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Impact of new legislation on public contracts

Public sector & Social profit

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On July 14, 2016, the Belgian Official Journal published the new law of June 17, 2016, concerning public contracts (Public Contract Law 2016) and the new law of June 17, 2016, concerning concession contracts (Concession Contract Law 2016). However, the legislation on these contracts remains unclear. When exactly is the public contracts or concession contracts legislation relevant? Prof. Dr. Steven Van Garsse is specialized in administrative law and wrote a white paper on this subject.

 

Public Contract Law

Insourcing

The former public contract legislation didn’t explicitly regulate insourcing (or internal procurement). Hence the new legislation was introduced. The new regulations have codified the so-called in-house exception, for which public contract law does not need to be applied. With in-house procurements, the government assigns a task to its own public service (pure internal procurement/insourcing). The insourcing has to comply with three conditions:

  1. The contracting authority monitors the legal entity as it would its own services.
  2. More than 80% of the activities of the monitored legal entity are tasks that have been assigned to the entity by a monitoring contracting authority or by other monitored legal entities of the same contracting authority.
  3. National legislation, in accordance with the treaties, does not require direct participation of private capital of the monitored legal entity, with the exception of participation of private capital that does not result in controlling or blocking forces that do not have a decisive influence over the monitored legal entity.

“The most important change compared to earlier jurisdiction is that henceforth the percentage is fixed at a minimum of 80%. Furthermore, upward and sideward cooperation is explicitly allowed under certain conditions. From now on, participation of private capital is also allowed under very strict conditions, when it does not result in controlling or blocking power and when it is mandatory on the grounds of national legislation and through which no decisive influence can be exerted on the monitored entity.

Outsourcing

Outsourcing (or external procurement) is the only modality that clearly fell under the former legislation of public contracts. Contracts in which activities are outsourced will be qualified as public contracts, although “a qualification as concession […] is not ruled out.” The new law does not change this.

Divesting

Divesting is not a modality that currently falls under public contract legislation. That will remain the case after the amendment.

 

Public-public cooperation

The new regulations also offer a framework for public-public (horizontal) cooperation. “Henceforth, legislation dictates that a contract, awarded solely to two or more contracting authorities, is excluded from the scope of this regulation when each of the following cumulative conditions is met.”

  1. The contract offers the opportunity for, or the implementation leads to, cooperation between the participating contracting authorities to ensure that the public services they need to provide are granted in view of the realization of their common objectives. 
  2. The interpretation of that cooperation relies solely on considerations concerning the public interest.
  3. On the public market, the participating contracting authorities do not account for more than 20% of the activities subject to cooperation.

These guidelines are not strict, and there is a lot of discussion on how to interpret the new guidelines. “A compensation may be paid for provisions or services in a public-public cooperation as mentioned above, but it should not exceed the costs, as otherwise they may be considered public contracts for which the new regulations are in fact relevant.”

 

“A compensation may be paid for provisions or services in a public-public cooperation, but it should not exceed the costs."

The Public Contract Law is not the only new law in this respect. On June 17, 2016, a new concession contract law arose as well.  Up to now, concession has been a way of external procurement, but this is now more regulated now.

 

Concession contract law

Up to now, Belgium did not have legal regulations for concessions. That is about to change. The new law of June 17, 2016, intends to regulate concessions of work and services. “Concessions are related to public contracts, but the biggest difference is that concessionaries are entitled to an exploitation right instead of the mere payment of a price.” They take on the risk to carry out the contract. Concessions are a well-known technique to outsource activities.

During the legislating process on the new regulations, there was a lot of resistance against the new guideline. It was feared that this would lead to increasing privatization. The water industry felt most strongly about it. That is why the European legislator has decided this group will not be covered by the new law. Another measure taken is to offer member states a voice in the determination of concessions: “governments autonomously decide on the management resources that they find most suitable for performing work and service contracts.”

"Governments autonomously decide on the management resources that they find most suitable for performing work and service contracts.”

The concession contract law does not impose specific conditions, contrary to the public contract law. It does, however, include commitments that make the process of awarding concessions more transparent.  

  • Concession awards should be announced in the Official Journal of the European Union and the Bulletin des Adjudications .
  • Specific awarding and selection criteria should be established.
  • Procedural provisions.

Conclusion

In terms of outsourcing and divesting, not much has changed with the new public contract legislation. The difference is, however, prominent in insourcing and cooperation. Insourcing was not included in legislation up to now. From now on, insourcing is clearly split into pure insourcing that does not fall under the law, and quasi-insourcing that does fall under the law. Moreover, the new law includes a framework for public-public cooperation. The guidelines are, however, not strict and will probably be the subject of many discussions.

Although the concession contract law is not as strictly regulated as the public contract law, we can expect that it will have an impact. Today, the outsourcing through concessions is often regulated via general principles. When the law enters into force, there will be a (more) strict judiciary framework within which one should work.

 


Keep up to date with the latest developments in the field of regulation and jurisdiction concerning public contracts. Prepare yourself for possible issues in the implementation phase.

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