Does this mean that such a solution should be applied across the board and that all such establishments should be excluded, as a matter of principle, from public procurement law?
Certainly not.
It should be remembered that to qualify as a contracting authority, which is essential for the application of public procurement law, legal entities governed by private law must comply with the conditions set out in article L. 1211-1 2° of the Public Procurement Code.
Under the terms of this provision:
"Contracting authorities are :
1° Legal entities governed by public law ;
2° Legal persons governed by private law that have been
created specifically to meet needs in the general interest that are
not industrial or commercial in nature, and whose :
a) either the activity is financed for the most part by a
contracting authority ;
b) the management of which is subject to supervision by a
contracting authority; or
c) the administrative, management or supervisory body is made up of
members more than half of whom are appointed by a contracting
authority;
3° Bodies governed by private law with legal personality set up by contracting authorities with a view to carrying out certain activities jointly.
Persons governed by private law formed by contracting authorities with a view to carrying out certain activities in common are also classified as contracting authorities (point 3° of the aforementioned article, not concerned by the present article).
In order to determine whether a legal person governed by private law should be subject to public procurement law, it is first necessary to determine whether it has been created specifically to meet needs in the general interest which are not of an industrial or commercial nature.
Without going into detail about this concept, which is the subject of abundant Community case law, there are a number of indicators that can be used to determine the nature of the activity carried out, and in particular the competitive environment in which the body carries out its activity, its non-profit nature and the absence of financial risk and profitability requirements for the body in question.
Once this first condition has been met, it is necessary to determine the degree of dependence of the body in question on other contracting authorities.
It must therefore be determined whether at least one of the following three conditions is met:
- the activity is financed for the most part by a contracting authority,
- its management is subject to control by a contracting authority,
- the body's administrative, management or supervisory body is made up of members more than half of whom are appointed by a contracting authority.
In other words, public procurement law will apply to this body if it can be shown that a contracting authority exercises active control over its management, calling into question its autonomy to such an extent as to allow that authority to influence its decisions on the award of contracts (ECJ 27 February 2003, Adolf Truley GmbH, C-373/00, point 69).
It was in this context that the Conseil d'Etat received a request for an opinion from the Bordeaux Administrative Court of Appeal, which had to determine, in the context of a dispute relating to the payment of an ERDF grant, whether private social and medico-social institutions, which manage social and medico-social establishments and services, were subject to active management control by a contracting authority within the meaning and for the application of Article L. 1211-1 2° b) of the French Public Procurement Code.
A positive response should lead to the application of public procurement law to this establishment.
After examining in particular the rules governing these social and medico-social establishments and services and the role assigned to the various authorities involved in setting fees, loan guarantees and investment programmes, the Conseil d'Etat considered that, in the light of these provisions, these establishments are not subject to active management control enabling the public authorities to influence their decisions on the award of contracts:
"It follows from all of the legislative and regulatory provisions mentioned in the previous point that legal entities governed by private law that manage the social and medico-social establishments and services listed in Article L. 312-1 of the Social Action and Family Code, including for-profit organisations, are only subject to regularity control, including when, in the case of not-for-profit establishments, malfunctions in their financial management are at issue. Although some of these controls, such as those relating to loan guarantees and investment programmes, are exercised a priori, they are intended to ensure compliance with pricing regulations and do not, any more than other controls, have the purpose or effect of calling into question the management autonomy of these private entities. As a result of these provisions, social and medico-social establishments and services are not subject to active management control that would enable the public authorities to influence their decisions on the award of contracts.
It is therefore solely on the basis of Article L. 1211-1 8° b) that the Conseil d'Etat rules out the classification of these organisations as contracting authorities and, consequently, their submission to public procurement law:
"The control exercised by the administration over these bodies is not such as to create a situation of dependence on the public authority, equivalent to that which exists in particular when the management body of the legal entity governed by private law is composed of members more than half of whom are appointed by a contracting authority. Managers of social and medico-social establishments and services governed by private law cannot therefore be regarded as a contracting authority within the meaning of b) of 2° of Article L. 1211-1 of the French Public Procurement Code.
Such a solution cannot therefore be applied systematically without considering whether these same bodies can be classified as contracting authorities on a case-by-case basis in the light of the other criteria set out in Article L. 1211-1 2° of the French Public Procurement Code.
A social and medico-social establishment could thus be classified as a contracting authority:
- if its governance is made up of members more than half of whom are appointed by a contracting authority,
- the majority of its funding comes from a contracting authority.
On this last point, however, the revenue received by these bodies by way of charges for their activities should be excluded from the calculation of this majority funding share, as such funding consists of remuneration for the provision of services (CJEU, 12 September 2013, IVD GmbH & Co KG, aff. C-526/11, cons. 22).
In summary, while the opinion issued by the Conseil d'Etat on 11 April 2024 makes it possible to exclude a large number of social and medico-social establishments from the scope of public procurement, it does not obviate the need for a careful case-by-case examination based on the specific situation of each of these organisations.
Originally published 18 June 2024
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