Limits on Framework Agreements under Public Procurement law
7 October 2020
Framework agreements are subject to certain limits under public procurement law. The recent judgment in Case C-216/17 – Autorità Garante della Concorrenza e del Mercato – Antitrust and Coopservice clarifies some of those limits.
Award of Public Contracts via Framework Agreements
A common method used by contracting authorities to award public contracts for the provision of supplies or services, is by establishing a ‘framework agreement’ between one or more contracting authorities and one or more economic operators via an initial public procurement process. Individual contracts ‘called-off’ from the framework can then be awarded, either:
- in the case of a single-operator framework, by requesting the economic operator to supplement its tender in writing to reflect the requirements of a particular contract; or
- in the case of a multi-operator framework, either: without reopening the competition if all of the terms are set out in the framework agreement itself; or, by reopening competition among the economic operators on the framework (known as a ‘mini-competition’).
Benefits & Risks of Framework Agreements
The key benefit of using framework agreements is that they can drive economies of scale and efficiencies by facilitating the co-ordinated and flexible award of repeat or phased contracts. However, the improper use of framework agreements can lead to the infringement of the key public procurement law principles of transparency and equal treatment, and the prevention, restriction or distortion of competition.
Given these risks, the EU public procurement regulations impose several limits on public sector framework agreements subject to those regulations. For example, framework agreements must be limited to a maximum duration of 4 years, unless a longer duration can be justified in exceptional circumstances. Equally, ‘called-off’ contracts must not entail ‘substantial modifications’ to the terms specified in the framework agreement.
Case C-216/17 – Autorità Garante della Concorrenza e del Mercato – Antitrust and Coopservice
The judgment of the Court of Justice of the European Union of 19 December 2018 in Case C-216/17 – Autorità Garante della Concorrenza e del Mercato – Antitrust and Coopservice, has clarified two further limits to public sector framework agreements:
- Membership of Framework Agreements: The general rule is the membership of a framework agreement is fixed for its duration and new economic operators or contracting authorities may not be admitted. However, the Antitrust and Coopservice judgment has confirmed that a ‘secondary’ contracting authority may in fact award a ‘called-off’ contract from another contracting authority’s framework agreement, providing that the ‘secondary’ contracting authority has been clearly identified as a potential beneficiary of the framework agreement in the tender documents at the outset.
- Maximum Quantity of Supplies/Services Procured: The Antitrust and Coopservice judgment also confirmed that a framework agreement must, at the outset, determine the maximum quantity of supplies or services that may form the subject of ‘called-off’ contracts under the framework agreement. Once that limit has been reached, the framework agreement will no longer have any effect.
The Antitrust and Coopservice judgment is significant in that it confirms that once the maximum quantity of supplies or services that may form the subject of ‘called-off’ contracts under the framework agreement has been reached, the framework agreement will no longer have any effect.
This means that the quantity of supplies and services procured under ‘called-off’ contracts will need to be closely monitored throughout the lifetime of the framework agreement. This is to ensure that the overall quantity specified in the framework agreement is not unintentionally exceeded, thereby exposing contracting authorities to legal and commercial risk.