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Brussels, 3 June 2010

Public procurement: Commission refers Netherlands to Court over land development project in the Municipality of Eindhoven

The European Commission has decided to refer the Netherlands to the Court of Justice over the direct award of a public works concession contract - where the contractor is paid in part by being given the right to exploit the development – by the Municipality of Eindhoven relating to the development of a community centre known as the "Doornakkers Centre". The Commission is concerned that the Netherlands has failed to fulfil its obligations under the EU public procurement rules. The aim of these rules is to ensure fair and transparent competition for public contracts in Europe, thereby creating opportunities for European companies while ensuring best value for public money. The Commission sent a “reasoned opinion” to the Netherlands in October 2009 asking it to comply with EU law. As no satisfactory reply was received, the Commission has decided to take the case to the Court.

What is the aim of the EU rules in question?

Public procurement is about how public authorities spend public money. It covers purchases of everything from coffee to computer systems, waste water plants, ship building or highways. Total public procurement in the EU is estimated at about 17% of the Union’s GDP. The open and transparent tendering procedures required under EU public procurement rules mean more competition, stronger safeguards against corruption and better service and value for money for taxpayers.

How is the Netherlands not respecting this rule?

In 2007, the Dutch Municipality of Eindhoven awarded a contract for the development of a community centre known as the "Doornakkers Centre" directly to a developer without applying the EU public procurement rules. The municipality owned the land on which the project was to be realised and would sell it at a later stage to the developer who was granted a right of exploitation. The Commission considers the contract in question a public works concession that should have been awarded following an EU-wide tender process.

In the Commission's view, the concession contract's main objective was not the sale of land, but the execution of works, which falls under EU public procurement rules. The developer was to realise a specific number of buildings and apartments of a specific size, as well as a specific number of parking spaces and facilities such as a shopping mall and a health centre. In the Commission's view the municipality had a decisive influence on the work that was to be constructed. Furthermore, the initiative for the realisation of the project was taken by the municipality and its influence on the project went far beyond the mere exercise of its urban-planning powers.

Also, while the developer is to realise the project at his own risk and does not receive a direct payment from the municipality, the Commission considers that the municipality of Eindhoven has given the developer a right of exploitation within the meaning of the EU public procurement rules, since the developer acquires for the project a tailor-made building license that gives him the right to construct and to exploit the work foreseen in the contract.

According to the Commission, the municipality of Eindhoven also obtained a clear and direct economic benefit by means of this contract within the meaning of the jurisprudence of the Court of Justice in a similar case (Case C-451/08, Helmut Müller). Not only is the contract intended to regenerate the urban area, to ensure the availability of specific services for the citizens and to offer great economic advantages to the area, but the municipality also receives a subsidy from the Dutch State for each house to be built.

How are EU citizens and/or businesses suffering as a result?

The contract was awarded after two local economic operators were invited to present their bids. Other economic operators were not invited nor allowed to participate in this informal procedure. In these circumstances companies from other Member States had no possibility to obtain the contract that has a value of more than 30 million Euros. In addition, this manner of awarding contracts does not guarantee that the municipality obtained best value for public money.

About infringement procedures

The European Commission has powers to take legal action – known as infringement procedures – against a Member State that is not respecting its obligations under EU rules. These procedures consist of three steps. The first is that the Member State receives a letter of formal notice and has two months to respond. In case further compliance with EU legislation is needed, the Commission sends a reasoned opinion. Again the Member State has two months to reply. If there is no satisfactory reply, the Commission can refer the matter to the European Court of Justice in Luxembourg. It can also request that the Court impose a fine on the country concerned if it does not comply with the Court's ruling.

More information

Public procurement:

Latest information on infringement proceedings concerning all Member States

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