A contracting authority does not have full liberty to decide whether or not to apply public procurement law when launching PPP land development projects. In two recent decisions on two similar cases, the Council of State ruled against a contracting authority that had incorrectly neglected to treat the PPP projects concerned as public works contracts. If a contracting authority incorrectly decides not to treat a project as a public procurement contract, there is a risk that the entire tender procedure may be deemed unlawful.
On 30 November 2017, the Council of State rendered judgments (nos 240.043 and 240.044) on two applications for suspension, filed pursuant to the extreme urgency procedure. The applications concerned tender procedures for two land development projects. In both cases, the contracting authority decided not to select the applicant because the latter had not demonstrated the required experience, although the applicant had relied on the professional experience of another company.
In both projects, the contracting authority was going to sell property rights on the project land to its private partner. Subsequently, the private partner would construct residential buildings. It would be required to construct these buildings in conformity with the detailed requirements of the contracting authority; the contracting authority would only grant the property rights on that specific condition. Moreover, the projects also included the construction of public domain infrastructure, from which the contracting authority would enjoy direct benefits.
According to the Council of State, the contracting authority unlawfully decided that these projects did not constitute public works contracts.
In the judgments, the Council of State applied all the conditions in the definition of a "public works contract" to the projects.
The Council of State readily accepted that the contracts involved a pecuniary interest. This conclusion seems logical, in view of the different (economic) benefits which the contracts entailed for both contracting parties.
On the other hand, the Council of State gave considerable weight to the following "public works contract" condition: "the realisation, by whatever means, of works corresponding to the requirements specified by the contracting authority exercising a decisive influence on the type or design of the works".
Even if a contracting authority treats the specific project differently, it will qualify as a public works contract if the contracting authority had a decisive influence on the design and the construction of the project.
Consequently, the contracting authority cannot exempt the project from the application of public procurement law if the tender documentation clearly demonstrates that the contracting authority (i) wishes to retain firm control of the project from beginning to end, (ii) imposes its will on the private partner, and (iii) unilaterally decides how the project will be developed.
The fact that the project is formally structured as a property rights transfer does not preclude the applicability of public procurement law.
In the cases concerned, the Council of State held that the contracts would qualify as public works contracts. Consequently, the contracting authority had a duty to apply all applicable public procurement law rules, without any exception. In these specific cases, the contracting authority was not allowed to exclude the applicant from the tender procedures due to the applicant's reliance on the professional experience of other entities, as that is the right of every tenderer under public procurement law.
Finally, it seems that the Council of State will permit an applicant to raise its legal objections to the tender documentation and the chosen tender procedure for the first time in its appeal application, even if the applicant had already agreed to the chosen procedure during the tender procedure. The Council of State does not expect tender participants to raise their objections earlier with the contracting authority when they have to file a request for participation within a relatively short amount of time, and taking into account the fact that the question of the correct treatment of the contract is a matter of significant complexity.
With these judgments, the Council of State confirms that contracting authorities cannot circumvent public procurement law as they please.