Public authorities have to conduct procurement processes under the relevant EU and UK law for any public contract unless one of the exemptions applies. One exemption is the ‘internal’ award of a service contract to a body over which the public authority exercises control similar to that exercised over its own departments (often known as the Teckal exception after a case of that name).
Two German public authorities (city and regional authorities in Düren) tried to use this exemption to allow one of them to assign the responsibility for providing cleaning services to its public buildings to the other, at cost. The European Court has rejected that attempt. The Teckal exception is only available where one authority controls the body delivering the work. Neither of these authorities controlled the other even though both might be said to be part of the same public sector. An argument that the authorities were simply collaborating to discharge a duty they both had was also rejected as they shared no obligations to clean each other’s buildings.
The ‘in house’ exception to public procurement is widely used in a number of industries and is prone to potential misuse. Vigilant authorities need to be rigorous about their power to actually make such awards and their control over the bodies designated to provide the services. Vigilant suppliers should also keep a close eye on whether the contracts in which they are interested are made subject to proper procurement procedures as they should be.
John Houlden leads our cross-disciplinary procurement group. Chris Jackson and Jennifer Gibson are procurement disputes lawyers within the group.