the field of public procurement law. A number of tendering procedures in the healthcare sector will take place this year and the discussion between the European Commission and the State of the Netherlands regarding the position of housing corporations may have a significant impact on the public procurement landscape. To be continued!
Detailed information on dawn raids by ACM or the European Commission can be found at invalacm.nl
