There has long been concern about the extent to which the public procurement rules apply to development agreements entered into by public bodies. Much of it dates from Auroux [2005], when the ECJ laid down wide-ranging rules as to when the public procurement regime would apply. Now, however, we have an ECJ decision that adopts a less strict approach. In summary:

if the involvement of an LA in a development is limited only to the exercise of its regulatory planning powers, then the public procurement rules will not apply;

provided no ‘immediate economic benefit’ is derived by the authority from the development, then the rules will also not apply;

but, the following are sufficient for there to be an ‘immediate economic benefit’: the authority will become owner of the development works, or the authority will hold a legal right over the use of the works so they can be made available to the public; or the authority has contributed financially to the development or assumed risks involved in it;

for the procurement rules to apply, there must also be a direct or indirect obligation to carry out works (an ‘indirect’ obligation would seem to capture indirect delivery through a sub-contractor);

the ‘specification of requirements’ by an authority involves more than the mere examination of building plans, or taking a planning decision. The authority must have taken measures to define the type of work to be built, or at least had a decisive influence on its design.

The end result is that it is now clear that a public works contract (involving the procurement rules) will only arise from a development agreement when the works will be of ‘direct economic benefit’ to the authority (eg if the authority acquires ownership or use of the works, or contributes at least some of the cost). As such, this is a relaxation of the previous position and will be welcomed by developers and local authorities alike. Helmut Muller [2010] C451/08. Source: Berwin Leighton Paisner.