Procurement: What – How? | The Didam Rulings versus Public Procurement Law

Background of public procurement

Public procurement is purchasing (Recital 4, Directive 2014/24/EU). The contracting authority has a need and turns to the market to fulfil it. Interested economic operators (suppliers of works, supplies, and services) must be given a fair and equal opportunity to compete for the contract. This is safeguarded by the fundamental principles:

• The principle of equal treatment ensures equal opportunities for all economic operators within the procurement procedure.
• The principle of transparency ensures the monitoring of that equal treatment.

The didam rulings and creating competition

Because procurement concerns purchasing, the fundamental principles of public procurement law do not formally apply to other legal domains. The Court of Justice of the EU (CJEU) ruled this, for example, in the Muller case. According to the CJEU, the fundamental principles do not apply, among other things, to the sale of land.

And this is where Didam comes in. The two Didam rulings essentially established that, in the case of sales of land (and similar assets), the general principles of good governance (abbb) do apply. This means that a public authority selling land must offer genuinely interested parties an equal opportunity to acquire it. The authority may, however, restrict the genuinely interested parties based on objective criteria. The Dutch Public Procurement Act 2012 does not apply in this context.

Overlap between procurement and land sale: area development

There may be overlap between procurement law and the Didam rulings, particularly in the context of area development. It is not uncommon in such cases that a public authority not only sells the relevant land but also wishes to influence the development by imposing requirements and conditions. Does this fall under procurement law, or solely under the general principles of good governance?

Under Article 2.12b of the Dutch Public Procurement Act, it must be assessed on the basis of the main subject matter of the agreement whether procurement law applies and, if so, which part. It is therefore not excluded that procurement law applies, precisely because the authority imposes (decisive) requirements on the area development.

Procurement or general principles? influence is key.

For area development, the key question is whether the public authority wishes to exert influence: influence over what is developed and over the fact that development (as required) actually takes place. Influence requires an onerous title. And if the agreement provides for such an onerous title, the agreement falls under procurement law. In that case, the authority retains considerable control but must conclude the agreement under stricter rules.

If the authority does not wish to exercise influence over the content or implementation, a pure land sale under the general principles of good governance is appropriate. The agreement can then be concluded under a less strict framework, but the authority forfeits influence. It cannot, for example, enforce actual development if the developer takes no steps.

There is no single right or wrong choice here. But be aware of the consequences of the choice you make.

This blog is part of the series ‘Procurement: What – How?’, in which Joris Bax, attorney at Brackmann, shares his insights and reflections on current topics in procurement and construction law.