Procurement: Framework Agreements and the need for transparency from the outset

Decision of the European Court of Justice in C-216/17 AGCM/ASST[1]

In a recent decision concerning the operation of a framework agreement (FWA) in the health sector in Italy, the European Court of Justice (ECJ) looked at two questions:

• Do all potential contracting authority users of a FWA have to be signatories to the original FWA at the time it is set up? and
• Must the original FWA specify the maximum total quantity of good or services which may be called off under the FWA?

In its judgment, the ECJ confirmed that:

• Contracting authorities who wish to use a FWA must be clearly identified at the outset in the tender documents for the establishment of the FWA. They do not, however, have to be signatories to the FWA when it is set up. They can become signatories at a later date.
• The principle of transparency, in particular, requires that the maximum total quantity of goods or services which may be called off under a FWA must be clearly specified in the FWA.

Background

An Italian local health and social care body, ASST Lake Garda, awarded a contract for environmental sanitation, collection and waste services to ATI Markas (the original contract). The original contract was for a period of 9 years, commencing in February 2012 and expiring in February 2021.  The original contract provided for the possibility of one or more of 18 health bodies listed in the original contract to request that ATI Markas extend the contractual arrangements, to cover that purchaser’s service requirements. ATI Markas would then enter into an independent contractual relationship with that purchaser, on identical contractual terms to those in the original contract and for the remainder of the original contract period.

One of the 18 listed health bodies, ASST Valcamonica, exercised this option and entered into a contract for sanitation services with ATI Markas. The decision to extend the original contract arrangements and enter into a contract to cover ASST Valcamonica’s requirements was challenged in the Italian Courts.

There was some debate in the case about the correct classification of this arrangement as a framework agreement, but the ECJ proceeded to consider the issues on the assumption that this was a framework agreement.

Do all potential contracting authority users of a FWA have to be signatories to the original FWA at the time it is set up?

The ECJ commented that the requirement to be an original party to a framework agreement applies only to economic operators. 

The ECJ confirmed that it is not necessary for contracting authorities which may call-off contracts under a framework agreement to be signatories to the original framework agreement itself. They do, however, need to be clearly identified as potential beneficiaries in the tender documentation. There must be an explicit reference that makes both the potential beneficiary contracting authority and any interested supplier aware of the possibility that the arrangement may be extended. In this way, the principles of advertising and legal certainty, and therefore transparency, are complied with.  

Must the original FWA specify the maximum total quantity of good or services which may be called off under the FWA?

It was argued in this case that there is no obligation to provide, at the outset, an indication of the quantity of services which may be required under the FWA. It was also argued that, in relation to services required by potential beneficiary contracting authorities, it was sufficient to refer to the “usual requirements” of those authorities.

The ECJ ruled that the contracting authority setting up a FWA must specify, at the outset, the maximum quantity of services that may be required, including services which may be provided under subsequent contracts with the listed potential beneficiary contracting authorities.

The ECJ confirmed that the contracting authority setting up the FWA need only use best endeavours in predicting the value and frequency of any subsequent contracts.  In this context, reference to a contracting authority’s ‘usual requirements’ is not sufficiently clear, particularly for suppliers from other Member States.

The ECJ emphasised that providing information on the maximum potential quantity of contracts to be awarded is particularly important to ensure transparency of FWAs, because contracting authorities are not required to publish the results of award procedures for call off contracts[2]. It was also concerned that allowing contracting authorities not to specify the maximum quantity could lead to abuse of framework agreements by the artificial division of contracts. In addition, the ECJ was of the view that publication of the maximum potential quantity prevents contracting authorities from using framework agreements improperly or in a way that would prevent, restrict or distort competition.

The ECJ also noted that the contracting authority that is an original party to the FWA can make commitments on its own behalf or on behalf of the potential contracting authorities that are specifically indicated in that agreement only up to a certain quantity. Once that limit has been reached the agreement will no longer have any effect.

[1]               C-215/17 Autorità Garante della Concorrenza e del Mercato-Antitrust (AGCM), Coopservice Soc. coop. arl v Azienda Socio-Sanitaria Territoriale della Vallecamonica- Sebino (ASST) and others.    

[2]               PCR 108(1)(b) requires contract award notices to be published in Contracts Finder for above threshold “call-off” contracts awarded under FWAs. This is a domestic, not EU, requirement.