27 May 2014

The recent opinion issued in Impresa Pizzarotti v Comune di Bari, confirms the EU approach to interpretation – it is necessary to look at the nature of a transaction rather than its classification to determine whether or not the procurement rules apply.

The central question in the case in Pizzarotti was whether the contract was a 'public works contract' under the EU procurement rules or a 'lease'. The categorisation of the type of contract is important since leases are exempt from the requirements to advertise and tender contracts in accordance with the procurement rules.

The facts of Pizzarotti are as follows:

  • The Municipality of Bari in Italy entered into a conditional agreement for the 'off-plan' rental of judicial offices by way of a lease
  • Bari was funded by the Italian Ministry of Justice
  • The Ministry of Justice had significant influence over the characteristics of the works through 'numerous technical specifications'

The Advocate General took the view that the contract was a public works contract and not a lease, regardless of the contract's label under the relevant domestic law. His reasoning was that the main purpose of the contract was the construction of the offices. Since the buildings did not exist at the time of the contract, the 'lease' had no purpose without the requirement to first construct the buildings.

A determining factor was the fact that although the Ministry of Justice was not procuring the works, it was providing the funding and had influence over the specifications. The specifications, which related to a precise description of the buildings to be constructed, their quality and fixtures and fittings, far exceeded the usual requirements of a tenant in relation to newly constructed premises. This is a classic example of a third party indirectly procuring works.  

There has been extensive caselaw on the indirect procurement of works under Directive 2004/18. The new Directive 2014/24  provides further clarity on the meaning of a 'public works contract' especially in relation to indirect procurements and takes into account the previous caselaw.  

A public works contract is defined as 'Having as its object one of the following:

  • The execution, or both the design and execution, of works related to one of the activities within the meaning of Annex II.
  • The execution, or both the design and execution, of a work.
  • The realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority exercising a decisive influence on the type or design of the work.

There are two main points to note regarding the new definition:

  • The focus on the 'object' of the contract.
  • The wording for a contracting authority to engage a person to procure works, which has led to confusion, has been removed – it is sufficient for the contracting authority to have decisive influence on the type or design of the works.

Unfortunately the opinion Pizzarotti does not provide further detail on the extent of the contracting authority's role in deciding upon the specifications in order to have decisive influence. However since Pizzarotti has now been referred for determination to the European Court of Justice, it is hoped that the judges will take the opportunity to provide further clarification.  

The author Stephanie Rickard is a Senior Associate in the Burges Salmon procurement team led by John Houlden.

Key contact

John Houlden

John Houlden Partner

  • Head of Public Sector
  • Head of Procurement and Subsidy Control
  • Projects

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